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any company involved with the import of goods into Ukraine that has not recently been  negatively affected by the outdated rules and  procedures.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.