These amendments provide Ukrainian businesses with an opportunity to prepare for the upcoming European customs rules that will be introduced with the new Customs Code of Ukraine.
Introduction of European-Style Customs Representation
The primary innovation is the introduction of the concept of customs representation, similar to that used in EU countries. This change divides customs representation into two types:
- Direct Customs Representation: The customs broker acts in the interest and on behalf of the client.
- Indirect Customs Representation: The customs broker acts in the interest of the client but on their own behalf.
Businesses and customs brokers can now independently choose the format of customs representation that best suits their needs. This choice delineates the rights, duties, and responsibilities between the customs broker and the client.
Key Differences Between Direct and Indirect Representation
- Liability: In indirect representation, the customs broker becomes the declarant and shares joint liability with the client for customs payments.
- Payment of Customs Duties: Previously, customs brokers could pay duties on behalf of clients without clear rights as taxpayers. The new amendments clarify this process.
- Responsibility for Declarations: Under the old system, customs brokers were responsible for the correctness of declarations, even though inspections were directed at clients. The new system aligns responsibilities more appropriately.
Three Scenarios for Declaring Goods
With the new amendments, goods can be declared under one of the following scenarios:
Scenario 1: Self-Declaration by Importer/Exporter
- The business has trained staff to handle declarations.
- They understand customs control and clearance rules.
- They prefer not to incur additional costs by hiring a customs broker.
- They possess licensed software for goods declaration.
Scenario 2: Engaging a Direct Customs Representative
- The business lacks staff for declarations.
- They are not well-versed in customs procedures.
- They are willing to hire a customs broker.
- They accept full responsibility, potentially reducing broker fees.
- They do not have licensed declaration software.
Scenario 3: Engaging an Indirect Customs Representative
- Similar to Scenario 2 in lacking staff and expertise.
- Willing to hire a customs broker and pay higher fees.
- Responsibility for declarations is shared with the broker.
Legislative Progress Towards EU Integration
On August 22, the Verkhovna Rada adopted the Ministry of Finance's draft law "On Amendments to the Customs Code of Ukraine on the Implementation of Certain Provisions of the Customs Code of the European Union" (No. 10411 dated January 16, 2024). This comprehensive law, spanning about 150 pages, significantly aligns Ukrainian customs legislation with that of the EU.
Main Changes Proposed by the Draft Law
- Customs Representation Concept: Introduces direct and indirect representation, clarifying duties and responsibilities.
- Authorization System Transition: A gradual 18-month shift to an EU-like authorization system for enterprises under customs control, including customs brokers and warehouse operators.
- Customs Warehouse Operations: Introduces EU model types of customs warehouses and expands permissible operations.
- Enhanced Opportunities for Authorized Economic Operators (AEOs): Broadens financial condition criteria, even with negative net assets.
- European Approach to Customs Regimes: Implements authorizations for specific customs regimes, storage requirements, and transfer mechanisms.
- Alignment with EU Delivery and Storage Provisions: Adjusts regulations on delivery, presentation, and storage of goods under customs control.
- Simplification for Enterprises: Eliminates the need for customs officer presence when moving goods between authorized enterprise facilities.
- Development of Post-Customs Control: Merges post-clearance control with customs audit measures, allowing electronic exchanges and risk analysis.
- Protection of Intellectual Property Rights: Enhances measures against counterfeit goods crossing the customs border.
Anti-Corruption Measures
- Transparency in Decision-Making: Customs authorities will publish depersonalized decisions resulting from complaints within three days.
- International Information Exchange: Customs authorities can electronically share customs value information with foreign counterparts.
Collaboration with Business and Public Stakeholders
During the draft law's preparation for the second reading, several initiatives and clarifications were added:
- Priority for AEOs: Enterprises with AEO status will receive priority in border crossing and state border arrival, utilizing electronic queue systems.
- Definition Clarifications: Terms like "accounts," "declarant," and "goods holder" are clearly defined.
- Responsibilities Outlined: Duties of declarants, regime holders, and taxpayers are distinguished and aligned with the Tax Code of Ukraine.
- European Storage Requirements: Replaces permanent customs control zones with financial guarantees for goods preservation.
- Expanded Permitted Operations: Clarifies the list of operations allowed with goods under customs control.
- Authorization Improvements: Enhances provisions for granting customs regime authorizations.
- Equivalent Goods Use: Clarifies regulations regarding the use of equivalent goods.
- State Refusals: Regulates the possibility of refusing goods with Ukrainian status in favor of the state.
- Customs Clearance Payments: Improves regulations regarding payments for customs clearance outside customs authority locations or working hours.
Implementation Timeline
The proposed changes are expected to come into effect six months after the official publication of the law. During this period, the Cabinet of Ministers and the Ministry of Finance must approve all necessary subordinate regulations. Certain provisions, such as priority border crossing for AEOs and exemption from delivery time limits due to electronic queues, will become effective the day after the law's publication.
