Talking point: New Customs Code: EBA success

Issue 46, May 2012.

On 21 April 2012 new Customs Code of Ukraine was officially published in parliamentary newspaper Voice of Ukraine. As of 1 June 2012, when new edition of the Customs Code ("Code") will become effective, business is granted a right for customs clearance at any customs office despite legal entity registration.

Among the progressive and positive novelties new Code brings is the right to undergo customs clearance at any authorised customs office in Ukraine, which means that branches, subsidiaries or independent subdivisions of legal entities are granted a possibility to declare goods at any local customs office as against the place of headquarters' registration.
Prior to the new Code adoption legal entities had to obtain a special "letter of approval" to carry out customs clearance out of the place of registration. The problem was deepened by abuse of authority by some customs officers and their reluctance to re-allocate and loose cash flows. The EBA consistently advocated the necessity to withdraw such burdensome requirement bringing Ukrainian customs legislation in line with EU's one.
Speaking in general, new Customs Code is a switch to a new level in customs clearance concept and approach. Inter alia, the new Code has unified and consolidated the separate statutory documents in the area of customs clearance. Nevertheless some aspects of customs procedures still need consideration and the EBA will continue advocating the issues of royalty definition in customs value determination, tolling operations at the territory of Ukraine etc.
The previous version of the Customs Code envisaged the system of guarantee deposit for inclusion of intellectual property objects into the special registry of intellectual property objects at customs check-points. Such guarantee deposit was aimed to ensure the compensation of expenses to the customs bodies and owners of the temporary storage facilities for suspension of customs clearance of goods and for storage of goods. Such system proved to be ineffective and burdensome for business entities, as they had to pay the respective sum for each trade mark included to the registry to ensure the compensation of expenses.

The EBA has consistently put the concerns over such deposit on the agenda. This issue had been discussed at various meetings with the State Customs Service of Ukraine, other state authorities and included into EBA report "Overcoming obstacles to business success" (2009) and other EBA position papers.
The EBA considers this policy step as important step for improvement of intellectual property rights protection in course of customs clearance. The Association will keep on monitoring the implementation of respective provisions in practice.
The new edition of the Customs Code of Ukraine, which will enter into force since 1 June 2012, allows companies to get partial tax relief for imported goods due to the temporal admission regime.

Previous version of the Customs Code was not fully harmonised with Convention on Temporary Admission implemented by Ukraine on 24 March 2004 in terms of goods taxation in the regime of temporal admission. In particular, in the previous Customs Code envisaged the list of goods, which were allowed to be temporary imported to Ukraine with tentative full relief from taxation. Since other rules are not stipulated, temporary import of goods that are not listed in the Article 206 is taxed as goods that were imported for the free use in the import customs regime. Such situation created considerable inconveniences in terms of taxation for business representatives.

In this regard, the EBA position proclaimed the necessity of fixing at the legislative level the possibility of partial tax relief for goods, which temporary imported to Ukraine and cannot be fully relieved from taxation. The existence of such procedure would allow paying only fixed part of taxes used for certain period of temporary import.

Currently, the new edition of the Customs Code contains definite provision concerning abovementioned problem, namely article 106 that is called “Goods, which can be placed to temporary import customs regime with partial tax relief from customs duties”. Since now, this provision establishes the conditions of partial exemption from customs payments, in particular: customs duties rates, mechanism of their estimation and calculation as well as the terms of its paying off.