Revenue mobilization & Horizontal functions and governance

Ukraine is carrying out customs reform, one of the directions of which is the introduction of principles and instruments used in the EU countries. The EU assists Ukraine in the development and implementation of such customs instruments. Which of them is already operating or are starting to operate in Ukraine and what changes can be expected in this regard for Ukrainian business?

The round table provided an opportunity for professional dialogue between stakeholders – business, the Ministry of Finance, the State Customs Service, and European experts.

The event was attended by: Evhenia Lytvynova, President of the Ukrainian Exporters Club, Gennadiy Chyzhykov, President of the Ukrainian Chamber of Commerce and Industry, representatives of business associations, Oleksandr Moskalenko, Director of the Customs Policy Department of the Ministry of Finance of Ukraine, Serhiy Demchenko, Director of the International Transit System Implementation Department of the State Customs Service of Ukraine, Svitlana Anishchenko, Director of the Customs Audit and Accounting Department of the State Customs Service, Andrii Teplyi, Head of the AEO Support Unit of Department of Customs Control Organization and Customs Clearance of the State Customs Service, Vytenis Ališauskas, EU4PFM International Expert on Customs and former Deputy Head of Customs of the Republic of Lithuania.

The speakers provided an overview of the principles enshrined in the EU Customs Code and the tools used by EU countries to implement these principles; which of them should be expected in Ukraine (including with the support of European partners), as well as on customs instruments that are already introduced or close to being introduced in Ukraine – in particular, the common transit regime (NCTS), the Authorized Economic Operator (AEO), Customs audit.

Of particular interest to business, representatives wase the system of customs simplification, which is used in the EU countries and being introduced in Ukraine now- in particular, in the framework of the Association Agreement between Ukraine and the EU.

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According to Gennadiy Chyzhykov, President of the Ukrainian Chamber of Commerce and Industry, “It is important for a business to be efficient, simple and fast. We want everything to turn up well in a split second, but customs reform is a complicated process. However, what we are seeing now gives a good deal of optimism. And above all, we are moving towards the EU, including mentally.”

“Is it important for the business to know: what changes are awaiting us? Opportunities or additional costs? The round table will give an impetus to better understand the expected changes, to prepare for them, so that our export after 2022 is painless, efficient, active,” Evhenia Lytvynova, President of the Ukrainian Exporters Club.

The new mission of the European Customs

“Amendments to the EU Customs Code have fixed a new mission of the European Customs. If before customs had to protect the local market and collect customs duties, now it becomes a part of the international trade chain. And the competitiveness of the local exporters depends on how well it works,” said Vytenis Ališauskas, EU4PFM International Expert on Customs, former Deputy Head of Customs of the Republic of Lithuania.

The expert named the IT solutions to be a key factor, which changes processes because it helps to organize them differently. “IT plays a key role in this new mission of the European Customs. IT gives possibilities to make the processes, which we had on paper before, simpler, faster, and more efficient. They allow better control over those who need to be controlled, but, on the other hand – to simplify procedures for conscientious entrepreneurs and create conditions under which it is profitable to be bona fide,” said Vytenis Ališauskas.

He stressed that the task to be solved with the help of the EU Customs Code is that it would be profitable for an entrepreneur to be conscientious, that a bona fide business could save time and money, that a company itself could perform some parts of the processes that are (usually) done at the Customs. “An Authorized Economic Operator (AEO) is a symbol of a conscientious entrepreneur who is trusted by the Customs and who has significant advantages in customs clearance,” the expert said.

He highlighted the key tools used by the European Customs to save time for conscientious business – in addition to the simplification system (AEO program and simplification in the common transit regime), it is the customs audit system (post-audit) and customs risk management system.

“When we talk about the new role of the Customs, about the simple and fast (but effective) procedures, there is a big role of a modern automated risk management system. It is the heart, the engine of all work, which allows determining the conscientious businesses, allows to save time and to increase their competitiveness,” said Vytenis Ališauskas.

These very principles and tools are being developed and implemented with the support of international partners in Ukraine.

European vector

According to Oleksandr Moskalenko, Director of the Customs Policy Department of the Ministry of Finance, “Ukraine is working in the vector defined by the Constitution of Ukraine – European integration. Europe is our largest trading partner, and that is why it is important to converge, to introduce the best European practices – for European and Ukrainian customs to work according to the same rules.”

He also stated: “We have completed a large portion of legislative changes. Now both customs and business must deploy all this. We need training, education, promotion. Therefore, I would like our international partners to help us also to train the business. So that all participants of the process would not only have their rights but also know how to use them. Acceleration of the customs clearance should be achieved not by commanding the customs officers to “work quicker”, but by an effectively built system. We are moving towards building a partnership between business and customs. It will take some time.”

“The main changes to take place in the Ukrainian Customs are identified in the Association Agreement between Ukraine and the EU. I am pleased with the speed with which these changes are taking place. I think we will see results in 1-2 years,” Vytenis Ališauskas forecasts.

Customs simplifications and new tools

“Simplifications that now business has under the temporary provisions of the Customs Code (until November 7, 2022 – ed.), will be replaced over time. Therefore, I would already think about obtaining the status of AEO,” replied Oleksandr Moskalenko to a question. In addition, several simplifications (but for transit) are provided by the common transit regime, which is currently being introduced in Ukraine.

Vytenis Ališauskas believes that the business will have the biggest impact from the complex of simplifications – transit and AEO Program.

Serhiy Demchenko, Director of the International Transit System Implementation Department of the State Customs Service, said that in the second quarter of 2022 Ukraine is expected to join the Convention on the Common Transit Procedure, and in the third quarter of 2022 – Ukraine reaches the stage of using of the NCTS system. That is, in a year Ukrainian companies will be able to have transit with 35 countries (including all the EU countries, EFTA, Turkey, Great Britain) on the principle of “one vehicle – one transit declaration, one financial guarantee.”

He informed about 4 special transit simplifications provided by the common transit system: authorized consignor, authorized consignee, self-affixing of special type seals, general financial guarantee. Regarding the guarantee, the representative of the State Customs Service stressed that new approaches are being applied, which will reduce the amount of security for the basic amount of the guarantee when using it – by 50%, 70%, or even 100%.

As you know, NCTS is now used nationwide, but companies that use it (have submitted 50 declarations or more) can apply for simplifications, which will also apply to the international application of the system.

To date, more than 3,000 customs officials have been registered in the system, more than 180 companies have gained access to the Trader’s Portal, about 300 T1UA declarations have been submitted, 3 companies have received financial guarantor status, Helpdesk is working, 7 seminars have been held with entities, involved in foreign trade.

Full implementation of the Authorized Economic Operator (AEO) Program is a priority of the State Customs Service for the next 2-3 years. This was announced during this round table by Andrii Teplyi, Head of the AEO Support Unit of Department of Customs Control Organization and Customs Clearance of the State Customs Service. Among the main challenges, he called “the transformation of the Customs-business relationship: such relations today are based on the mistrust of business to the Customs but should be open and a partnership.”

As you know, the Authorized Economic Operator (AEO) Program has been active in Ukraine since August 2020. Its implementation is provided for in the Association Agreement between Ukraine and the EU. It provides a number of simplifications and advantages for customs clearance. To obtain the status, one needs to go through a rather difficult and lengthy authorization procedure. As of September 2021, the State Customs Service received 5 applications for AEO authorization. Out of these, 1 company was granted AEO authorization, 2 were denied an assessment; 2 applications are at the stage of preliminary consideration.

According to Vytenis Ališauskas, the AEO Program was not popular in Lithuania in the first year either. “In order to obtain the status of AEO, they must not only assess themselves in the self-assessment questionnaire, but also present all the confirming documents to the institutions that control them. And in the EU, this process did not go ahead at once. The business first looks at what it offers, whether it will be profitable,” the expert said.

However, now, as Oleksandr Moskalenko said, “more than 80% of enterprises in the EU have entered into this partnership program with the Customs.” “The AEO program is what started in the EU in 2004 as a simplification program and has now become a core system,” he says.

Svitlana Anishchenko, Director of the Customs Audit and Accounting Department of the State Customs Service, stressed that “customs audit in Europe is more focused on foreign economic activity and acts as a system that speeds up the customs clearance process.”

“We feel the need to create a quality IT tool – with the support of the European partners, the first version of the Information System “Customs Audit” was created, in August-September, it is tested by customs. A month ago, an agreement was reached with the European partners to support the creation of the 2nd version. The development of a risk management system for the selection of enterprises for customs audit has also begun,” said the representative of the State Customs Service.

Let’s implement change together!