Сustoms regulations: оverview of Ukraine’s progress in implementation of Association Agreement with the EU
February 28, 2018
Ukraine’s commitments under the Association Agreement with the EU in terms of customs regulations can be split into two major groups, as follows: Commitments regarding approximation of customs legislation (Annex XV of the Agreement) and Commitments of a general nature (Chapter 5 “Customs and Trade Facilitation” of the Agreement).
With regard to the first group of commitments, the Association Agreement defined clear deadlines for implementation to Ukrainian legislation of main four EU’s Regulations and two conventions. Commitments of the second group represent principles and best practices in the customs area (e.g., such as the EU’s Customs Blueprints). Furthermore, provisions of Chapter 5 of the Agreement envisage not only unification of law but harmonization and improvement of law enforcement practices (such as customs valuation, selective inspections based on risk analysis, etc.).
Therefore, what did the high-level analysis of Ukraine’s performance on approximation of customs legislation showed? It is necessary to remind that on request, more detailed comments regarding certain aspects of legislative changes and practices of applying customs legislation may be available.
The Union Customs Code (UCC) – 3 years after Agreement’s entry into force
Comprehensive changes to current Customs Code of Ukraine would be necessary for implementation of the UCC (Regulation (EU) No. 952/2013).
Currently the Verkhovna Rada considers the draft law on amendments to the Customs Code (No. 4777 of June 3, 2016) developed on the basis of the UCC and bylaws to the UCC (Commission’s delegated acts (EU) 2015/2446 and 2015/2447).
For almost a year and a half (since June 2016) the draft law remains “motionless”.
In addition to that, Ukrainian Government has recently registered another draft law (No. 7473 dated 29 December 2017) on the same subject. Essential provisions of the draft laws No. 4777 and 7473 are similar and comply with the UCC. Draft law No. 7473 provides a 3-year transitional period for implementation of the Authorized Economic Operator (AEO) concept in Ukraine (during this period, a limited number of AEO certificates may be granted to manufacturing companies that are engaged in cross-border activities not less than 3 years).
Approval of the above drafts would only partially contribute to the UCC implementation, in particular as for:
- Simplification of customs formalities for AEO.
- Introduction of short entry declarations (to be lodged by forwarders).
- Harmonization of post-clearance audit techniques.
- Reduction of paper workflow in customs clearance.
A single comprehensive draft law on amendments to the Customs Code is required for the full-scale implementation of the UCC provisions. As at to date, we are not aware of any intentions of the Ukrainian Government regarding development of such a draft law. This draft law should focus on those UCC’s provisions where the differences between the customs legislation of Ukraine and the EU are the most significant, in particular:
- Inspections of goods and verification of customs declarations.
- Customs debt and guarantees.
- Customs procedures (including levying of customs duties).
- Appeals and penalties.
Convention on a Common Transit Procedure (NCTS Convention) and Convention on the Simplification of Formalities in Trade in Goods (SAD Convention) – 1 year after Agreement’s entry into force
Accession to the above Conventions would be possible only upon invitation of Ukraine by the European counterpart (provided that Ukraine meets the legal and technical conditions). The Government has elaborated relevant draft law (No. 5627 dated 29 December 2016) on this. At the same time, the draft law does not establish a specific procedure for application of NCTS for transit movements of goods between the EU and Ukraine.
In addition, Ukraine’s accession to the NCTS Convention cannot bepossible without implementation by Ukraine of the main UCC provisions on transit of goods (in particular, relating to customs debt, guarantee systems, interaction between customs authorities of Ukraine and the EU during transit operations, etc.).
At the same time, at the bylaw level the Order of the Ministry of Finance No. 1193 dated 28 December 2016 harmonized certain codes used for customs declarations and brought them in line with the requirements of the NCTS.
Procedure of completion of customs declarations in Ukraine generally complies with provisions of the SAD Convention. However, existing practice of excessive information about the goods, and a large number of documents to be attached to the customs declaration are not aligned with the EU practices.
Currently, Ukraine’s commitments in this area cannot be considered as accomplished.
Council Regulation (EC) No. 1186/2009 dated 16 November 2009 setting up a Community system of reliefs from customs duty – implementation of Chapters I and II during 3 years after Agreement’s entry into force.
This Regulation mainly governs exemption from customs duties of the goods imported by individuals in non-commercial turnover.
The draft law elaborated by the Ukrainian Government (No. 4615 dated 6 May 2016) generally complies with the Regulation. However, it has been in the Verkhovna Rada for more than one and a half years and has not been considered at a plenary session of the Parliament yet.
Council Regulation (EC) No. 1383/2003 dated 22 July 2003 and No. 1891/2004 dated 21 October 2004 (regarding protection of intellectual property rights during movement of goods across border).
In order to implement provisions of the Regulations No. 1383/2003 dated 22 July 2003, No. 1891/2004 dated 21 October 2004 the Government has elaborated draft law (No. 4614 dated 6 May 2016). Generally, the draft law meets requirements of the Regulations and would, in particular, facilitate resolving the problem of “parallel import” (original goods imported without the permission of a IPR holder), “patent trolling” (abuse of intellectual property rights), as well as the destruction of small quantities of counterfeit goods under a simplified procedure.
However, within one and a half years the draft law has never been put to the vote.
Therefore, such a “slow mode” of the adoption of the necessary legislation in terms of customs-related commitments under the Agreement negatively impacts implementation of the new standards by Ukraine’s customs. Obviously, Ukraine will receive the invitation to join the Conventions on a Common Transit Procedure and on the Simplification of Formalities in Trade in Goods only after fulfilment of the total scope of its obligations under these Conventions.
Robert Zeldі – Manager, Tax and Law, EY Ukraine
Anton Melnyk – Senior, Tax and Law, EY Ukraine
Yevheniy Kovtun – EU Law Expert, NGO Ukrainian Centre for European Policy
Author : Ukrainian Liaison Office in Brussels