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Ivan Shynkarenko

Partner, Ph.D. in Economics

I am working on changes to the customs legislation, made by the law¹ on the introduction of the Authorized Economic Operators (AEO) in Ukraine, which was adopted in early October. Changes are comprehensive and after the transitional periods will likely have significant impact on the customs clearance practices. And not only of importers and exporters that would be lucky enough to obtain this new status.

We will consider details of the new rules and changes to the customs clearance in other materials.

At the same time, now I want to share some important moments that brought my attention after initial review of the new legislation.

First, the law establishes transitional period during which only very limited number of companies may obtain the status of AEO. Namely:

• during the first year the authority would process up to 10 applications from companies;
• during the second and the third year – up to 20 and 30 applications respectively.

There is no information as of now how the first lucky applicants will be selected. If in the order of submission (first come, first served basis) then it is advisable that the companies, for which this status may be of interest, should already start respective elaborations as necessary for submitting the application.

At the same time, it is not crystal clear what companies would be eligible to AEO-S status (operators with the right to special simplifications).

Thus, it is literally stated in the law that in these first 3 years the applications would be accepted “…exclusively from companies which are simulteneously both manufacturers and exporters (importers) within the meaning given in paragraph 1 of Article 12 of this Code”.

Updated Art. 12 of the Customs Code provides for the following definitions of manufacturer and exporter (importer):

“1) manufacturer is an enterprise that directly produces goods intended for export;

2) the exporter (importer) is an enterprise which, on the basis of foreign trade contracts (contracts), concluded directly or through an intermediary (commissioner, agent, consignee, etc.), performs export (import) of goods with their movement through the customs border of Ukraine, regardless of the customs regime, in which such goods are placed”.

In other words, based on a literal reading, during the first three years this status will be granted exclusively to manufacturers producing the goods for export, whic carry out or do not carry out import operations. Accordingly, its seems that importers or exporters (distributors), as well as manufacturers who import material, but produce goods only for the domestic market would not be able to enjoy this opportunity.

Second, it seems that in three years time, importers will have to say goodbye to such a convenient and already familiar tool as a preliminary declaration with the amount of data required to release goods into customs regime (“EA” type declaration).

This is evident from item 2 of Section II of the Final and Transitional Provisions of the Law, according to which:

“Part Two of Article 258, Subparagraphs 2 and 3 of Part Three, Part Four, Five, Seventh, Twelfth of Article 259 of the Customs Code of Ukraine shall cease to have effect three years after the entry into force of this Law”.

In other words, from 07.11.2022, provisions that provide for the mechanisms that allow goods to be customs cleared under a preliminary customs declaration after moving through the customs border without presentation to the customs office, where such declaration was made, will be excluded from the Customs Code.

Hence, whereas the benefits of AEO status are not apparent for business currently, it may change in the future after the clearance mechanisms with the use of a preliminary “EA” type declaration would no longer be available.

Third, the law introduces an updated customs post-audit procedure, so-called “post-customs control” (Article 337¹ of the Customs Code). And a lot of enterprises will soon face this new procedure regardless of their intention to obtain AEO status.

Thus, within the framework of such control, the customs office who carried out the customs clearance of goods has the right to check “…the accuracy and completeness of the information contained in the customs declaration, the general declaration of arrival, and the presence, accuracy and correctness of the documents, based on which the goods were released”.

Post-customs control is carried out as a result of the application of the risk management system and can be initiated during customs clearance or within 30 calendar days after release of the goods to respective customs regime.

Within this control the customs office requests in electronic form the documents which must be submitted and the declarant is obliged to submit them within 15 calendar days after the request.

These documents are checked at the customs office, so it is a kind of cameral audit. As a result, a message is sent to the declarant outlining the main findings.

At the same time, as I understand it is not a full-fledged customs audit, as a result of which the customs office will have the right to draw up an act and determine adjustment of customs duties and taxes. In accordance with the new provisions of the Customs Code, the results of post-customs control of the enterprise are considered by the risk management system and during the planning and carrying out of documentary audits.

In other words, if within the framework of post-customs control the potential issues are identified, it can cause the initiation of a documentary audit. And it is upon results of such an audit, an act may already be drawn up and adjustments made.

To recap, the amendments to the Customs Code due to Authorized Economic Operators concern not only enterprises intending to obtain such status. There are many changes for all subjects of foreign economic activity and it is advisable to get acquainted with such changes.

Notes:

¹The Law of Ukraine “Changes to the Customs Code due to Authorized Economic Operators” of October 02, 2019 No. 141-IX.

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