Talking point: Customs index

Issue 51, November 2012.

The European Business Association on September 20, 2012 released the latest results of its Customs Index – an independent poll measuring the degree of satisfaction with customs services in Ukraine in H1, 2012.
The findings of the H1 2012 Customs Poll are evidence of the first signs of recovery in Ukraine's trade environment. The assessment of customs services given by business people shows an obvious positive trend. It is still too early to declare there is a trend for long-term growth, but at least there are grounds for optimism.


The EBA Customs Index poll tracks the collective views of 79 EBA member companies – importers, exporters and logistic operators – on the ease of customs operations, the professionalism of customs officers, and business people's perception of the innovations in the country's new Customs Code. The EBA Customs Index as a powerful communication vehicle that serves as a barometer of the cross border trade environment.
The Customs Index diagnostics in H1, 2012 were based on five indicators that formed the background to the overall perception of customs services. They include:

1. Customs clearance procedures’ assessment
 Duration of customs clearance (number of days spent on the customs clearance of a shipment)
 Percentage of shipments selected for physical inspection
 Percentage of cargo classification codes changes by customs authorities
2. Percentage of refusals to apply the first customs valuation, transaction, or method
3. Volume of paperwork needed for customs clearance of a shipment
4. Frequency of post-customs audits and checks
5. Level of competence and professional expertise of customs officers

Also analyzed were companies' opinions and comments on the use of e-declaration, the level of corruption and bureaucracy in the customs authorities, and changes due to the adoption of the new Customs Code.
All in all, the grade given by business people to the quality of customs operations in the first half of 2012 was 3.97 on a 5-point scale (the index was calculated as an integral of seven key indicators).

Duration of Customs Clearance

Compared to H2, 2011 the number of days spent on customs clearance has slightly decreased, from 2.8 to 2.5 days. The average time spent on customs registration per declaration was 6.45 hours, according to data from respondents.

Percentage of Shipments Selected for Physical Inspection
 

 

I/2010 55%
II/2010 52%
I/2011 26%
II/2011 41%
I/2012 22%

 

The percentage of cargo classification codes changes by customs authorities, at 9%, was unchanged in comparison to the previous calculation of the Customs Index.
One of the most dramatic changes occurred in the area of customs valuation methods – retro valuation methods were used less frequently, and the number of refusals to apply the progressive WTO-advocated transaction method of goods valuation decreased from 33% to 27%.
The amount of paperwork needed to pass through customs clearance decreased from 10.6 documents in the second half of 2011 to 8.0, showing a positive trend in the transition to a less time- and effort-consuming customs clearance procedure.

Percentage of Post-Customs Audits and Checks


The most dramatic improvements were seen in the frequency of post-audits, with respondents reporting that only 3% of them faced post-customs checks, in comparison with 23% in the previous six months.

 

 

I/2010  
II/2010 22%
I/2011 40%
II/2011 23%
I/2012 3%


Putting in place a transparent and sustainable customs system is impossible without highly competent and professional customs personnel. Assessing the level of expertise of customs staff, companies' experiences in encounters with customs staff are still unsatisfactory, which clearly shows that there is still a lot of room for improvement.
The fight against corruption and bribery should still drive the agenda of customs reform, as an alarming 59% of the companies questions reported there had been no improvement in this area, and graft and abuse of authority still top the list of businesses' concerns.

Electronic Customs Declaration

Importantly, the poll results showed there is continued interest in using e-declarations, and almost half of those surveyed (48%) stated that they now use this progressive tool in their customs operations. Moreover, another 29% of the companies polled stated that they plan to use the e-system in the near future. However, 25% of the respondents said they do not intend to use it at all.

In the Aftermath of the Adoption of the new Customs Code

The graph below shows how businesspeople feel about the adoption of the new Customs Code. The most welcome innovation introduced by this document is the possibility to put good through customs clearance at any customs office, not just at the place of customs registration.

 

 

 

 

 

 

 

 

 

 

 

Yes, completely positive 1%
Rather positive than negative 59%
Equally positive and negative 31%
Rather negative than positive 7%
Absolutely negative 1%

 

Alexander Lazarev, EBA Customs Committee Co-chair, DAMCO Ukraine:

"The results of the latest calculation [of the Customs Index] can be summed up by the phrase “everything is relative." Ukraine’s customs chiefs have put tremendous effort into improving communications and facilitating their dialogue with business people.
Three months have passed since new Customs Code's adoption, and we can already see some perceptible changes. Freed from registration requirements, companies can declare goods at any customs office; eye-to-eye contact with customs officers is gradually being phased out, with the help of the e-declaration system, which is gaining momentum. The tangle of problems and delays with customs valuations is being unraveled. The percentage of physical inspections is falling. Customs clearance takes four hours - and it's really working! Of course, we still have a bunch of problems to tackle – for example, the ecological, sanitary and veterinary control systems still drag the whole system down, and cause delays in the overall customs clearance process. To cut a long story short, we applaud the substantial progress made by Customs Service, and really hope the stats soon start to reflect the full potential for improvement!"