Stanislav Tolochnyi: EXPORT RIGHT- HOW YOU CAN AVOID "SURPRISES" ON THE CUSTOMS BORDER

The recent news about customs restrictions on the import of branded goods has shaken the business community and raised many questions not only from importers, but also from exporters. The export potential of Ukraine continues to grow, so the customs clearance of goods, including those listed in the State Fiscal Service of Ukraine, is an important issue for both novice and experienced exporters.In the first quarter of 2017, the volume of Ukrainian goods sold to foreign markets amounted to $12.4 billion, which is 28% more than last year. This is evidenced by the latest data of the Ministry of Economic Development of Ukraine. Theoretically, Ukrainian producers now have great opportunities for expanding their business, because different areas of the world are open for the sale of goods. The European Union remains the main trading partner of Ukraine today. Also, India, Russia, Turkey, Iran, Egypt, and USA are among the countries that showed the largest increase in exports of Ukrainian goods in the first quarter of this year. It is likely that this list will soon be complemented by Canada, with which, in early April, Ukraine had completed ratification of the Free Trade Area. The signing of the Free Trade Agreement with Israel is currently under negotiation.

Despite the open horizons, many companies face significant difficulties at the customs clearance stage. Due to the thorny legal framework, the specifics of the work of customs services and constant changes of regulatory acts, customs clearance has been associated with a number of risks that can be minimized or completely prevented.

What should pay attention to in the customs clearance process so that the cargo “should not be stuck” at the border?

FULL PACKAGE OF DOCUMENTS

The customs registration of an export declaration requires the submission of the following documents:

• Foreign-economic contract of sale with additions (specifications). This is the main document, on the basis of which the exporter will carry out its activities with a partner, so you should pay attention to a number of points. 

You should know:

— if you intend to sell different products under a single contract and the seller may require different conditions then it is better to indicate that the terms of delivery are indicated in the invoices (contract specifications) for each consignment.

— any terms of payment may be indicated, but it must be taken into account that, according to the NBU regulation No. 410, the term for currency admission for export should not exceed 120 days. Non-observance of terms should entail a penalty for each day of delay in the amount of 0.3% of the amount of non-receipt of proceeds.

— The list of documents accompanying the goods must be as complete as possible. There are precedents when the contract prescribes certificates of conformity or bank charges that the customs does not control. But, if they are registered, then they can apply for customs clearance. Therefore, it is recommended to list only: invoice (4 pcs.); packing sheet (4 pcs); transport document depending on the nature of the carriage; veterinary/phytosanitary certificates, if required by the product code.

2) Invoice. The broker gathers from it the basic information in the declaration.

If the goods are shipped free of charge, then the price information should be indicated for the customs clearance, and it is not intended for commercial activity. In this case, the INVOICE Proforma, which is identical to the invoice, except for the name, is submitted.

3) Packing list. This is an analogue of the invoice, only the following information is indicated instead of the price: quantity, gross weight, net weight, type of packaging (pallets, barrels, boxes, etc.). You can combine the packing list and invoice, or prescribe the weight in the specification to the contract.

4) Transport documents. This is the CMR for auto-delivery, bill of lading for sea shipping or airway delivery for air transportation. Should be made up by the carrier.

You should know: It is better to send out the documents to the business partner in advance so that it can check them and confirm them until the goods have crossed the border.

Correct classification under UKT ZED (The Ukrainian Classification of Goods of Foreign Economic Activity)

Classification of goods during customs clearance should be carried out by a broker based on the Law of Ukraine “On Customs Tariff of Ukraine”, and is called UKT ZED. Every product that crosses the border of Ukraine must be encoded in accordance with this classification.

There are situations when the customs system automatically generates the risk of classification of goods, or the inspector itself sets out the form of control over the classification. In the latter case, it may be necessary to prove that, conditionally speaking, the hanger is really a hanger, and not part of the hadron collider. In such circumstances, the broker provides additional information. However, if the department of the nomenclature determines that the hanger can whip milk and therefore it should be considered a mixer, it will require a laboratory examination, which takes from 10 to 40 days. In summary, the product code should be confirmed or changed.

You should know:

— The decision of the customs authority regarding the code of the goods is obligatory, but the exporter may apply to the court to appeal the conclusion of the examination.

— For the classification of the goods the exporter may apply for an expert opinion to the Chamber of Commerce and Industry. However, this code can be changed by the customs. An alternative should be when you apply to the customs authority, either by yourself or through a broker, for receipt of the PRK (preliminary decision on classification), which should be issued within 30 days, accepted by all customs authorities, and valid for 3 years.

TARIFF AND NON-TARIFF REGULATION

Tariff regulation is the use of customs duties when exporting goods. The website of the State Fiscal Service of Ukraine contains the "List of Goods, for which the Laws of Ukraine Set the Rates for Export Duty in 2017." But to use it, you will have to define the product code first.

Non-tariff regulation involves several types of controls, among which the most common are:

• Radiological control, which is subject to all products, regardless of the code.
• Veterinary control, which includes virtually all products of animal origin, as well as products used for the production of animal feed. To begin with, the manufacturer must be included in the Register of market operators who are allowed to export the goods. The exporter then issues an Internal Veterinary Certificate Form No. 2, on the basis of which an international veterinary certificate will be issued for the country of receipt of the goods.

You should know: If the documents for the product cause suspicion to the inspector, an additional procedure for laboratory analysis will be assigned.

• Phytosanitary control, which applies to all products of plant origin. To begin, the exporter needs to receive accreditation in the phytosanitary service. Most checks for international certification can occur in two scenarios. The first check, which is the examination of each batch of goods, should be carried out by the inspector of the phytosanitary service after the arrival of the vehicle on the terminal (1 to 2 days). The second scenario is when the local inspector goes to the factory or warehouse where the product is produced or stored and makes measurements and analyses, and then issues a conclusion related to the production areas.

You should know:

— At the visit of the inspector to the production area, the exporter is deprived of the necessity to carry out the analysis every time and wait for one day at the customs.

— You should pay particular attention to wooden pallets. When exported, they should be marked with a cone, have act of fumigation of pallets and purchase documents. The situations occur when pallets are not properly labelled, and in this case the customs refuses to release the goods on the pallets.

• Environmental control, for which the Ministry of Ecology and Natural Resources of Ukraine must issue a certificate on whether the product enters yellow or green waste lists (second-hand, broken glass, scrap metals, etc.).

• The intellectual property is a kind of control in which the exporter needs to obtain permission from the owner of the trademark, if this product is included in the customs register of the State Fiscal Service of Ukraine, which, according to the owner’s application, contains information about the property rights to the intellectual property object.

At the end of May, customs authorities restricted importing goods from well-known brands purchased in foreign online stores, at the request of legal owners or their representatives. As explained in the State Fiscal Service of Ukraine, the restriction applies to counterfeit goods or goods whose origin has not been able to be established. Quite often, exporters face similar problems.

According to the Ukrainian legislation, customs clearance of goods entered in the Register of intellectual property objects should be suspended for up to 10 business days to obtain the permission of the copyright holder of the trademark. If the permit is received, the cargo should cross the border. In case of refusal, the goods may be confiscated.

You should know:

— Be sure to check the customs registry. Even if you export nuts, check if the packages in which you packed the product are not intellectual property.

— If the exporter has a warranty letter from the right holder, the customs clearance should still be pending until the management of the customs service receives a fax from the right holder of the trademark confirming that the goods can cross the border.

Other types of control that occur quite rarely, include: dual/military goods (the permission of the State Export Control Service of Ukraine) and cultural values (the permission of the Ministry of Culture of Ukraine).

ORIGIN OF THE GOODS

Rules of origin of goods also have a number of nuances. Consider an example of foreign economic relations with Canada under free trade agreement. According to Article 3.2 of Chapter 3, there are three types of origin of goods: fully manufactured; produced exclusively of materials that are manufactured in Ukraine; subjected to sufficient processing.

Attention:

• A product may be considered manufactured in Ukraine if the total cost of materials of another origin does not exceed 10% of the transaction value or ex-factory price.
• The declarant/exporter/seller/sender independently indicates in the invoice the country of origin by writing the phrase: “The exporter of the goods covered by this document declares that, except in cases where it is clearly indicated, these goods are goods of preferential origin of...”. Next, the place and date, and also the signature and the name of the exporter, should be indicated.After this phrase, the invoice should be considered a declaration of origin. However, the customs authority will most likely require a copy of the declaration of origin and all documents confirming the status of origin of the goods.
• If the goods need to be sent immediately (prepayment, season, etc.), and to prepare all the documents is not possible now, the exporter can fill the declaration within two years. It is also possible to draw up one declaration for identical goods (sunflower oil or pine boards), and on the basis of it to carry goods 12 months from the date of issue of the document.
• The documents, on the basis of which the declaration has been issued, and its copy to the exporter, must be kept for three years after the registration.

Importance of customs clearance is difficult to be overestimated. There are still many subtleties and standards that you should know. Professional approach and deep expertise carried out under UKT ZED in gathering the necessary documents and passing all customs procedures allows to avoid penalties, confiscations of goods and additional logistic costs.