New rules for customs checkpoints

From now on Ukraine’s customs checkpoints will have to abide by new procedures under the Customs Code in its new wording, signed by President Yanukovych toward the end of last week, on the second try, after returning the original bill (submitted in November 2011) for revision. The Verkhovna Rada took into account most of corrections by the head of state, except the clause to the effect that the new Code will take effect on January 1, 2013. The final bill reads that the zero-hour for importers and exporters will come considerably earlier, on the first day of the second month from the date of publication. If the new Customs Code is officially published before the end of April, the new clearance procedures will take legal effect in June; if in May, then in July 2012.

Bad news for Ukrainian business, considering the absence of a transition period, lack of time to figure out the new customs procedures. One can only wonder about this haste; it took the authors of the new customs code bill half a year to work it out. Does this mean the customs procedures are simpler than the tax ones?

Vitalii Khomutynnik, chairman of the [VR’s] Finance, Banking, Tax, and Customs Committee, believes the central budget will receive an additional 10 billion hryvnias as a result of these new customs rules.

“This document makes it possible to bring our legislation into conformity with the rules and procedures of the European Union, Kyoto Convention, and those of the WTO,” says Iryna Abramova, first deputy head of Ukraine’s Presidential Administration, adding the president’s signature doesn’t mean work on this document will stop, so amendments are likely to be forthcoming.

The Day asked for expert legal and business comment, mainly whether this updated Customs Code would make Ukraine’s import and export business any easier.

Serhii TERIOKHIN, first deputy chairman, VR’s Finance, Banking, Tax and Customs Committee, BYuT-affiliated former economy minister of Ukraine:

“Everyone had been expecting adjustment. None is in evidence because there is no transition period between the previous and new customs clearance procedures. This spells big problem for Ukrainian business. There is this new post-audit control clause. Previously all Ukraine’s customs officers had to do was check a given truckload/shipment papers and wave it across. From now on they are authorized to examine every such delivery, taking their time, considering that the [newly enacted] Customs Code doesn’t define the target of any such examination. This isn’t likely to stabilize business [in Ukraine].

“A closer look at the customs duties section [of the Code] reveals a number of loopholes that allow a customs officer put on record his own estimate of a given shipment, even if contrary to its actual contract value. The newly enacted Customs Code of Ukraine leaves this country bereft of customs borders. There is this clause about duty-free goods (cigarettes, alcoholic beverages, dual-use goods) that are imported by Ukraine as [foreign inland] investment, also foreign-capital-based joint ventures. Such investments can be in terms of fur coats, lathes, you name it. Such imports are duty-free. In other words, no taxes levied to protect Ukraine’s domestic market.”

Anna DEREVIANKO, CEO, European Business Association:

“All things considered, the [new] Customs Code is better than Ukraine’s current legislation [in this sphere]. It is in harmony with international law. It provides for uniform simplified, quicker customs clearance procedures. There are shortcomings. The royalties clause isn’t stated clearly enough to satisfy Ukraine’s potential business partners abroad – and this is something none of them will consider lightly. There is no definition of false data. The Code has a clause that entitles the customs authorities to impound the carrier’s shipment or levy a fine worth 100 percent of the sum stated in the bill of entry. Of course, such false information should be legally punishable, but declarants are known to have made technical mistakes, so there should be room left for such unintended errors. By and large, I regard the [new Customs] Code as a step forward, and that the gaps in it should be filled by way of amendments.”

Ihor DANKOV, senior manager, Tax and Legal Services Department, PwC Ukraine; co-chairman, Customs Committee of the US Chamber of Commerce in Ukraine:

“I would point out, among the positive aspects, the clause making it possible to submit bills of entry within three years from the customs clearance date, also the simplified clearance procedures (you can clear customs at any checkpoint, without having to do so at the checkpoint of original registry, as previously required). Also, the provisos that determine the customs value. They prevent tax authorities from overstating this value, thus serving domestic business interests. There are a number of other positive clauses. Unless the [Ukrainian] business community agrees to act in accordance with this law, the situation will remain the same. Their counterparts across the world are eager to watch what the new Customs Code of Ukraine will produce. Another big question is whether Ukraine’s central and local authorities will be able to upgrade their tax rules and regulations, considering that the new Customs Code will become legally effective on June 1, 2012. This date makes one wonder about the consequences. The presence of controversial clauses may prompt the Verkhovna Rada to suspend some of them.