EBA Meeting with the Head of the State Customs Service
Yesterday, April 15, the EBA business community met with experts of the State Customs Service of Ukraine and its head Maksym Nefodov. The meeting brought together about three hundred participants, which proves that the business highly appreciates the opportunity to have a direct dialogue with the customs management.
The discussion focused mainly on changes in customs procedures due to lockdown, the current status of business-relevant initiatives and projects, plans to enhance the performance of the State Customs Service.
According to the customs representatives and the head of the State Customs Service, the introduction of restrictive measures in Ukraine and neighboring countries has undoubtedly adjusted the work and plans of the customs. There is a 5% drop in trade in Q1 2020 compared to the same period last year, although the growth of 11.3% was planned. Accordingly, the dynamics will be even worse in April. It was triggered by several factors: border closures, falling prices for basic imported goods (gas, diesel, etc.), declining industrial and consumer demand.
As stated by Mr. Nefodov, the recent budget changes, that reduced the State Customs Service’s funding, will not interfere with the planned reform, namely, raising the salaries of customs officers after the recertification. Such recertification programs will start upon the end of the quarantine. At the same time, expenditures for development will be cut and partly transferred to the new stabilization fund. We hope that this fund redistribution will not affect the reform of the customs service significantly.
The State Customs Service representatives also assured the business that the quarantine would not affect the start for implementation of the Authorized Economic Operator (AEO) and the joint transit regime. Generally, the customs service follows the previously approved schedule. As for the joint transit regime, the software testing is being carried out, and the draft resolution on AEO was submitted for public consultation by the Ministry of Finance. Mr. Nefodov hopes that the first authorized economic operators would appear in Ukraine by the end of the year. Other customs representatives also commented on their position on establishing a minimum amount of overall financial guarantee and limiting the range of potential guarantors and concluded that they do not support such initiatives.
We are grateful for the update on the application of the Pan-Euro-Med Convention with Georgia and Israel. The agreements have now been ratified, following some technical procedures, namely publication in the official journal of the European Commission. Then Georgia and Israel will become the first countries with whom Ukraine will have a diagonal cumulation. Then Ukraine will proceed with EFTA countries.
Regarding the cooperation between the State Customs Service and the Security Service of Ukraine, Mr. Nefodov said that the authorities were trying to build constructive collaboration within the framework of the legislation. According to the head of customs, the SBU should not exert excessive pressure on the business. However, as long as there is no financial investigation service, the security service would still be involved in certain smuggling investigations.
When asked about the criminalization of the responsibility for export/import of goods with the violation of customs rules, it was reported that the relevant draft law was forwarded to the Ministry of Finance in February. At the same time, due to the change of ministers, it has not yet been approved yet. But there is consensus on this issue among the authorities, and the EU Delegation supports the initiative. The only question that remains open is the extent of the crime subjected to criminal liability. Also, the head of customs proposes to grant the customs authorities with some law enforcement functions.
The business was also interested if there would be any changes in the work of the checkpoints. Although this matter is not within the competence of the customs authorities, Mr. Nefodov hoped that there wouldn’t be further checkpoint closures since quarantine measures should not restrict trade and cargo traffic.
At the same time, it became known on April 15 about the closure of another 10 road crossing points at the Ukrainian border. An up-to-date list of open and closed checkpoints is available on the interactive map.
Regarding the introduction of electronic document flow and new e-services, the Head of the State Customs Service said that modernization of IT processes was one of the most important aspects of customs reform. There is an online customs portal with lots of e-data bi.customs.gov.ua. The implementation of electronic document flow is already finalized for the central office and will gradually spread to the regions. For this purpose, it is necessary to carry out training of employees and to modernize the equipment, but these processes are being slowed down by the quarantine. At the same time, the current extraordinary conditions can be the impetus for the digital transformation of inert government authorities.
For its part, the business noted that they had fewer problems with adjusting the customs value. According to Mr. Nefodov, the share of declarations for customs value adjustments amount to 4-5%, while 80-85% of customs declarations are processed by the first method. As for now, the customs service is not going to abandon this tool and offers to resolve all disputable issues individually with the support of the EBA.
The business also reported a problem with customs declarations of EA type, such as a frequent reaction of an automated risk system, namely the risk 117 of custom value control with the obligatory delivery of cargo to the customs control area (terminal). This implies additional time and financial costs for companies, especially in the quarantine period, when it is recommended to limit the personal contacts of the driver, declarant, and customs inspector. We expect the support of our proposal to change the custom value control procedure to reduce the necessity of sending trucks to the customs terminal.
Customs clearance of medical products against coronavirus is currently a priority for the customs. During the meeting, the representatives of the customs service informed that the updated clarification letter was sent to the territorial authorities on the implementation of changes to the tax and customs legislation and Government regulations regarding the VAT and import duties exemption for medical goods.
Also, it was mentioned that the possibility of paying import VAT by issuing a promissory note must not be reintroduced during the lockdown since it is expected to be a temporary situation that will last several weeks or, maximum, a month.
All issues that the business did not have time to address during the meeting will be submitted in writing to the State Customs Service. We sincerely thank Maksym Nefodov and all experts of the State Customs Service for their time and prompt response to the EBA appeal. We look forward to having further productive meetings!