Customs simplification: an overview of major European innovations
Volodymyr Zosimov, associate at Legal Alliance Company
Simplification of customs procedures and bringing them in line with the best world standards is a prerequisite for Ukraine's competitiveness in the global economic system.
Unfortunately, Ukraine has long lacked a comprehensive customs policy. With the signing of the Association Agreement with the EU, the country has made additional commitments to reform customs procedures. Fulfillment of all obligations undertaken under the Agreement should significantly facilitate customs procedures and, consequently, reduce the cost of international carriage. However, activities in this area for the last 5 years have remained chaotic and haphazard.
The Association Agreement, among other things, provides for the implementation of the EU customs legislation (the so-called EU Customs Code), in particular, it provides for the creation of a "single window" at customs, the introduction of the Institute of Authorized Economic Operators (or AEO), the creation of a single administrative document (SAD) with its further recognition by the EU, as well as Ukraine's accession to the common European transit system. All these processes are interconnected by the logic of the Association Agreement.
Improvement of the single window mechanism
The Cabinet of Ministers of Ukraine made some progress in facilitating customs procedures when it issued Resolution No. 364 of May 25th, 2016, which introduced the “single window” elements at customs. This made it possible to introduce (though not to the full extent) electronic document flow in customs procedures. Over three years more than 85% of the declarants (according to the State Fiscal Service) have used this service, which may indicate a positive perception by the business of this innovation. However, due to the absence of further legislative regulation of the "single window", the practice of submitting documents in paper and electronic forms has remained widespread.
In order to change this situation, the above-mentioned Law No. 2530-VIII of September 6th, 2018 has been adopted, which introduced significant changes to the Customs Code of Ukraine and other laws regarding the improvement of the single window mechanism and reduction of the number of control procedures during customs clearance of goods.
According to this law, the customs authorities should establish and ensure the functioning of a single governmental information web portal "Single Window for International Trade", through which the work of all participants of customs procedures should be carried out. In particular, the law provides for the possibility of submitting electronically all the documents and / or information required for customs clearance. That means, the obligation of a foreign economic entity or customs broker to submit a paper document issued by one governmental authority to another will be abolished, and the documents and information will be provided electronically on a one-off basis and the supervisory authorities themselves will put electronic marks in a common database.
Currently, the practical implementation of all the planned features of the single window for international trade portal remains questionable. The Customs Service is also obliged to identify the UKT FEA codes for goods that have been subject to prohibitions or restrictions across the customs border of Ukraine and to maintain and publish lists of such prohibitions or restrictions on its website.
In addition, to simplify the procedures for controlling goods at the border crossing points, the law reduces the number of control bodies involved in customs clearance. This reduction is due to the fact that the checkpoints no longer fully carry measures of phytosanitary and veterinary-sanitary control, as well as state control over the observance of the legislation on food, feed, animal by-products, animal health and welfare. All these controls now known as official controls are carried out not at the checkpoints, but at the destinations points.
Customs officers carry out official control measures only in the form of preliminary documentary control, which means check permits, which were previously controlled by the officials of the State Environmental Inspectorate. Customs officers have the right to call officials of the State Environmental Inspectorate to carry out official controls only in specific cases (for example, in case of carriage of live plants or animals due to the threat of pathogens). Thus, sanitary and epidemiological supervision was excluded from the customs procedures and will be carried out within the country after customs clearance of goods. At the border crossing points of Ukraine, the functions of the sanitary and epidemiological service are limited to carrying out preventive and anti-epidemic measures through medical examination of passengers, crews of ships and aircraft, etc.
Radiological control, which was also previously carried out by officials of the State Environmental Inspectorate, is now exercised by officials of the State Border Guard Service of Ukraine.
Institute of Authorized Economic Operators
The introduction of AEO will help reduce the number of customs procedures for reliable companies, with further mutual recognition of companies with AEO status by EU and Ukraine. The status of Authorized Economic Operator confers certain preferences in customs procedures and is, in fact, evidence of the highest degree of customs confidence in a company that can reasonably be given to an enterprise by the state. Formally, the institute of authorized economic operators has been described in the Customs Code of Ukraine since 2012. However, in practice, due to the complex and inexcusable bureaucratic mechanisms of obtaining this status and its further operation, business has not paid due attention to this institute. Moreover, in essence, these rules do not comply with the European legislation.
Single administrative document
The introduction of the SAD means the introduction of customs declarations that are in line with the EU declarations and can be used for any import or export procedure.
Some changes to the implementation of the SAD in Ukraine were made by Law of Ukraine “On Amendments to the Customs Code of Ukraine and Some Other Laws of Ukraine on the Introduction of the Single Window Mechanism and Optimization of Control Procedures for the Movement of Goods Across the Customs Border of Ukraine” No. 2530-VIII which was approved by the Verkhovna Rada of Ukraine on September 6th, 2018 and entered into force on October 4th, 2018. These amendments allow, before the entry into force of the Convention on a Single Transit Regime for Ukraine, in the cases specified by the Cabinet of Ministers of Ukraine, using customs declarations that comply with this Convention. Unfortunately, at present the Cabinet of Ministers has not been able to adopt an appropriate document establishing the cases of the use of such customs declarations, and therefore, the order of their completion has not been established either.
Accession to the Single Transit Convention
Ukraine's participation in the common transit system of the European Union through its accession to the Single Transit Convention could offer numerous benefits for all EU trade participants (exporters, carriers, importers), the main one being the elimination of the need to declare export goods at the EU border (this will only be done in Ukraine) leading to a significant acceleration and cheaper movement of goods.
Probability of Ukraine's accession to the Convention on a Single Transit Regime is low. The Convention unifies the procedure for the transit of goods among the states parties. Ukraine was required to amend its legislation in accordance with the requirements of the Convention to join the convention in 2018 (under the Association Agreement). In 2018, the government only managed to publish a "Roadmap for Ukraine's Accession to the European Union / European Free Trade Association (EU / EFTA) Joint Transit Procedure", which stipulates that the harmonization of Ukrainian legislation with the requirements of the Convention can be completed no earlier than 2020. In addition, changes contemplated by this document do not cover some of the essential requirements of the Convention (for example, the protection of personal data, the peculiarities of using paper documents when moving goods by rail and air, etc.).
What did we get as a result?
A “single window” was introduced at the customs office with the transition to electronic document flow (although not all elements have been implemented in practice) and the number of customs procedures has been reduced by canceling customs clearance of goods, measures of phytosanitary and veterinary-sanitary control, as well as state control over compliance with legislation on food, animal food, animal by-products, animal health and welfare.
Regarding introduction of the institute of authorized economic operators, as well as a single administrative document and Ukraine's accession to the EU Common Transit System, unfortunately, there is no visible progress.
There were three draft laws to remedy the situation: # 4777 (concerning AEO), # 567 (concerned SAD) and No. 7473 (concerning compliance with the requirements of the Association Agreement with the EU in the field of customs control). The first two, after a lengthy consideration in the Council, did not find adequate support among the people's deputies, and the third, after nearly a year's consideration in the committees, was adopted at first reading at the end of February this year, but its further prospects remain hazy.
Therefore, we hope that the new Verkhovna Rada will find the strength and the desire to continue the planned reforms, and the newly created State Customs Service will support this process.