The latest reforms of State Customs Service of Ukraine are unlikely to help simplify the customs clearance procedure
Despite a number of legislative reforms implemented by the Government of Ukraine in order to simplify entrepreneurial activities, doing business in Ukraine is only getting harder. This is confirmed by the results of an international study conducted by World Bank and entitled “Doing business in 2012”. Over the past year, Ukraine has dropped a few positions in the overall ranking in the ease of doing business category, and today Ukraine is 152 among 183 countries. In the "International trade" category, which assesses the ease of foreign trade, our state's ranking has also dropped (we now hold 140th position).
This situation could have been helped somewhat by the entry into force of the new Customs Code, adopted by the Supreme Council of Ukraine on November 3, 2011. The relevant law, in particular, called for the harmonization of Ukrainian customs legislation with a number of basic international instruments in this field (for example, the Istanbul Convention on Temporary Admission, the Kyoto International Convention on the simplification and harmonization of Customs procedures, etc.). However, in December of 2011 the bill was vetoed by the President of Ukraine. Therefore, the State Customs Service of Ukraine (SCSU) began introducing some customs reforms independently.
Challenges of the new control mechanisms
At the end of 2011, Resolutions #1030 and #1031 of the Cabinet of Ministers of Ukraine (CMU) came into effect, according to which the control of goods during their movement across the customs border of Ukraine is to be performed in the form of a preliminary documentary control.
Such control is done by checking the documents required by the sanitary-epidemiological, veterinary, phytosanitary and environmental control, as well as in order to control the movement of cultural values. The preliminary documentary control is performed by customs authorities at the checkpoints across the state border on the individual items (the list is specified in the Resolution #1031 issued by the Cabinet of Ministers) imported into the customs territory of Ukraine (including those for the purpose of transit). Since the function of many regulatory authorities at the border has been transferred to the SCSU, the passage of vehicles should be much faster without the involvement of related regulatory bodies. However, in practice, the preliminary documentary control does not always simplify customs formalities.
According to CMU's Resolutions #1030 in order to perform the preliminary documentary control the carrier or freight forwarder, or an authorized person shall submit to the customs authority all documents necessary to implement the appropriate form of state control, in addition to standard shipping documentation. At the same time the above-mentioned documents must be originals or notarized copies or copies certified by the seal of the consignee or the manufacturer. That means that prior to importation of goods, the importer must obtain all permits and submit them to the carrier by mail or courier service.
Before the implementation of the preliminary documentary control the inspector used to affix "Subject to verification at the place of destination" stamp to the appropriate shipping documentation and the goods would pass internal customs without delay. Now, in the absence of at least one of the required documents, the shipment will be held at the border until the missing documents are supplied.
Since the State Customs Service of Ukraine will not go back to the old control system, the preliminary documentary control will contribute to simplification of customs procedures, provided that the documents necessary for the passage of this type of control can be sent electronically with the certification of digital signature. The current format of this control that requires hard copies of the documents is quite controversial in terms of its positive impact on the subjects of foreign economic activity.
Real effect of decriminalisation
The Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine concerning the humanization of responsibility for violations in the sphere of economic activity" (the law on humanization) came into force on January 18, 2012. It made changes in art. 352 of the Customs Code of Ukraine, according to which the movement of illegal goods with concealment from customs control (smuggling) will lead only to administrative liability (except for drug smuggling, smuggling of poisonous substances, cultural values, weapons).
It should be noted that giving customs authority documents containing false information might also be considered concealment. Since during the import of a wide range of goods minor errors or inconsistencies in the shipping documents are rather common, customs authorities will now have a formal reason to consider such action an administrative offense. Until the entry into force of this law this was impossible, since for such acts to qualify as crimes, the cost of goods had to exceed a certain limit (as of the date of publication – approx. 67,000 USD or more).
The very fact of simplified administrative procedure will play into the hands of customs authorities, since the review of these violations is significantly faster and to a lesser degree requires the collection of evidence (e.g., conducting examinations, analysis of samples and specimens, etc.) and the direct proof of intent necessary to determine the perpetrators, etc.
The humanization of the Law on commodity smuggling provides the following administrative sanctions: (a) a penalty of 100% of the cost of goods, and (b) confiscation of such goods, and (c) the confiscation of vehicles used for moving goods across the customs border of Ukraine. In the latter case, the carrier may also be punished for any errors in the documents of the exporter or the importer.
Thus, the decriminalization of commercial smuggling could be another effective tool to fill the state budget. Because of this "humane" approach, many international carriers have begun to structure their routes bypassing Ukraine.
Adjusted prices
On February 6, 2012 on its website the State Customs Service of Ukraine granted access to an internal database of the customs value of SCSU's Unified Automated Information System (base price information) used to control the customs value of imported goods.
This database has a number of shortcomings. First, the base pricing information is not binding. Such information is considered a weighted average, that is, given the average rate on the basis of the minimum and maximum customs value of the imported goods already imported to Ukraine for the previous 3 months (excluding such indicators as volume and terms of delivery, country of origin and other relevant factors). Second, the price information is given only in respect of imports (exports are not included) and is not detailed, as it is disclosed only at the level of commodity sub-items (the first 6 digits of the code in accordance with the Ukrainian Classification of Goods for Foreign Trade, while for the importation of product and its declaration requires 10 characters.
And third, the information is considered incomplete since sometimes there are entire groups of goods for foreign trade missing (for example, there is no data on cost of goods that belong to groups 25 through 27).
Nevertheless, it is better than nothing, and the information obtained from the database may be useful for the preliminary calculation of customs value and to avoid possible problems with its determination at the time of actual importation. Therefore, all importers, preferably before the date of importation of goods, are advised to compare their prices with base price information supplied by the SCSU. However, one must be prepared for the fact that because of the "averaged" data, during the actual import of goods they can expect a nasty surprise in the form of higher prices.
If the importer's price is lower than that contained in the database, one should prepare a package of additional documents confirming the accuracy of the customs value of imported goods and be ready for consultations with the customs officers to establish one's case.
Consequently, SCSU's base price information allows us to estimate the probable customs value of imported goods only approximately and is not 100% accurate. This means nothing much has changed for the better as far as determining the customs value of goods.
Юридическая практика (Yuridicheskaya Praktika)
№13, 27.03.2012
Author: Ivan Yurchenko, Oleksandr Tereshchenko