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The new Customs Code of Ukraine will come into force as early as June 1, which in total gave the Cabinet of Ministers of Ukraine and the central executive authorities only 36 days after the signing of the law by the President of Ukraine to bring their regulations in line with the code.

The international business community is cautiously waiting for the changes that the Code may entail, given the multi-dimensional nature of this document. Experts of the American Chamber of Commerce in Ukraine have been working on improving the Customs Code for over a year now, interacting with Ukrainian legislators.

The experts’ proposals primarily concerned the consideration of methods of solving urgent customs problems. These methods are already working successfully in Europe and the United States.

Igor Dankov, Co-Chairman of the Customs Policy Committee of the American Chamber of Commerce in Ukraine, and one of the Committee’s experts, his colleague Robert Zeldi, note that as a result of this cooperation, the following innovations proposed by the Chamber’s experts were recorded in the Customs Code:

  • the principle of conflict of interest (if the provision of the law cannot be interpreted unambiguously, the decision is made in favor of the declarant);
  • Provision of consultations by customs authorities on practical application of the legislation on customs affairs;
  • inclusion in the customs value section of the WTO decisions on the customs valuation of carriers with computer programs and inclusion of interest in the customs value;
  • Clear description of cases when customs authorities may not accept the declared customs value;
  • the requirement for customs authorities to argue why the customs value is not accepted and how the interrelationship has affected the transaction value;
  • Control by other government agencies over the movement of goods across borders on a “single window” basis;
  • priority of electronic declaration;
  • Introduction of amendments to customs declarations and liability;
  • Some aspects of preliminary declaration and submission of additional declarations;
  • Some aspects of customs regimes application, activities of customs brokers;
  • consolidation of the principle of “independent disclosure”, under which importers will be exempted from liability if they independently declare goods that were not declared earlier in the customs clearance process but were identified by the declarant;
  • When declaring the customs value, the importer may declare royalties calculated from sales or profit within 180 days without penalty;
  • Temporary importation with partial exemption from customs duties is allowed for any goods that do not fall under full exemption (now – only for goods imported for production and work);
  • exclusive list of grounds on which the customs authority may require additional documents to confirm the customs value, as well as an exclusive list of cases when the customs authority may refuse to recognize the customs value at the contract price;
  • a number of decisions of the WTO’s Technical Committee on Customs Valuation, including those related to the determination of the customs value of goods imported under financial leasing agreements, as well as a decision that relates to the determination of the customs value of carriers with software.

The proper implementation of the Customs Code can fundamentally change the fundamentals of the work of customs authorities in Ukraine and business would like to see how these rules will work. At the same time, the document still contains a sufficient number of provisions that require significant improvement.

“One of the key sections of the Code is the section devoted to the customs value of goods. This section, which takes into account some proposals of the American Chamber of Commerce, has several limitations that make it difficult for customs authorities to determine the customs value arbitrarily. In particular, it is a requirement to justify why the declared value cannot be accepted,” Dankov said.

However, in general, the section on customs value requires improvement. In particular, it is necessary to take into account the decision of the World Trade Organization on cases where customs administrations have reason to doubt the reliability or accuracy of the declared value. “This document is about reasonable doubt.

Accordingly, before accepting a declared value, the customs authority must explain why. If this mechanism is fully implemented, then the declarant will have a better opportunity to challenge improper decisions to adjust the customs value, if such decisions are unfounded and the customs authority cannot explain the reason for the adjustment,” the expert says.

An important aspect is also the finalization of the procedure for consultations between customs authorities and the declarant to exchange information in order to select the appropriate method of determining the customs value, in the case when the customs authority argues that the customs value cannot be determined at the transaction value.

“The openness of the “customs base” of the State Customs Service of Ukraine would be very helpful in such a dialogue between the declarant and the customs authorities. In our opinion, while maintaining confidentiality, it is possible to open the database widely enough so that the declarant can see the relevant information contained in it. This will significantly reduce the possibility of manipulating the information contained in the database,” Dankov emphasizes.

At the same time, according to the experts of the American Chamber of Commerce, if there is still a dispute over the customs value and the goods are released under warranty, they should not be subject to payment until the final decision is made (including by the court).

The U.S. Chamber of Commerce also favours the speedy introduction of an electronic declaration mechanism with a minimum of documents (contract plus invoice).

If Customs wants to see other documents in order to dispel their reasonable doubts, it can be done in the process of inspections after the release of goods.

If there is no documented data on customs fraud or obvious undervaluation (also documented), the goods should be promptly released, and disputes should be transferred to later.

Experts also pay serious attention to the numerous regulations necessary for the implementation of the new code. Many of them have not yet been approved, although the importance of ensuring their full compliance with the code is extremely high.

The U.S. Chamber of Commerce intends to closely monitor how the code will begin to work and promptly take initiatives to adjust certain provisions that will hinder its full operation.

Helen T. Lindsey