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Why you should consider using «customs visa-free» with Ukraine

27 February 2023 11:57

Why you should consider using «customs visa-free» with Ukraine

On October 1, 2022, Ukraine joined the Convention on the Common Transit. From now on, the transit of goods can be carried out within the framework of one transit procedure (from the customs office of departure to the customs office of destination) with a single transit declaration (with one means of transport and one guarantee).

However, in the first four months after Ukraine joined the Convention, only 1175 transit declarations were issued, of which 422 were for entry into Ukraine (In the EU - up to 50,000 every day). Unfortunately, there are many prejudices caused by the war. Therefore, the use of such a convenient tool is not yet widespread.

But everything is not so bad. Common transit is still worth using - and here's why.

How does the common transit procedure work?

You can familiarize yourself with the common transit procedure in detail on the website of the European Commission (here).

In short, the essence of the procedure is reduced to cooperation between customs through the NCTS system (New Computerized Transit System - is a technology that links customs services in countries participating in the Convention, allowing the exchange of customs data). Because customs in the member countries can "see" your goods through this system, you don't need to declare the goods in every country of your route - this is done only in the country of departure and the country of destination.

Common transit procedure allows you to obtain additional simplifications: to declare/receive the goods without presenting them at customs, apply seals yourself, and also apply a general financial guarantee with a reduction of the amount by 50% and 70% or exemption from the guarantee.

In addition, the criteria for obtaining transit simplifications are "common" with the requirements for obtaining the AEO status/customs simplifications. And vice versa. (You can read about the benefits of AEO status here)

Therefore, we recommend that your subsidiaries in Ukraine receive both AEO status/customs simplifications and common transit simplifications doing only one preparation.

And what about the war?

Due to the war in Ukraine, foreign suppliers often complete the common transit in the last EU country bordering Ukraine (Poland, for instance). This is often caused by the fear that goods may be destroyed or lost due to military action, especially missile strikes. First of all, to avoid the incurrence of customs debt.

However, since the war is a force majeure, the debt is canceled if the failure to fulfill the common transit procedure is caused by the destruction or irreversible loss of goods due to unforeseen circumstances or force majeure (Article 112 of the Convention).

On February 28, the Ukrainian Chamber of Commerce and Industry (UCCI) officially recognized the occurrence of force majeure circumstances in the country, namely the military aggression of the Russian Federation against our state. This means that if the goods are destroyed due to a missile attack on the customs territory of Ukraine, the exporter (or, on his behalf, a third party) shall not be responsible for paying the import payments (You shouldn`t confuse the risks of customs debt with the risk of destruction or damage to property due to force majeure. Regarding the second, the rules are unchanged regardless of the use of common transit. The moment of transfer of risks of accidental destruction or damage to property is determined by law, contract, or international commercial customs (including Incoterms).

To be exempt from customs payments, it may be necessary to submit a notification of force majeure circumstances with their justification and a certificate from the UCCI regarding the confirmation of force majeure (Despite the fact that the UCCI issued a general letter confirming that the war in Ukraine is a force majeure, we don't rule out that you will have to get an individual certificate as well).

In addition, customs clearance of goods is usually carried out in the western part of Ukraine, where no hostilities and missile attacks are rare. This minimizes the risk of destruction or damage to goods.

As you can see, recent changes have made the common transit of goods to and through Ukraine convenient, easy, and profitable, and the risks associated with war are less significant than one can think.

Oleg Kyryievskyi, managing partner at First Chair Legal, co-chair of the EBA Customs Committee.

Co-author: Yuriі Nakonechnyi, an associate at First Chair Legal.

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