Concerns loom over how it will work in practice.
Ukraine’s long-awaited revamped Customs Code came into effect on June 1, ushering in what businesses hope will be a new and easier era at the borders.
Ukrainian government officials have rushed to praise it, but experts say that while the changes look promising on paper, the main question is how it will be implemented.
The new code affects not only businesses but also the personal transport of goods.
The limits for imposing duties on gifts and souvenirs have been raised – to 1,000 euros for those coming in by plane and 300 euros for mail delivery. The previous threshold of 50 euros on consumption goods was raised to 200 euros (albeit retaining restrictions on quantity or volume).
Additionally, up to five packs of medication per person can now be brought in. Previously, Ukrainians were technically banned from bring in medicine that was not registered in Ukraine without individual permits, though the rules were rarely enforced.
The bulk of the changes, however, impacts importers and exporters who should see customs clearance operations simplified and greater flexibility regarding import procedures.
According to a report by Big Four auditor PwC, some of the major changes include canceling value added tax and duties on imports for processing, partially exempting temporary imports, allowing the sale of goods in warehouses prior to customs clearance and establishing free customs zones.
Boris Khruslov, head of Ukraine operations at the international logistics company Raben Group, said the most important changes are the possibility of filing electronic declarations, which would greatly reduce the amount of paperwork, and clearing customs at the check point of choice, rather than the point of registration.
These decisions have indeed received wide praise from the business community. A press release from the American Chamber of Commerce in Ukraine applauded measures to streamline the import-export process.
“The new Customs Code is a major step forward for Ukraine in terms of the simplification of the procedures for customs registration of goods, via a reduction in the number of documents required for customs clearance,” the organization’s president Jorge Zukoski said.
Another much anticipated change, Khruslov noted, is lowering the time of customs clearance from 24 hours to just four hours. By comparison, a survey by the European Business Association found that the average number of days spent on the customs clearance of one shipment actually rose from 2.4 in the first half of 2010 to 2.5.
The time savings will be made possible through the use of post-audit checks. Customs applicants will file electronic declarations, after which the post-audit customs department, the staff of which has been increased 50-fold in the last several months, will be entitled to adjust the valuations accordingly, explained Oksana Kochmarska, deputy director at business service Konsu Group’s Kyiv office.
“This would mark a revolutionary breakthrough,” the head of Raben Ukraine declared. “But the question of implementation remains.”
Therein lies the rub, though. Implementation has been a weak spot of many of Ukraine’s past reform programs, with many declared goals remaining just that. Experts warn that further amendments will be needed for the changes to take full effect.
Meanwhile, a change is taking place within the institution itself. According to Khruslov, the attitude of customs officers is slowly changing, with more young people entering the organization’s ranks, bringing a new progressive way of thinking with them.
With greater experience and knowledge of international standards, he noted, many customs officials are simply interested in making the process as effective and professional as possible.
As an execution body, however, they remain limited by the law, Khruslov said, and they are also subject to pressure from the government to raise revenue.
“Unlike in other countries, customs is a dominant milk cow of the state budget,” he said. “They have very strong demands from the government – money!, money!, money! – and they need to be very tough to refuse.”
Increased social spending ahead of the October parliamentary elections and a difficult external economic environment have made revenue generation the number one priority for many state services.
Businesses complain about overzealous tax collectors, seeking any possible excuse to impose fines or demanding taxes be paid in advance just to shore up revenue.
The most recent survey from the European Business Association shows that 77 percent of respondents had been offered unjustified proposals to pay taxes beforehand, while 41 percent we ordered to carry out so-called “budget fulfillment tasks” by tax collectors.
Meanwhile, Ukraine’s State Customs Service announced recently that revenue in January-April rose 24 percent to 38 billion hryvnias compared to the same period last year. In 2011, customs service payments to the national budget increased by roughly a third, to 115 billion hryvnias.
Kyiv Post staff writer Jakub Parusinski can be reached at [email protected].
