The Verkhovna Rada of Ukraine has adopted Draft Law No. 10411. What changes does it introduce to the customs legislation?

I. The order and content of the functioning of customs regimes

The law envisages a number of significant changes related to the order and content of the functioning of customs regimes, in particular concerning the authorization for placing goods into the customs import regime (in terms of the end-use procedure), temporary admission, processing within the customs territory, processing outside the customs territory, namely:

• the decision on authorization is made by the customs authority based on an application from the enterprise or on the basis of a customs declaration;

• a mandatory condition for obtaining authorization is the retention of documents and the maintenance of accounting records regarding goods placed in the respective customs regime to enable their identification, reflect their customs status, and track their movement;

• the possibility of full or partial transfer of rights and obligations to another enterprise;

• granting permission for the movement of goods across the customs territory of Ukraine without placing the goods into the transit customs regime and applying customs formalities, except for those related to the retention of documents and the maintenance of accounting records;

• defined conditions for the completion and termination of customs regimes with the obligation to submit a report to the customs authority within 30 days for the actual confirmation of:

  • the completion of the customs processing regime within the customs territory;

  • the completion of the customs import regime (in terms of the end-use procedure).

II. The criterion "stable financial condition”

The law has changed the approach to assessing the financial condition of enterprises. Henceforth, during the calendar year in which the assessment is conducted and the previous three calendar years, the accounting data and financial statements of the enterprise must confirm that the financial condition is sufficient to fulfill its obligations, considering the type and volume of commercial activity, and that there are no negative net assets, except in cases where they can be secured. 

Subsequently, the updated approach to assessing the criterion "stable financial condition" will be presented by the Government with amendments to the Resolution of the Cabinet of Ministers of Ukraine dated 27.09.2022 No. 1092 "Some issues of implementation of the Customs Code of Ukraine regarding authorizations" in order to comply with the requirements of this Law.

New terms have been introduced, namely: "declarant"; "customs representative"; "accounting records"; "risk management"; "holder of the customs regime"; "holder of the place of delivery"; "holder of the goods" to clarify the formulation of concepts in accordance with the terminology of European legislation, in particular Regulation No. 952/2013.

III. The institution of "customs representation"

The law introduces the institution of "customs representation" which allows a person authorized by another person to perform the necessary actions and customs formalities as defined by Ukrainian legislation on customs matters. From now on, any person may appoint a customs representative:

• in the case of direct representation, the customs representative acts in the interests and on behalf of the person he represents (direct customs representative);

• in the case of indirect representation, the customs representative acts in the interests of the person he represents but in his own name (indirect customs representative). During the exercise of their powers, the customs representative must declare that he acts in the interests of the person he represents and provide the customs authorities with documents confirming his authority and determining the type of representation.

IV. The procedure for declaring goods at an authorized facility under the “local clearance procedure”

The procedure for declaring goods at an authorized facility under the “local clearance procedure” has been regulated. Thus, the declarant can be: 

• an enterprise defined in the authorization to apply the simplification for declaring goods of such an enterprise; or

• a direct customs representative of the enterprise granted authorization, acting in the interests and on behalf of the enterprise defined in the authorization to apply the simplification (declarant);

an indirect customs representative acting in the interests of an enterprise that does not have authorization to apply the "local clearance procedure"" but such a customs representative has authorization to apply the simplification. The responsibility for non-fulfillment of obligations lies with such an indirect customs representative.

V. The features of post-customs control

The law defines the subject and procedure for conducting post-customs control, which is carried out by:

• post-clearance audit of customs declarations, the customs clearance of which has been completed;

• documentary audits of compliance with the legislation of Ukraine on customs matters, including the timeliness, accuracy, completeness of the calculation, and payment of customs duties.

For the purposes of post-customs control, customs authorities have the right to verify:

• the correctness, accuracy, completeness, and reliability of the information contained in the customs declaration, the customs clearance of which has been completed;

• the presence, accuracy, correctness, and authenticity of documents based on which goods have been placed in the respective customs regimes, as well as the existence, authenticity, correctness, and validity of any supporting document, including by checking the enterprise's accounting records and other documentation regarding operations with the respective goods or regarding previous and/or subsequent commercial operations with such goods after their release;

• the legality of the import (shipment) of goods to the customs territory of Ukraine, the export (shipment) of goods beyond the customs territory of Ukraine;

• the timeliness, accuracy, completeness of the calculation, and payment of customs and other payments, as well as penalties, the control over the collection of which is entrusted to the customs authorities. The sending of notifications by customs authorities about the conduct of documentary audit, requests, orders, and other documents related to post-customs control is carried out:

  • in electronic form;

  • in paper form;

  • by handing over for personal signature upon receipt. 

VI. The documentary audits  

Also regulated are the specifics of organizing the conduct of documentary on-site (scheduled or unscheduled) and off-site audits of compliance with the legislation of Ukraine on customs matters, including the timeliness, accuracy, completeness of the calculation, and payment of customs duties. In particular, but not exclusively, regarding the conduct of scheduled checks based on quarterly plans-schedules of such audit, which are independently formed by customs authorities based on the analysis of foreign economic operations of enterprises using the risk management system. 

Quarterly plans-schedules for conducting documentary planned on-site audits by the customs authority are published on the official website of the central executive body that implements state customs policy by the 15th day of the last month of the quarter preceding the quarter in which such checks will be conducted.

VII. The facilitating the protection of intellectual property

The law has improved provisions related to issues of facilitating the protection of intellectual property rights during the movement of goods across the customs border of Ukraine, which provides for the possibility of selecting samples for identification of the presence or absence of signs of intellectual property rights infringement. 

For goods suspected of infringing intellectual property rights, customs authorities apply measures to suspend customs clearance. 

The new changes provide for the expansion of the possibilities for proving signs of infringement of intellectual property rights by recognizing the conclusion of the right holder on the existence of a violation of intellectual property rights on a par with the conclusion of the examination. The requirements for the form and content of such a conclusion of the right holder should be determined by the Ministry of Finance. 

In addition, the amendments provide for the right of the right holder to participate in proceedings in cases of violation of customs rules, and certain simplifications in the procedure for the destruction of goods, the customs clearance of which is suspended on suspicion of violation of intellectual property rights. The new provisions are designed to simplify the procedure for protecting intellectual property rights for businesses and increase the effectiveness of the fight against counterfeit and pirated goods at customs.

Another important innovation is the introduction of a reasonable period within which the customs authority makes decisions defined by the Customs Code, as well as performs customs formalities. 

Among other things, it is envisaged to expand the list of ordinary operations with goods placed in the customs regime of a customs warehouse, processing within the customs territory, processing outside the customs territory, free customs zone, and equivalent goods and the conditions for their use.