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 Call for Action: Main Customs Law Requires Modernization Now!
U.S.-Ukraine Business Council (USUBC)
Kyiv, Ukraine, Tuesday, October 12, 2010
UKRAINE BUSINESS NEWS - SIX ARTICLES
Call for Action: Main Customs Law Requires Modernization Now
INDEX OF ARTICLES ------
Clicking on the title of any article takes you directly to the article.
Return to Index by clicking on Return to Index at the end of each article
1. MAIN CUSTOMS LAW OF UKRAINE REQUIRES MODERNIZATION
A call for action now by the government of Ukraine
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Oct 12, 2010
2. UKRAINIAN VICE PRIME MINISTER TIGIPKO MEETS WITH UPS AND DHL SAYS UKRAINE NEEDS TO MODERNIZE ITS CUSTOMS REGULATIONS
VPM Tigipko proposes approval of amendments to the customs code and other initiatives
U.S.-Ukraine Business Council (USUBC), Kiev, Ukraine, Friday, July 30, 2010.
3. SERHIY TIHIPKO: IN SEPTEMBER GOVERNMENT WILL DEMAND THE PARLIAMENT ADOPT A NEW VERSION OF THE CUSTOMS CODE OF UKRAINE
Customs clearance procedures for express shipments need to be radically simplified says Tihipko
Press Service of Vice Prime Minister Tihipko, Kyiv, Ukraine, Fri, July 30, 2010
4. WELCOME TO THE UKRAINIAN CUSTOMS SERVICE
Actual express package horror stories regarding Ukrainian Customs Service
one of the worst customs clearance systems in the world.
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, July 17, 2008
5. UKRAINE: EXPRESS MAIL HELD UP BY CUSTOMS CODE
By Yulia Golub, Staff Writer, Kyiv Post, Kyiv, Ukraine, Thu, July 17, 2008
6. UKRAINE'S EXPRESS DELIVERY SECTOR: IN DIRE NEED OF EXPRESS FIXING
By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Mon, Mar 3, 2008
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1. MAIN CUSTOMS LAW OF UKRAINE REQUIRES MODERNIZATION NOW
A CALL FOR ACTION by the government of Ukraine
CALL FOR ACTION: U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Oct 12, 2010
WASHINGTON, D.C. -- There is hardly any forum for international and domestic investors in Kyiv where the terrible situation with the Ukrainian governments customs clearance procedures will not be raised for serious discussion.
The most common concerns are in the areas of (1) the customs demand to increase the customs value of imported goods above their real value, (2) the extremely slow and overly bureaucratic procedures of clearing items and (3) the physical inspection of goods in quantities and percentages which are above and beyond any comprehension and totally out of line with internationally accepted standards.
These major issues have become so common that there is hardly any company involved with the import of goods into Ukraine that has not recently been negatively affected by the outdated rules and procedures.
IMPORTERS ARE GIVEN LITTLE CHOICE
Importers are given little choice. They have to either agree with the increased value of the goods (most of the time having little to no grounds for it) or have their goods delayed at the borders for an uncertain period of time while arguing with the customs decision and thus absorbing extra costs.
The voice of private business has been heard and at least considered. The Program of Economic Reforms of Ukrainian President Yanukovich acknowledges the necessity to (1) introduce new procedures on determining customs values which will be in line with WTO and EU recommendations, (2) stop the practice of setting taxes & duties on imports based on the amount of tax income targets set for customs departments, (3) to improve the efficiency of customs procedures and speed of clearance.
The intention is right - however the reality is different - year after year nothing actually gets done, nothing changes. The negative impact on Ukraine’s image among investors is hard to underestimate.
CUSTOMS CODE OF UKRAINE NEEDS TO BE BROUGHT IN LINE WITH KYOTO CONVENTION
There are a few things that can be done today to improve the situation with the customs clearance especially in the area connected with the vicious practice
of increasing the customs values in order to meet revenue targets. But even what can be improved does not happen.
However, the majority of the significant changes needed are not feasible unless the main customs law, The Customs Code of Ukraine, is modernized, and its main stipulations brought in line with the International Convention on the Simplification and Harmonization of Customs Procedures, known as the Kyoto Convention.
The draft law on the changes to the Customs Code of Ukraine, which incorporated the main principles of Kyoto Convention and EU Customs regulations, was ready for the first hearing in the Parliament in the summer of 2008. The intention at the time was to have a modern Customs Code passed and implemented by the beginning of 2009.
A CALL FOR ACTION NOW
But nothing happened and there has been little progress, if any, in the last three years. It was only recently that VPM Serhiy Tihipko “re-launched” the process of discussing the draft customs code with the experts from the private business organizations and announced the objective to bring the proposed legislation to the Parliament in the autumn of 2010.
The VPM made his announcement at a meeting in Kyiv in August organized by the U.S.-Ukraine Business Council (USUBC) which highlighted the serious problems of the customs service and issued a "Call for Action." The action by VPM Tihipko got the attention of some key government bureaucrats in the Customs Service but they have successfully managed to stop any real progress from being made.
"We are using every opportunity to stress the importance of modernizing the Customs Code of Ukraine as soon as possible. The attempts to change the way customs operates has taken far too long, " said Vadim Sidoruk, Commercial Manager of DHL Express in Kyiv.
"There is little chance Ukraine will attract the major, long-run international investments it needs in the private sector unless its business climate at least matches that of its neighbors in Central Europe. Clear and transparent customs regulations which meet international standards and are professionally implemented in actual practice will make a significant impact on the investor attractiveness of the country," Sidoruk explained.
NOTE: UPS and DHL, two of the major handlers of express packages in Ukraine, are members of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.ususb.org.
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2. UKRAINIAN VICE PRIME MINISTER TIGIPKO MEETS WITH UPS AND DHL SAYS UKRAINE NEEDS TO MODERNIZE ITS CUSTOMS REGULATIONS
VPM Tigipko proposes approval of amendments to the customs code and other initiatives
U.S.-Ukraine Business Council (USUBC), Kiev, Ukraine, Friday, July 30, 2010.
KYIV - VPM Sergei Tigipko met with top company representatives of UPS and DHL in Ukraine, two members of the U.S.-Ukraine Business Council (USUBC), following his commitment given at a two-hour USUBC Business Roundtable meeting with the major corporate members of USUBC on Tuesday, July 27 in Kyiv, to further investigate the critical issues which significantly hamper the delivery of express packages into Ukraine.
VPM Tigipko stressed that Ukraine needs to modernize its customs regulations and to bring it in line with the requirements of the modern world and promised his full support to this process. The major issues impacting the speed of clearance are partly due to the current legislation which will only change with the approval of the amendments to the Customs Code in the Parliament.
Several immediate initiatives were proposed by VPM Tihipko in order to streamline the process of clearance of express shipments:
[1] packages for private individuals with the declared value below 200 Euros and which do not require additional payments to be cleared on the day of arrival and all additional paperwork to be cancelled asap.
[2] Non tariff regulation permissions for non dutiable shipments to be delegated to the Customs Services to avoid time consuming applications to numerous state authorities.
[3] Customs Services was advised to accept a practice of maximum 5% inspection of packages which is in line with the best international practices.
The Deputy of the Head of the Customs Services Victor Bondar was also advised to review other procedures that can be resolved in the immediate future.
Also the proposed measures will only resolve a part of the major problem but this will be a big relief for the thousands of express operators’ customers and the first ever “walk the talk” in the facilitation of the customs issues impacting delivery of express packages to Ukraine.
BUSINESS COMMUNITY HURT BY EXTREMELY SLOW SYSTEM
"The ability to receive and/or send express packages is vital to sustaining operations of almost any international firm in Ukraine. The complete mess that is the system for processing these type of letters and parcels is yet another one of the many impediments to Ukraine receiving adequate investment by international entities," said Morgan Williams, Director, Government Affairs, Washington, D.C., office, SigmaBleyzer private equity investment group, who serves as president of USUBC.
“The archaic, inefficient, slow and extremely complicated customs procedures have been discussed with Ukrainian government officials for four years now and little progress if any has been made. It is a typical situation when equipment worth hundreds of thousands of dollars will stand idle for a week waiting for the spare parts worth 100 dollars while the parts get cleared at customs," said Williams.
"The business community contacts USUBC on a regular basis about the terrible express package system operated by the Customs Service in Ukraine," according to Williams. "USUBC has had the improvement of the handling of express packages as one of its top priorities since 2008. Almost no improvement in the system has taken place in the last two years."
Vadim Sidoruk from DHL Express presented the issues faced by the international express carriers in Ukraine to VPM Tigipko, State Customs Services’ and Cabinet of Ministers’ top officials. “ There are three dedicated cargo aircraft landing in Kiev everyday with express packages and just over 20% of the dutiable shipments can be cleared through customs on the day of arrival.
UKRAINE'S SYSTEM IS ONE OF THE WORST IN THE WORLD
"There are only few countries in the world which “outperform” Ukraine as the worst in the world. It is important to understand the impact of the shipments delayed at customs which often result in lost revenues, additional costs for companies and Customs Services itself, it generates innumerous complaints from business community and private individuals. Last but not least it constantly deteriorates Ukraine attractiveness among potential investors,” according to Sidoruk from DHL.
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3. SERHIY TIHIPKO: IN SEPTEMBER GOVERNMENT WILL DEMAND THE PARLIAMENT ADOPT A NEW VERSION OF THE CUSTOMS CODE OF UKRAINE
Customs clearance procedures for express shipments need to be radically simplified says Tihipko
Press Service of Vice Prime Minister Tihipko, Kyiv, Ukraine, Fri, July 30, 2010
KYIV - Customs clearance procedures for express shipments need to be radically simplified, Vice Prime Minister Serhiy Tihipko said today during a meeting on Friday with representatives of express shipping companies [DHL and UPS, and with representatives of U.S.-Ukraine Business Council (USUBC)] and the management of Ukraine’s customs service.
During the meeting they discussed ways to resolve problems that hinder the work of international postal operators. In particular, due to complex and conflicting legislation, every day only 23% of express shipments are cleared quickly. A large number of permits are required to clear even a small package, often resulting in delays from three to ten days – something that is unacceptable in the express-mail business.
The Customs Service of Ukraine has already drafted the necessary decisions that would free international express shipments that are not subject to taxation of such mandatory permits, and consolidate the registration of such international express shipments using a register.
SOME NEW PROCEDURES CAN BE ADOPTED QUICKLY
According to Serhiy Tihipko, these regulations need to be adopted in the nearest future: “Mailings worth less than 200 Euros and weighing up to 50 kg should not be taxed and should be cleared through customs free of charge on the day of arrival.”
The Vice Premier also believes that not all express packages should be inspected, given that based on international practice of selective inspections, no more than 5% of shipments are inspected. The radical simplification of customs clearance is only possible after the adoption of a new version of the Customs Code of Ukraine, which has been in parliament for two years but has yet to be considered.
Serhiy Tihipko believes that finalizing and adopting a new Customs Code, which will radically simplify customs procedures, is a priority.
LINK: http://www.kum.gov.ua/control/uk/publish/article?art_id=243563372&cat_id=243316861
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4. WELCOME TO THE UKRAINIAN CUSTOMS SERVICE
Actual express package horror stories regarding Ukrainian Customs Service,
one of the worst customs clearance systems in the world.
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, July 17, 2008
KYIV - Major express package shippers have provided the U.S.-Ukraine Business Council (USUBC) with the following actual express package horror stories regarding Ukrainian Customs Service, one of the worst customs clearance systems in the world.
1. A major soft drink company imports samples of plastic caps with their logo on them, 6 pieces. Shipment is not released because Ukrainian customs
requires an official letter from the company that the bottle caps will not be used for medical purposes thus causing huge delay in their delivery.
2. A company imports communication equipment with a value $1,000,000. A CD disc with installation instructions is included in the shipment. Ukrainian
customs does not clear the shipment and requires a new invoice with the following break down:
$ 999,997 - Equipment
$ 3 - CD
This unnecessary requirement caused a delay of 7-12 days in the final delivery of the one million dollars of communication equipment.
3. A company imports play stations. In the device there are standard batteries. Ukrainian customs does not clear play station without a license. To obtain
the license the company spends 2 weeks.
All chemical sources of power (batteries) are subject to licensing by the Ministry of Industrial Policy of Ukraine. The same goes for players, notebooks, watches, mobile phones.
4. An importer applied for a preliminary inspection before customs clearance. The inspection took 3 hours. A customs inspector prepared and stamped the inspection list. During actual clearance the shipment was subjected to the same 3 hours inspection again.
5. A representative of a foreign company planned to visit an exhibition in Kyiv and sent by express mail some heavy promotional material (brochures).
The shipment was addressed to the hotel where the guest had a reservation.
The shipment arrived one day earlier than the guest arrived. To obtain such a shipment the businessman then when he arrived had to get 5 documents, wait a minimum of a week. By the time all the documents were collected and the declaration submitted to customs service - the exhibition was over.
6. While on a business trip a person forgot his pants in the hotel. The hotel sent them to the person in Kyiv by express mail indicating a value of $50.
Ukrainian customs increased the value to $400. The person refused to pay the $40 duty required by customs for his own old pants. Pants had to be
shipped back.
7. A private individual expected to receive samples of textile 250 gr that had a value of 0.15 Euro. Ukrainian customs prepares a request to tariff department. After 8 days the tariff department increases the value up to 0.90 Euro.
Duty planned first - 0.10 cents. Duty paid after increase - 0.70 cents. 12 days time lost do to this Ukrainian customs procedure.
8. If you are an on-line shopper living in Ukraine you must be prepared to undergo the following steps to customs clear an express shipment with the
basic content says of a gift book, teddy bear, t-shirt, set of screwdrivers,etc.:
a) Prepare copy of your passport, translated invoice, detailed description of the content;
b) Produce a hard copy of the declaration M-16
c) Spend an hour or so in a line to the customs chief to have the name of inspector who'll be dealing with your case;
d) Spend another hour plus in line to see "your" inspector
e) Wait 1 to 2 hours until shipment physically checked (Customs maintains Soviet days policy of 100% control over every package!)
g) Spend 30 minutes in line to pay the duties
NOTE: This is the best case scenario. If there's a single deviation (e.g. $1 difference between the declared and actual value) the whole process starts
all over again from the beginning.
9. A person orders a book through the internet (English training book). In the book there is a CD with interactive material. To clear the shipment one
has to provide a different invoice breaking down the book and the CD.
Internet sellers do not do that, so the express package shipper has to invent such an invoice. As a result - delay of 7-10 days.
10. Many weeks up to 25% of all the express packages brought into Ukraine have to be shipped back to the sender because the receiver of the package
just gives up, says it is not worth the delay, or does not want to pay all the extra expenses involved to get the package or just gets tired of all the hassle
involved in obtaining the package. This is probably the worst return rate for express packages for any country in the world.
11. Express packages get to the shippers warehouse say by noon each day. Customs starts process of clearing packages. Then in each warehouse the
customs service employees all take a one-hour lunch break at the same time. The whole clearing process shuts down. After lunch customs starts again
and the easiest packages take at least three hours to clear. It is now late in the afternoon...so much for one day delivery.
There is one day express package delivery to Kyiv from most major cities around the world. Then the time it takes to get the package cleared by Ukrainian customs is a guessing game.....who knows......a high percentage of the packages are held up from one day to three weeks or more. Very, very costly for business.
12. Major international express package companies operating in Ukraine have to have more warehouse space per package handled and more staff
per package handled than in most any other country in the world.
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NOTE: UPS and DHL are members of the U.S.-Ukraine Business Council (USUBC), Washington, D.C. USUBC's list of top reforms needed in Ukraine, starting in 2008, included improving the delivery of express packages, which is just part of the recommended program supported by most business organizations to overhaul of the entire customs service. Very little has changed since the article above was written two years ago.
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5. UKRAINE: EXPRESS MAIL HELD UP BY CUSTOMS CODE
By Yulia Golub, Staff Writer, Kyiv Post, Kyiv, Ukraine, Thu, July 17, 2008
KYIV - While the competition in Ukraine's express carrier and freight forwarding market is not fierce, there are a number of problems that need immediate attention to raise the industry up to European levels. Ukraine's express services industry is far behind its Western counterparts, which are used daily to lubricate the international business machine.
However, "this kind of service is getting more and more essential, taking into account that Ukraine's main trading and economic partners are from the U.S. and the EU," explained Oksana Yakovleva, general director of DPD Ukraine.
All market insiders agree that because of the difficult customs procedures, a Soviet-era hangover, the quality of service in Ukraine is lower than in
other Western countries and explains why the service is in low demand.
Ukraine's entry into the WTO (World Trade Organization) will improve many different areas of the Ukrainian economy and laws. It will also benefit
express delivery services and freight forwarders which operate in Ukraine (the exception being domestic providers), by the passage of a new Customs Code, which will streamline clearance procedures and bring them up to Western standards.
"It is expected that the express market will undergo a boom if and when the new Custom Code is adopted," noted Vadim Sidoruk, commercial manager
of international giant DHL.
"It has become common knowledge that Ukrainian Customs laws regulating express delivery are some of the most, if not the most, complicated in the
world," complained Sidoruk, adding that no other country requires payment of duties for all parcels addressed to private individuals. The duties are
of doubtful value to the country's economy, as the costs of collecting them are often higher than the duty itself.
The complicated procedures adversely affect the profitability of express carriers and discourage their expansion of services in Ukraine. The current
law dramatically increases costs and reduces timeliness.
"The delay can be from one day to one week," noted Kaijo Meyer, general manager of LIONGroup, a German freight forwarding company, which leads
to client dissatisfaction and frustration.
But, for Ukrainian companies that work solely in the domestic market, "the customs procedures do not affect our cost or delivery times, as we specialize entirely in internal transportation," said Segey Grachev, general director of InTime.
Despite problems, market growth is robust. Annual growth rates hover between 30 and 35 percent, Yakovleva said. But, spiraling fuel prices and attendant
inflation makes it difficult for companies to maintain attractive pricing. At the same time, the market's clients demand a truly Western expectation of
timeliness.
"Companies are developing their businesses by implementing new kinds of services and improving those already existing, the development of infrastructure in Ukraine allows making deliveries better and faster," noted Alexander Pavluk, country manager for FedEx in Ukraine.
The industry is dogged by yet another persistent problem - qualified personnel. To counteract this trend, leading companies strive to increase
the retention and skill of their workforce.
"DHL invests heavily into staff training programs to overcome this personnel problem," said Sidoruk. But keeping highly trained operators puts pressure
on the payroll. "The constant growth of salary demands due to the high inflation rate is one of the many problems our company faces," added Yakovleva.
The lack of adequate warehouse and storage space continues to slow expansion. There are very specific demands for the quality of warehouse premises for clients using shipping services. "Class 'A' storage facilities need to be built in logistically strategic places, meeting rigid specifications," explained Grachev.
"They are built for longterm storage and we use logistic centers for crossdocking.Theoretically we should be building storage facilities of the strictly designed configuration, on suitable land near high traffic routes," he added.
This is very difficult to do in Ukraine because the majority of the land is zoned for agricultural use. Also, there is very little opportunity for well planned development because it is practically impossible to buy land and there is no legal basis for this kind of use in Ukraine.
Experts agree that the express delivery business is transitioning from the extensive to intensive phase of development. Grachev added that "several years ago the development of our transport operators was focused on expanding our geographical coverage, now we are striving to improve efficiency."
The Ukrainian market for international express services could be considered one with medium penetration. There is a high potential for crossborder internet sales traffic, to be unleashed by streamlining customs procedures. But, potential international internet clients are still unprepared to deal with the cross
border shipping costs.
In many cases the potential shipments of express carriers are being carried in individual suitcases. However, the future of the express business is
connected with the integration of the Ukrainian economy into the global economy.
"Ukraine lacks investments into real production of goods. And that is where the ability to provide justintime delivery of spare parts, production components, and consumer goods is most critical," said Sidoruk.
LINK: http://www.kyivpost.com/business/industglance/29264/.
NOTE: Very little has changed in the way the Ukrainian Customs Service handles express packages since the above article was written two years ago in 2008. A new customs code has been developed in cooperation with the private sector but never passed by the Ukrainian Parliament.
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6. UKRAINE'S EXPRESS DELIVERY SECTOR: IN DIRE NEED OF EXPRESS FIXING
By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Mon, Mar 3, 2008
KYIV - Express operators - DHL, UPS, FedEx and others - pride themselves on guaranteed, fast and reliable, on demand, worldwide, integrated, door-to-door delivery.
However, express shipments headed for Ukraine are guaranteed only as far as the country's borders where they collide with the State Customs Service,
which remains mired in Soviet-era bureaucracy and acts as a barrier to the sector's development
In an increasingly integrated world economy, in which the velocity of business has accelerated immensely over recent decades, the express industry
worldwide and particularly in Europe has played an essential role in the "just-in-time" concept that serves to provide business and industry with the
essentials of modern business.
GROWTH INDUSTRY IN A GROWING MARKET
The express industry developed first in the United States and by the 1980s began to make a major impact in Europe. The European Express Association
(EEA), a membership association covering all the major express operators, says the industry has more than 250,000 employees with that number expected
to reach 500,000 by 2013. EEA members deliver more than 450 million packages each year, almost half the intra European air cargo traffic.
In Ukraine, the express figures are less widely known, but two long-time express market competitors, DHL and UPS, continue to grow and expand
their investments. DHL is number one in the market with UPS a highly competitive number two.
ASSESSING THE PROBLEMS
Because the express business is so competitive and because keeping customers informed of the status of their shipments is an integral part of the competitive marketing process, all of the major actors in the sector have extremely sophisticated tracking systems.
Also because of the high sophistication of the technology, they are extremely adept at spotting and pinpointing delivery problems.
Unfortunately, in recent years, Ukraine has had more problems than any other major express destination in the world.
At least one of the major express companies actually has as part of its tracking system in its headquarters a large, flashing red light that goes off when some part of the system seriously breaks down and is not delivering within prescribed standards. When that red light begins flashing more often than not the problems have been in Ukraine - and almost invariably related to customs matters.
We should point out that this was not always the case. A few years ago - the late 1990s and early 2000s, Ukraine had problems but not as many as Russia
and it was Russia that got the attention - and then responded to the obvious flaws in its express handling procedures.
Today Russia is now rapidly becoming competitive with other advanced European countries in the sophistication of its express industry, while Ukraine, once a beacon of hope, has slid back into a bureaucratic miasma of failed opportunities.
LOOKING FOR SOLUTIONS?
As Ukraine fell further behind the international standards common to express companies, the carriers, both through their membership associations and
individually, began a series of efforts to help Ukraine attain higher levels of compliance and competence. For example, in March 2006, a delegation from the EEA visited Ukraine at the request of the Ukraine Express Association (UEA) to discuss with Customs ways to improve operating procedures for members.
Following this visit, a delegation of senior Ukrainian customs officials, accompanied by a number of company representatives, took a fact-finding tour of the major European express interconnection hubs, located in Brussels, Liege and Cologne.
The purpose of the visit was to enable Ukrainian officials to discuss first hand with Belgian and German customs officials the application of simplified
electronic procedures for express operators and to observe these procedures hands-on. The clear message following this tour was that Ukraine would
implement simplified electronic procedures as soon as practicable.
EXCUSES AND NO POSITIVE RESULTS
As of the end of February 2008, the express package customs clearance situation in Ukraine, in spite of endless discussions between Ukrainian customs officials and the express operators was little improved and some would suggest even worse.
An example of good intentions gone wrong is exemplified by the following excerpt from a joint implementation report of Ukraine-European Commission
work in 2003:
"Customs Regulations and Procedures. The New Ukrainian Customs Code, which was signed in August 2002, will enter into force from January 2004 and
should allow for an efficient and smooth movement of goods into and out of Ukraine and will eliminate the legal uncertainty and lack of transparency
for economic operators under which the customs authorities are currently working.
"The EC expects that the new Customs Code should also simplify the procedures for customs clearance, e.g. by moving to a 'one-stop' system and thus, eliminating the current complex and time-consuming procedures for customs clearance. This would significantly facilitate trade."
Fine words, indeed, but rendered almost meaningless by time and an unwillingness or inability of successive Ukrainian governments to turn the words into positive and long-lasting changes.
A NEW FALSE DAWN
There was a hope that the introduction of simplified electronic procedures as of January 1, 2008 was a breakthrough that would replace documents with electronic transactions. In reality, the new procedure appears to have little value for customs clearance and involves intense amounts of added work for express operators.
The new system so far consists of an electronic database into which operators have to enter all import and export shipments. The data inputted must include not only those shipments that are liable for duty, but also document-only shipments that would carry no duty at all.
The new electronic files are apparently for customs hold management and perhaps could eventually lead to the implementation of a risk management system. However, for now and the foreseeable future, all that has been accomplished is to pile greater work on the express companies and build up files on electronic data that are of no current value to anyone.
The new data remains almost totally unused as customs clings to the old practices - and the old paperwork - assuring it of 100% control of all incoming goods.
The 100% control system is still ingrained in law, regulation and practice in Ukraine. It is so totally antiquated and out of touch with 21st century business practice that Ukraine is increasingly placed at odds with the world express industry and the millions of customers worldwide who depend upon it to meet their needs and to increase business efficiency.
THE COST TO INDUSTRIAL DEVELOPMENT
Vadim Sidoruk, DHL's Ukraine commercial manager explained one of the greatest problems with Ukraine's system: "Over and over again, companies
considering multi-million dollar investments in Ukraine come to us and asked for an evaluation of the efficiency of the express delivery system here.
"We have no choice except to tell them the truth because we cannot afford to mislead companies to make major decisions based on incorrect information.
"It is hard to imagine just what would lead the parliament and the Customs Committee to make the changes necessary to remove the roadblocks.
"However, I cannot help but think that if they understood the many development projects that have gone elsewhere in part because of the antiquated customs procedures, that alone would have a very strong impact on their thinking - and actions."
Sidoruk also related a recent incident that points up the attitude that the Customs service takes toward express companies and their customers.
Within the last ten days, DHL has moved to a new 8,000 square-metre, USD 12 million state-of-the-art package processing centre in Kyiv. DHL
provided the customs service with fully equipped facilities for the 20 officers who staff the centre's customs functions.
DHL provided moving services to the new centre to meet not only its own needs, but also for the customs service. Once the move was complete, there
was a complaint that one box of personal effects belonging to a top customs official was missing.
Rather than dealing with the issue in a reasonable fashion, customs officials impeded the processing of incoming packages from all over the world for two days while customs officers searched for the one box of personal documents that had gone temporarily astray.
In effect, over 1,000 customers in a number of countries worldwide were inconvenienced and their packages unnecessarily delayed because of the pique of one customs official.
Sidoruk also pointed out that the new Ukraine DHL facility has what is probably Europe's largest holding and storage facility for uncleared incoming express packages. Unfortunately, the reason that such capacity is required, he pointed out, is that of all the packages held by customs in all of eastern and central Europe, 70% are being held in Ukraine.
HOPE FOR THE FUTURE?
Svetlana Tidyakina, country manager of the worldwide United Parcel Service (UPS) system, believes that Ukraine's accession to the World Trade
Organisation could provide a part of the impetus needed for improvements in the current situation.
"The structure of the customs service here is not attuned to change, but change must be accelerated if we are going to deal with Euro 2012 and other positive developments ahead," Tidyakina states.
Tidyakina, who has been with UPS in Ukraine since 1992, said that she sees no solution in the short run, and believes that a complete rewrite of Ukraine's Customs Code is essential for major improvements to the system. [A new custom's code has not been adopted as of August 2010.]
"We expect our traffic to at least double and perhaps triple by 2012, which requires that we all work together to effect system improvements now before
the current high inflow of express packages becomes a deluge," Tidyakina adds
WHAT IS REALLY NEEDED?
There is consensus among major express carriers that one of the first changes essential to the system is an increase in the value threshold for dutiable packages. Currently, any incoming package to a company name a value of less than EUR 100 is not subject to duty (packages for private individuals are subject to duty starting from USD 0.01!)
This is also complicated by the way that Ukraine looks at the dutiable value. In Europe, the duty threshold is considered only based on the intrinsic value of the transported goods. However, Ukraine calculates dutiable value based on the value of the goods transported and includes the cost of express t
transportation as a part of the dutiable value.
"All we need is a EUR 200 de minimus valuation on incoming packages and we could solve many of the problems that we face today. Moreover, if we
really want to make progress, we need to adopt another standard European procedure.
"In Europe, a dutiable package may be delivered to the customer, with the customer then having 10 days in which to complete the formal declaration
process.
"Implementation of these two changes alone would allow us to solve about 70% of the express package problems that are fouling our system today. Give us
that 70% relief and the 30% of other problems we could deal with." DHL's Sidoruk concludes.
LINK: http://www.businessukraine.com.ua/ukraine-s-express-delivery-in-of
NOTE: Very little has changed in the way the Ukrainian Customs Service handles express packages since the above article was written two years ago in 2008. A new customs code has been developed in cooperation with the private sector but never passed by the Ukrainian Parliament.
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