ACC Country Profile 2012,
Igor Dankov, Senior Manager
Robert Zeldy, Manager
The new Customs Code of Ukraine took
effect on 1 June 2012. It was the result of
a long working process by various state
authorities and businesses. The American
Chamber of Commerce took an active
part in this process. The authors of
this article, for example, were members
of the relevant Governmental and Parliamentary
working groups and submitted
numerous proposals that became provisions
of the Code. We discuss these provisions
in detail below.
The proposals were based on the best
practice available around the world.
Ukraine has declared its adherence to EU
values and a willingness to join that organization in the future. For it to do so, its
legislation must be aligned with the EU’s.
Adapting Ukraine’s customs legislation is
a priority task for the state authorities.
The EU has successfully implemented the
WTO’s customs valuation principles and
accumulated many best customs practices.
Logically enough, we studied this experience
and tried to borrow from it while
preparing our proposals.
The purpose of this article is twofold. On
the one hand, we summarize our contributions
to the new Code. On the other hand,
we discuss a variety of complex customs
issues that remain unsolved in Ukraine.
Opinions about the new Code vary. Some
say that it is worse than the previous Code.
Many believe there are a lot of good changes
as compared to the previous legislation.
It is obvious that many changes to the
Code are good for business. The unambiguous
Businesses may also benefi t from the following
provisions of the Code:
The new Customs Code is certainly not perfect.
It is diffi cult to create an ideal document
that will satisfy both the fi scal authorities
and the business community. The following
areas call for further improvement:
The Customs Code could be improved in
other areas as well.
Below we summarize certain provisions
we drafted towards making the Code
Historically, customs valuation has been
an area of dispute between importers and
the customs authorities. The customs
valuation provisions of the old Code were
based on WTO principles (the Agreement
on Implementation of Article VII of the
GATT). However, the customs authorities
have often misused these provisions in
order to increase revenue collections, as:
As a result, the customs authorities have
challenged declared value without suffi -
ciently explaining their reasons for doing
so. The basis for such a challenge could
be the availability of higher prices in their
internal database. The next step was to request that the importer present additional
documents to support the declared value.
As a rule, customs was requesting documents
that either did not exist (e.g., price
calculations of the goods) or that were
diffi cult to obtain (e.g., a foreign export
customs declaration, even if the exporter
could declare the goods electronically).
Should the importer fail to present the additional
documents, the customs authorities
have the right to defi ne customs value
themselves. The old customs valuation
rules were thus favorable for customs and
denied the importer the ability to determine
We focused our efforts on changing this situation
and making the customs authorities
explain (preferably in writing) every step
they take when rejecting a value as well as
how they arrived at the new customs value.
We proposed the following minimum provisions
(they were included in the new
We suggested that a customs offi ce may
reject declared value only in the following
However, practice shows that the customs
authorities have often misunderstood
these provisions. We would thus advise
further clarifying the terms “incorrect calculation
of customs value” and “incorrect
election of a customs valuation method.”
There are three different cases in which
customs must present arguments if they
do not accept a declared value:
We recommend that an importer use
these benefi cial provisions of the Customs
Code. If customs fails to argue why
they rejected a declared value, a declarant
will have a good chance of winning a court
case. There is no need to hold the goods
under customs control until the dispute is
resolved. It is possible to release the goods
against fi nancial guarantees and then appeal
against the customs valuation.
As we mentioned above, the customs authorities
have often demanded excessive
documents, in the hopes that the declarant
will fail to present them. In this situation,
customs obtains the right to determine
the customs value itself. Even when
the declarant submits the requested documents,
customs can disagree with it and
reject the declared customs value.
We thus suggested determining the list of
documents required to support declared
customs value as follows:
These Code provisions prevent customs
offi cials from demanding arbitrary documents.
We proposed strengthening the requirement that the customs authorities must substantiate
an adjustment of a customs value. Specifi cally, they need to provide the following
If customs fails to provide this information,
it will be easier for the declarant to
appeal against the adjustment.
The customs authorities release goods
against fi nancial guarantees when:
We managed to improve the process as
Also, we proposed that a fi nancial guarantee
remain in effect until the fi nal resolution
of a customs valuation dispute. For
instance, even if the declarant cannot
convince customs within 80 days, it will
be possible to appeal to a higher customs
body or to a court. Until there is a decision
from these authorities, the fi nancial
guarantee should continue to apply. Unfortunately,
this proposal was not implemented
in the Customs Code.
We suggested that the Customs Code incorporate
certain WTO Customs Valuation
Decisions that Ukraine committed to
following. In our opinion, this would facilitate
the practical use of these Decisions.
Cases where customs administrations
have reasons to doubt the truth or accuracy
of the declared value (Decision 6.1)
We suggested that this Decision be broadly
implemented by requiring the customs authorities
to substantiate their decisions for
rejecting and adjusting declared values. We
proceeded from the fact that the Decision
requires the customs authorities to have
reasons to doubt the declared customs value.
See above for how this was implemented.
We note that Ukraine did not commit to
follow this Decision. In our opinion, a failure
to follow it is not in line with the general
principles of customs valuation.
Valuation of carrier media bearing software
for data processing equipment (Decision 4.1)
This relates to customs valuation of carriers
(e.g., CD, DVD, etc.) with computer
software. In this case, for customs valuation
purposes only, the value of the carrier
medium should be taken into account.
The customs value should not include the
value of the software provided that it is distinguished
from the value of the carrier medium
(i.e., they are separate on the invoice).
The designation “carrier medium” does
not include integrated circuits, semiconductors,
or similar devices incorporating
such circuits or devices. This rule thus will
not apply, for example, when software is
recorded on a laptop hard drive.
Treatment of interest charges in the customs
value of imported goods (Decision 3.1)
This decision relates to the customs treatment
of interest charges in the customs
value of imported goods. It is particularly
relevant to the import of assets under a
fi nancial leasing contract. In this case, a
question may arise as to whether interest charges should be added to the customs
value of the imported assets.
The Code (following Decision 3.1) stipulates
that interest charges will not be a
part of the dutiable value when the following
conditions are met:
It is not relevant whether the fi nancing is
granted by the seller, the bank, or any other
legal entity or which customs valuation
method is applied for valuing the goods.
Treatment of payments in respect of
broadcasting/distribution rights of sound
or cinematographic recordings
While working on proposals for the new Customs Code, we focused on a number of
other important areas. We discuss these proposals below. Many of them were developed
further based on our initial ideas.
The Tax Code allows the controlling authorities
(including customs) to issue rulings
on the application of tax legislation.
We thought it would be good to oblige
customs to grant rulings on the practical
application of customs legislation. Thus,
the customs authorities can now issue
rulings on a wider range of customs issues
(not only tax ones). The important points
about the customs rulings are as follows:
If the customs legislation is unclear and
may be interpreted in favor of both the
declarants and the customs authorities,
the decision should be taken in favor of
the declarants. This provision allows for favorable treatment of the customs legislation
if it lacks clarity.
We supported this provision and recommended
including it in the Customs Code.
This concept is not new. Rather, the Ukrainian
customs authorities have long known
about it. We proposed that the customs
authorities follow this concept and it was
included in the Customs Code.
According to this concept, various types
of control over goods should be performed
using a single customs information
system (Recommendation UNECE/
CEFACT № 33, 2005). The customs authorities would coordinate all communication
with other state authorities.
Thus, the importer would need only to
provide all information about the goods
to customs. The latter would then connect
with other authorities regarding licenses
The customs authorities have already
committed to start implementing the single
window concept from 2013.
According to the WCO’s approach, introducing
the e-declaration of goods is an
area of priority development for customs
administrations. We have supported the
Code’s provisions concerning introducing
e-declaration in Ukraine. Ukraine’s customs
authorities have committed to fully introducing
e-declaration by the end of 2013.
We fully support the following approaches:
E-declaration represents a signifi cant facilitation
of cross-border trade. At the
current stage, trade is hampered by outdated
IT systems and by the absence of
electronic circulation of documents between
various state authorities. E-declaration
may be fully implemented within
four to fi ve years.
We support the following provisions of the
The draft Code envisages insuring customs
brokers’ liabilities for a minimum of EUR
300,000. This could be a serious blow to customs brokers’ activities in Ukraine. We
actively moved against this provision of the
Code and it was excluded.
The general conclusion is that the new
Customs Code is a rather progressive
document. Much will depend on how the
customs authorities implement it. The
likelihood of improper implementation
will rise if business fails to demand that
the authorities follow the rule of law.
There is no ideal document, and the Code
has room for improvement. The main areas
for improvement include:
We have already started polishing the
customs law in the following areas:
As active members of the Chamber’s Customs
Committee, we will continue making
all efforts to lobby for the interests of the
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