How to Export to Ukraine

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Customs Clearance Process in Ukraine



June 2007



Author: Sergiy Polovenko, Bisnis Representative in Ukraine



INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.

NOTE: This report should be used for general reference purpose only. As customs-related legislation and regulations are constantly changing, it is advised that exporters consult with customs officials from the country of importation to obtain accurate and current information that would pertain to their specific transaction.



I. GENERAL MARKET INFO



Trade Statistics (total volume of exports; exports from U.S. to Ukraine in thousands USD)






2002


2003


2004


2005


2006

U.S. Exports to Ukraine


254,905


230,771


398,009


531,652


756,134



Customs environment in general



Although foreign exporters may find Ukraine's import regime daunting, it is not insurmountable and is comparable to other transitional economies in the region. Importers must pay a series of import taxes, including value-added-tax (VAT), duties and fees, and, if applicable, excise taxes. Import duties are often higher for products that are also produced in Ukraine and VAT refunds on exports are presently very difficult to receive. While the number of goods requiring specific import licenses has been cut considerably, a large number of goods are still subject to import licensing. Customs valuations generally conform to world standards and Ukraine is trying to comply with WTO regulations on comprehensive tariffs. There are many other non-tariff barriers to trade, including a range of technical and phytosanitary regulations and inspection procedures. A new Customs Code as well as continuing accession negotiations with the World Trade Organization (WTO) offers some hope for easier import procedures and lower tariff and non-tariff barriers in the coming years.



The U.S. Embassy strongly advises U.S. companies to consider using competent legal counsel before and while doing business in Ukraine, since the country's weak and ever-evolving legal institutions and infrastructure have caused serious problems for foreign companies trying to establish a foothold in the country. Care should also be taken when choosing distribution and marketing partners, and when establishing joint ventures with Ukrainian companies.


II. CUSTOMS CLEARANCE



Procedure



In accordance with the international practice, all imported/exported goods are subject to customs and border control checks. There are 70 approved customs clearance points across Ukraine - at all international ports, international (and several domestic) airports, and railway and road border crossing points. Every checkpoint covers a particular geographical area. Therefore, U.S. exporters should decide whether to pay all taxes and duties at the border or at the customs checkpoint nearest to the imported goods' final inland destination. Although the procedures are generally the same, the latter method is considered to be preferable. Customs clearance can be a lengthy process, so it is better that goods are secured and guarded until closer to their final destination point. Alcohol and tobacco goods imported into Ukraine can only be cleared through Sevastopol, Mariupol, and Ilichevsk ports. Customs clearance is usually done by a broker acting on the importerÌs behalf or by the importer himself. The importer (consignee) engages the customs broker to clear the shipment and provides the broker with the documentation requested by customs. After documentation is submitted, necessary payments are made and the shipment/documentation is inspected, the shipment is cleared and can be released to consignee.



Customs Regimes



a) ÏFree CirculationÓ

b) International Customs Transit



Upon crossing an international border point, goods will be classified in one of two ways: transit or customs cleared. If marked transit, the container or vehicle will be sealed by customs authorities and then customs cleared at its final destination. Additionally, vehicles transporting goods marked for transit, which are subject to excise taxes, are required to be wrapped in a transit band all the way through Ukrainian territory. This band is obtained at the customs checkpoint and has an assigned number, which is designated on the customs declaration.



c) Temporary Import (ATA CARNET)



The ÏTemporary Clause on the Regime for the Temporary Import of Goods, Property, and Transportation MeansÓ governs regulations pertaining to foreign companies and representative offices bringing in demonstration and exhibition samples. The State Customs Committee of Ukraine issued this on December 30, 1991. These regulations classify imported items designated for demonstrations at exhibitions, fairs, and trade shows, as the temporary import of a foreign company's property, which is to be returned to that country afterwards. The temporary import of demonstration samples, excluding goods not allowed for importation, can be undertaken without registering the importer as a subject of foreign economic activity in Ukraine. This bypasses a burdensome bureaucratic process.

Temporarily imported goods can remain in Ukraine for one year from the date a customs declaration is submitted. If warranted, local customs authorities can extend this term for the duration of an economic, scientific, humanitarian, or other event in which the temporarily imported goods are required. The set term of temporarily imported goods should be reflected in the customs declaration. Samples may be shipped out of the country after usage via any customs point. Prior to their customs declaration expiration, temporarily imported goods should be:

? returned outside the Ukrainian customs border;

? declared at customs for further use;

? passed to customs for storage in a bonded warehouse; or demolished under customs control if these items cannot be used as goods, products, or equipment.



The following documents are required for temporarily importing demonstration samples: a customs declaration, permission from the respective Ministry, if required, and other documents outlined in the customs declaration.



Prior to being returned, samples are inspected by customs authorities to ensure that the quantity and description of goods match those registered at the time of importation. The customs fee for temporarily imported goods is US$30 for each customs declaration. When a large number of samples are imported, additional pages, costing US$15 each, should be attached. Demonstration samples to be returned outside Ukraine are exempt from customs fees.



d) Customs Warehouse

e) Re-import/re-export

f) Temporary Export

g) Duty Free

h) Free Trade Zones



Since 1996, a total of 21 special economic zones (SEZ) or priority development areas (PDA) have been established, reportedly covering some 10 percent of Ukrainian territory. The creation of free economic zones has been adopted as a method of regional industrial development. However, the law of Ukraine, effective March, 31, 2005, stipulated that all the Free Trade Zones must comply with general customs rules.



i) Bonded Warehouse



As in many other countries, import-?export operations may be conducted as sales through bonded warehouses. Using this system, the customer collects ordered goods by presenting a sales receipt to warehouse operators. Since such operations often involve offshore contracts, the bonded warehouse is a device frequently employed by non-resident companies that do not directly do business in Ukraine. Such bonded warehouses can be either state customs points or privately owned warehouses for the use of one or multiple clients (open versus closed warehouses).

Most foreign investors simply lease space in existing privately bonded warehouses. Larger importers may prefer to establish their own closed and secured facility. A representative office should note, however, that the establishment of an open warehouse may be considered a commercial activity by the Ukrainian Tax Inspectorate and possibly be subject to relevant Ukrainian taxes. Common business practice in Ukraine is to utilize a "closed" bonded warehouse. Opening a bonded warehouse is a very complicated affair involving the State Customs Committee and a great deal of paperwork.



To establish a bonded warehouse as an importer, one must first obtain a license to open a warehouse from the Ukrainian Customs Committee office nearest to where the warehouse will be established. To obtain such a license, one must present the following documents to Customs officials:



? an application (the application form should be obtained from the Customs Committee) stating that the enterprise wishes to establish a specialized bonded warehouse (solely for the storage of that enterprise's goods);

? a registration card of the entity opening a warehouse;

? a schematic diagram of the warehouse premises, indicating location of alarm systems and customs areas;

? an approximate list of goods intended to be stored in the warehouse.



Upon submission of the application and supporting documents, the warehouse must be ready for operation and equipped as a bonded warehouse. All interior renovations, including alarm systems, must be completed by this time. To open a warehouse, one must pay a set fee of the Ukrainian hryvnia equivalent of US$500 (at the National Bank of Ukraine's official exchange rate). Formal registration of the warehouse is normally done within 15 days after an application has been submitted. As a bonded warehouse licensee, an enterprise should also note that it will have to hire an official customs inspector on an as-needed basis to actually clear and approve shipments of goods. As a licensee, the enterprise can hire its own personnel to supervise the submission of customs declarations, but the customs official actually approves final clearance.



j) Other



Customs Documentation:

a) Customs Cargo Declaration with the description and value of goods, term of payment (i.e., cash, bank transfer, barter, etc.) and terms of shipment. If payment is made by bank transfer, the name of the bank, address, and account number should be included

b) Commercial Invoice

c) Contract

d) Transaction Passport (not required)

e) Packing List

f) Certificate of Origin

g) Necessary certificates (conformity; safety; veterinary; etc.)

h) Receipts for payment of customs dues

i) Other docÌs



Transaction Terms - Buyer/Seller Responsibilities



The relevant Ukrainian legislation requires that goods paid for by a Ukrainian resident, pursuant to an import contract concluded with a non-resident, must be imported and cleared through Ukrainian customs within 90 days from the date on which such residentÌs payment was made. This 90-day period may be prolonged in a limited number of cases, only pursuant to individual permission from the NBU. A residentÌs failure to comply with this 90-day requirement may result in a fine of 0.3% of the amount due under the export contract for each day of the delay in receiving the foreign currency proceeds.



Customs Payments



Up-to-date tariff information can be found on the official Ukrainian Customs web page: http://www.customs.gov.ua/document.jsp?cataloguerId=6118&contentObjectId=9679



a) Commodity Classification and Customs Valuation
Commodity Classification and Customs valuation in Ukraine conforms to world standards, where customs value is defined as the sum of the sales price, transportation costs, freight, insurance, storage fees, and any other costs not foreseen in the contract price. Receipts should be presented to document these costs and to allow customs officers to determine the proper customs value. In the event that receipts are not available, Ukrainian customs will assess the customs value using comparative pricing of similar goods and services in the country of origin.



b) Import Duty
In January 2000, border checkpoints began collecting a new uniform customs duty, combining seven import fees - customs clearance, sanitary, veterinary, phytosanitary, radiation, ecological control, as well as fees charged for the passage of vehicles on the motor roads of Ukraine - into a single tax.



c) Excise Tax
The Parliament of Ukraine establishes the list of goods (products), which are subject to the excise tax. The list of excisable goods includes caviar, crass, shrimp, chocolate, coffee, alcoholic beverages, beer, tobacco and tobacco products, cars, automobile tires, petrol and diesel fuel, weapon, jewelry, home electronics (microwaves, CD players, TV-sets, Video- and camcorders, audio and video cassette), clothing (fur coats and leather jackets), office furniture. Excise duty rates range from 10 to 300 percent of the declared customs value. Excise rates vary often in accordance to whether the imported good is produced in Ukraine. Excise duty rates are expressed as a percentage of the declared customs value, plus customs duties and customs fees paid for importing products. Payment should be made in Ukrainian currency at the Ukrainian National Bank exchange rate effective on the day of payment.



d) VAT
The VAT rate under Ukrainian law is 20%, as levied against taxable turnover, which does not include VAT. Taxable turnover for import VAT is calculated as customs value of the goods, including customs duties and any applicable excise taxes. This import VAT is due and payable at the same time customs duties are being assessed (with a potential thirty-day extension made at the discretion of the customs office). Notable, the new VAT law specifically cancels favorable treatment for products Ïimported for a companyÌs own productionÓ as of January 1, 1999. This cancellation was due to the fact that entirely too many products were imported without customs duties or value added tax.



e) Customs Processing Fee
Customs processing fee in Ukraine may vary from $100 to $200, depending on the brokerÌs service fees. The average cost for customs cargo declaration is $20 per declaration plus approximately $15 per each additional page.



Preferential Tariff Regimes



U.S. exports to Ukraine usually receive preferential customs rates (50%) if the following three criteria are met: (1) the company is registered in the United States; (2) the goods have a certificate to prove U.S. origin; and (3) the goods are imported directly from the United States.



Prohibited or Restricted Imports



The Ukrainian government strictly controls and restricts the import of weapons, narcotics, chemical and hazardous substances, and certain pharmaceutical and communications related products. U.S. companies wishing to import these goods should contact the relevant Ukrainian government ministry responsible for issuing licenses (for example, the Ministry of Internal Affairs licenses the import of hunting rifles). For further information, please contact: U.S. Department of Commerce, Bureau of Export Administration, 14th and Pennsylvania Ave., N.W., Washington, DC 20230; Tel: (202) 482-0500.



Membership in Free Trade Agreements


Ukraine has signed free trade agreements with all of the former Soviet republics except Tajikistan. UkraineÌs agreement with Russia began unraveling in mid-2001, however, when Russia introduced VAT on Ukrainian imports. Ukraine also has a Partnership and Co-operation Agreement with the European Union (PCA). Under the terms of the agreement, Ukraine enjoys most favored nation status with the EU, but is not required to bind its own tariffs. Ukraine is also a party to the 1995 CIS free trade agreement. However, this agreement has never been effectively implemented. Ukraine participates in the Black Sea Cooperation Council, along with Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, the Russian Federation, Macedonia and Turkey. It is envisaged that the organization be developed into a free trade area. Ukraine has furthermore concluded trade agreements with 12 countries (Austria, Argentina, Armenia, Bulgaria, Canada, Estonia, Finland, Krygzstan, Latvia, Moldova, Russia and Switzerland). These agreements grant on a reciprocal basis most favored nation status to export-import operations with the countries concerned. As in the case of the PCA, Ukraine benefits via these agreements from the tariff concessions made by its partner countries who are WTO members without binding its own tariffs. Ukraine intends to become a full member of the Central European Free Trade Agreement (CEFTA), which is predicated on Ukraine first becoming a member of the World Trade Organization. In 2003, Ukraine started negotiating with Russia, Belarus and Kazakstan on creating a yet-to-be defined Ïcommon economic space.Ó Negotiations are ongoing with the outcome far from certain as of mid 2003.

WTO membership has long been a proclaimed goal of Ukraine, and Ukraine has been engaged in the process of accession since 1993. Ukraine is still in the middle of the negotiation process. The U.S. Department of Commerce has assigned a resident advisor to assist Ukraine in developing economic trade laws in conformity with WTO requirements, and USAID expects to provide additional technical assistance in this area. Government officials have made various predictions about when Ukraine might actually become a WTO member including the beginning of 2008.



Applicable Legislation



A new Customs Code went into effect January 1, 2004. It codified uniform customs procedures for all goods, specified elements of customs procedures, and created a mechanism for submitting a preliminary declaration for customs clearance for those who declare items on a regular basis. The Code widens the powers of the State Customs Service of Ukraine (SCS), granting its staff free access to the companies' premises where commodities subject to customs clearing are stored. It gives the SCS the power to check foreign trade companies' financial and economic performance.



On July 1, 2001 the law "On the Customs Tariff of Ukraine" took effect under which only the Parliament (Rada) can introduce or change tariffs. The import tariff system of Ukraine has 21 sections, encompasses 97 groups of goods, and lists over 10,000 import duty rates. Import duty rates for most goods, except for farming goods, food and excisable goods, are established at levels accepted by GATT/WTO.

In September 2001, a law "On the Amendments to the Law of Ukraine 'On Unified Customs Tariff which is charged at the border checkpoints'" entered into force. Border checkpoints now collect uniform customs duties combining seven import fees - customs clearance, sanitary, veterinary, phytosanitary, radiation, ecological control, and a vehicle use fee - into a single tax. Non-residents entering UkraineÌs territory by car are exempt from any payments.





III. PORTS OF ENTRY



1. Name of Port of Entry



a) Corresponding Customs House(s)



STATE CUSTOMS SERVICE OF UKRAINE

11 Degtyarivska St., Kyiv 04119 Ukraine

Tel: (044) 247-26-06, 274-27-06

Fax: (044) 236-82-81

E-mail: dmsu@customs.gov.ua

www.customs.gov.ua



Below is the structure of the Customs Service in Ukraine:



State Customs Service of Ukraine:

? Boryspil Customs House

? Sevastopol Customs House

? Kyiv Regional Customs House

? Western Regional Customs House

? Volynska

? Galytska

? Rava-Ruska

? Rivnenska

? Ivano-Frankivska

? Yagodynska

? Carpathian Regional Customs House

? Zakarpatska

? Chopska

? Podilska Regional Customs House

? Vinnytska

? Vadul-Siretska

? Kelmenytska

? Ternopilska

? Mogyliv-Podilska

? Chornomorska Regional Customs House

? Bilgorod-Dnistrovska

? Kotovska

? Mykolayivska

? Prydunayska

? Rozdilnyanska

? Khersonska

? Krymska Regional Customs House

? Kerchenska

? Krasnoperekopska

? Donbass Regional Customs House

? Amvrosiyivska

? Luganska

? Mariupolska

? Eastern Regional Customs House

? Glukhivska

? Kupyanska

? Sumska

? Magistralna

? Poltavska

? Dnipropetrovsk Regional Customs House

? Berdyanska

? Zaporizhska

? Kirovogradska

? Kryvorizhska

? Northen Regional Customs House

? Zhytomyrska

? Novgorod-Siverska

? Cherkaska

? Chernigivska



b) Servicing Brokers
Servicing Brokers: There is a large number of customs broker companies providing services on customs clearance, exporting, and importing procedures in Ukraine. Below is a short list of companies Ò members of the American Chamber of Commerce in Ukraine:



DHL

Mr. Boris Khruslov, Country Manager

1, Vasylkivska vul. Kyiv 03040 Ukraine

Tel: +38 (044) 490-2600

Fax: +38 (044) 258-1766

E-mail: dmitry.konstantinov@dhl.com

www.dhl.com.ua



DHL DANZAS AIR & OCEAN

Mr. Jonathan D. Baker, Country Manager

6, Gaidara vul. Kyiv 03150 Ukraine

Tel: +38 (044) 246-6046

Fax: +38 (044) 246-6045

E-mail: IevAirAndOcean@DHL.COM

WWW.DHL.COM



POINT2POINT GLOBAL LOGISTICS

Mr. Vladimir Bilanovsky, Country Manager

84, Volodymyrska vul., #1 Kyiv 01005 Ukraine

Tel: +38 (044) 220-4526

Fax: +38 (044) 246-6698

E-mail: ukraine@p2pgl.com

www.p2pgl.com



INTERDEAN. INTERCONEX INTERNATIONAL MOVERS UKRAINE

Mr. Igor Marchuk, General Manager

5, Sluzhbova vul. Kyiv 03115 Ukraine

Tel: +38 (044) 452-4145

Fax: +38 (044) 450-0346

E-mail: interdean@interdean.kiev.ua

www.interdeaninterconex.com



SKYNET WORLDWIDE EXPRESS

Mr. Pierre A. Sleiman, President

16B, Knyazhyy Zaton, #66 Kyiv 02068 Ukraine

Tel: +38 (044) 201-4216

Fax: +38 (044) 201-4217

E-mail: sky.kiev@skynet-cis.com

www.skynetworldwide.com



UPS

Ms. Svitlana Tidyakina, Country Manager

20, Mechnykova vul., 1 Floor Kyiv 01021 Ukraine

Tel: +38 (044) 241-0000

Fax: +38 (044) 249-0138

E-mail: ups2@webber.net.ua

www.ups.com



c) Prevalent commodity types/transportation modes
In exporting directly from the United States to Ukraine, the least expensive and most reliable means of transport is by sea, through 18 marine ports in Ukraine, including Odessa, Illichevsk, and Mariupol. Rail is another cheap, but less reliable, method of shipping products throughout the country. Rail traffic has fallen substantially since Ukrainian independence and minimal backups at crossing points make rail transport an interesting alternative to other forms of transport. Nearly 23,000 kilometers of railway connect Ukraine with Poland, Slovakia, and Hungary, as well as with eastern and northern points of the NIS.
The most popular, efficient, and costly means of transporting goods within Ukraine is by overland truck. Numerous domestic and international freight-forwarders and shipping companies provide service to a number of commercial and diplomatic entities in Ukraine, although price is a factor that U.S. companies should consider.



POINT OF CONTACT

For more information, please contact:



U.S. Commercial Service

Ukraine, Kyiv 04050

Hlybochitska street, 4

Mr. Olexander Zavhorodniy

Commercial Specialist

Oleksandr.Zavhorodniy@mail.doc.gov

Tel.: 38-044-4904104

Fax: 38-044-4904046



BISNIS (Business Information Service on Newly Independent States) in Ukraine

www.bisnis.doc.gov/bisnis/country/ukraine.cfm

The Commercial service,

U.S. Embassy Kyiv,

4, Hlybochitska Str.

Kyiv 04050 Ukraine

BISNIS Representative

Sergiy Polovenko

Sergiy.Polovenko@mail.doc.gov