What you need to know about the Customs
Here you will find information about how to register at the customs office and the main customs procedures. You will get an overview of the customs tariffs and payments, including customs VAT.
Export to Russia, Kazakhstan, Belarus, Ukraine
Customs clearance is a key factor when exporting goods to Russia, and thus has major time and financial impacts. A thorough document check must be carried out in advance to avoid problems, particularly with delivery and transport documents. Optimizing customs handling is essential for successful export to Russia.
Special preparation is required to import goods between affiliated companies. For imports between unrelated companies, the invoice is usually sufficient as the main source for calculating customs value. For imports between affiliated companies, Russian customs requires additional confirmation of the value of goods by a price-list stamped by the Chamber of Commerce of the exporter’s country, the export declaration, and the official order confirmation.
The situation becomes more complicated when the exporting company is selling not only to its subsidiary, but also to other distributors in the Customs Union. In this case, different prices for identical products are registered in the customs database, with the price for the subsidiary usually being the lowest. This pricing policy often leads to corrections of the customs value and delays customs clearance, if not previously taken into account and properly prepared.
In order to regulate the import of goods, the Customs Code of the Customs Union outlines several different customs procedures. The main procedures are:
Major custom procedures
Release for Domestic Consumption
Under the current customs regulations, imported goods are free for circulation within the country of import once the following requirements are met:
- Full payment of customs duties, VAT, and other taxes (if required)
- Observance of all other requirements for importation of the goods (e.g. certification, licensing, etc.)
- Compliance with current limitations and restrictions on the country of import
This procedure covers the import of goods without any obligations to return or re-export the goods.
Export is the customs procedure by which goods are shipped out of the Customs Union without any obligation to return or re-import the goods. This procedure is only applicable for goods produced within the territory of the Customs Union or previously imported into the Customs Union from other countries, and upon which no restrictions or limitations apply. For some categories of goods, for example most raw materials, customs duties need to be paid, whereas zero-rated VAT applies for export operations.
International Customs Transit
International Customs Transit defines the customs procedure used for foreign goods traversing a country of the Customs Union to get to a third country. Transit is performed under the control of the customs office of entry until the goods reach the customs office of exit. The goods in transit are exempt from customs duties, taxes, import restrictions, and prohibitions. All issues concerning international customs transit, such as authorization and timing, are handled by the customs authorities. This procedure is applicable for any kind of foreign goods, except when there are clear limitations or restrictions. Customs transit is regulated not only by the Customs Code of the Customs Union, but also by various international agreements.
Economic customs procedures
Inward Processing (processing within the customs territory) is the import of goods that are to be processed (i.e. modified, assembled, adapted, etc.) in the territory of the Customs Union within three years of the date of import. The inward processing customs procedure allows for full exemption from import customs duties and taxes levied on the imported goods. The only requirements to comply with are:
- payment of the customs handling fees
- respective authorization, licenses, and certificates are submitted to the customs authorities
Importers must apply to the customs authorities for authorization prior to the import of the goods under this procedure. The subsequent export of the processed goods is not subject to export custom duties, though it may be subject to export restrictions (e.g. requiring authorisation from state authorities on export control, export licenses, etc.).
Processing for Domestic Consumption
Processing for Domestic Consumption is similar to Inward Processing, however the imported goods must be processed within one year of the date of import, and the final products are released for free circulation within the territory of the respective country of the Customs Union. Goods imported under this procedure are subject to all restrictions and prohibitions on imports. The initial goods are exempt from customs duties and taxes, but the final products are subject to payment of all applicable duties and taxes.
Outward Processing (processing performed outside the customs territory) is the export of goods from the Customs Union for processing outside of that country. Goods must be processed within two years of the date of export, and the final product re-imported into the Customs Union. Goods exported under this procedure are not subject to any economic restrictions or prohibitions and are completely exempt from export duties. The final imported products are partially or fully (in the case of warranty repairs of exported goods) exempt from customs duties and taxes. As with the other processing procedures, importers need to apply for permission beforehand.
This procedure allows for the use of foreign goods within the customs territory for a certain period of time, usually not exceeding two years. For each month, the authorities charge a fee of three percent of the payments that would apply if the goods were released for domestic consumption. The temporarily imported goods should be preserved in their original state except for changes caused by natural wear and tear. Temporarily imported goods need to remain in the possession of the declarant and may not be transferred to third parties without special permission from the customs authorities. At the end of the temporary import period, the goods should be re-exported or declared under a different customs procedure.
Customs (Bonded) Warehouse
Under the customs warehouse procedure, any goods imported into the Customs Union, except commodities whose import and export is prohibited or restricted, are stored in specially allocated warehouses or territories under the custody of the customs authorities. This customs procedure is beneficial when the final buyer of the goods is not known at the moment when the goods are delivered to the Customs Union. This allows the deferral of payment of customs duties and taxes. Goods may be placed under this customs procedure only after authorisation from the customs authorities and for a maximum period of three years. There are also so-called “completing” customs procedures such as re-import, re-export, destruction, and special custom procedures such as temporary exportation, duty-free trade, and so on.
Customs procedures in Ukraine
The Customs Code of Ukraine covers the following movement of goods across the customs border of Ukraine:
- Import (release for domestic consumption)
- International customs transit
- Temporary import
- Temporary export
- Bonded warehouse
- Free customs zone
- Duty free trade
- Processing in the customs territory of Ukraine
- Processing outside the customs territory of Ukraine
- Abandonment to the state
Each of the customs processes depends on the purposes of the transfer of goods and requires relevant customs procedures.
The Customs Tariff of the Customs Union is a standardized system of classifying traded products, and is essentially a broader and more specific version of the Harmonized Commodity Description and Coding System (abbreviated as “HS Code”) maintained by the World Customs Organization. Another comparable product classification system is the TARIC code (Integrated Tariff of the European Communities) that shows the various rules applying to specific products when imported into the European Union.
The current version of the Customs Tariff of the Customs Union came into effect on January 1, 2010 and was expanded by the Commission of the Customs Union with the support of the national customs authorities of the single member states. The purpose of the Customs Tariff is to identify goods during customs operations and to define the percentage of duties and the respective calculation of the
customs value for those goods.
Each Customs Tariff number of the Customs Union consists of 10 numbers:
- The first two numbers define the product group (e.g. 72 is for iron and steel)
- The next two numbers define the product position (e.g. 7201 Pig iron in blocks or other primary forms)
- The next two numbers define the product’s sub-position (e.g. 720110 Non-alloy pig iron containing 0.5% or less of phosphorus by weight)
- The last four numbers provide additional breakdowns in classification (e.g. 7201101900 Containing not less than 0.4% of manganese and more than 1% of silicon by weight)
The Customs Tariff includes a total of 21 divisions and 99 groups. Product classification under the customs tariff is carried out by the declarant, however the final confirmation and, if necessary, correction is performed by the customs authorities. The Customs Tariff in Ukraine is based on the similar principles and contains 21 divisions and 97 groups of commodities in total. In general, the declarant is liable for the classification of goods.
Nevertheless, the final decision of the customs authorities may be different from the classification proposed by the declarant.
According to current customs legislation, the import of goods into the Customs Union involves an obligation to pay the following customs payments:
Duties are normally set as a percentage of the customs value of imported goods, known as “ad valorem” duties. However, they may also be levied as a set amount per unit or measurement, known as “specific duties”, or by the greater of any of the two, known as “combined” duties. Certain goods, however, are duty-free. The type of duty applied is determined by the customs tariff number, and the range for most of the “ad valorem” rates is between 0% and 20%.
There are some exceptions, for example, with some types of meat, where rates are up to 65%. Previously, the percentage of the “ad valorem” import rate was clearly categorized in brackets of 0%, 5%, 10%, 15%, and 20%. Following the accession of Russia to the World Trade Organisation (WTO) in August 2012, the standard rates provided by the WTO are being adopted step by step during a 7-year transitional period. Amendments made to the Customs Code in 2013 have changed the structure of customs duties, with duties also being split into more specific percentage rates (e.g. 8.2%, 9.4%, etc.).
Moreover, the percentage of customs duties also depends on the country of origin. In this context, preferential treatment has been established for CIS states and less-developed countries, while maximum fees are levied on non-preferred trading nations:
- CIS countries and less developed nations are exempt from customs import duties
- For developing countries, 75% of basic rates apply. In order to benefit from these regulations, the respective certificate of origin needs to be presented to the customs authorities.
Currently, there are two duty rates in Ukraine: relieved and full rates. Relieved duty rates apply to goods originating from World Trade Organization (WTO) countries and countries that have granted Ukraine ‘most favoured nation’ trade status. Full duty rates apply to goods originating from all other countries, or where the country of origin cannot be determined. Special kinds of import duties (i.e. seasonal, special, anti-dumping, and countervailing) may be applicable on the import of certain goods.
Ukraine has no export duties except on natural gas, scrap metal, livestock, rawhide, barley, and certain oil seeds. In particular, the Customs Tariff of Ukraine provides the customs duties rates for different goods.
Excise taxes are levied on a range of imported goods including wine, beer, spirits, tobacco, oil, vehicles, and others. Imported goods are subject to excise tax at the moment they are imported.
These duties are generally applied at a fixed amount per unit of measurement, and are payable in the national currency. Excise duties apply to certain goods imported to or produced in Ukraine.
Excisable goods include ethyl alcohol, alcoholic beverages, tobacco and tobacco products, cars, car bodies, motorbikes, liquefied gas, petrol, diesel fuel, and certain other oil products, as well as disposal of qualifying securities and transactions with derivatives.
Ukraine is currently experiencing a gradual increase of excise tax on oil products, tobacco goods, ethyl alcohol, and alcoholic beverages.
Rates of excise tax can be ad valorem (a percentage of the value of the goods), specific (in monetary units per unit of goods), or combined.
VAT is generally due when goods are imported into the Customs Union. It is calculated based on the total sum of the customs value of the goods and customs and excise duties paid, if any. The rate of VAT depends on the country and on the nature of the imported goods. The standard rate of VAT in Russia is 18%, in Belarus 20% and in Kazakhstan 12%.
Certain goods, however, may be subject to lower VAT rates. For example 10% VAT is currently applied in Russia and Belarus for children’s products. In addition, certain goods are exempt from import VAT, like technological equipment imported as a
contribution to the charter capital of a Russian company, or medical equipment. In Belarus, VAT exemption is also granted in relation to certain types of technological equipment, components, and spare parts classified under the product groups 73, 84, 85, 86, and 90 of the Customs Tariff of the Customs Union that are entirely used for implementing investment projects.
There are three VAT rates in Ukraine: 0%, 7% and 20%. The rate of 20% applies to almost all transactions subject to VAT except the export of goods, which is taxable at 0%. The zero rate also applies to the supply of international transport services (confirmed by a single international shipping document), toll manufacturing services (if the finished goods are then exported from Ukraine), and certain other services. The rate 7% applies to the import and further supply of medicines and medical equipment which is directly specified by the Ukrainian government.
Import and further supply of other medicines and medical equipment are subject to standard rate 20%. Provision of services to a non-resident is not considered to be zero-rated. Such services are subject to 20% VAT or considered to be outside the scope of VAT (effectively exempt with no right to claim input VAT), depending on the place of supply.
Transactions that are subject to VAT include the following:
- The supply of goods and services where the place of supply is in Ukraine, including when the supply is made free of charge without consideration
- The importation of goods into Ukraine
- Exportation of goods
- International transportation services
The customs fee is a handling fee for the customs authorities, which is levied for each submitted customs declaration. The calculation of the customs fee is regulated individually in the single member states.
In Russia the amount of customs fees due depends on the customs value based on the following classification:
If the customs declaration is submitted in paper form, which since 2014 is only possible in rare cases, the charged customs fee is 25% higher.
In Belarus the customs fee is not calculated on the basis of the customs value, but simply depends on the type of product:
- 20 EUR is levied for the import of product groups 1 – 26, 30, 31, 41 – 70, 72 – 83 (consumer goods, food products etc.)
- 50 EUR is levied for the import of product groups 27 – 29, 32 – 40, 71, 84 – 97 (means of transport, machinery, and equipment etc.)
In Kazakhstan there is another system for calculating customs fees depending on the number of pages of the customs declaration:
- 50 EUR is levied for the first (main) page of the customs declaration
- 20 EUR is levied for each additional page in the customs declaration
Special customs fees in Ukraine might be levied only based on the declarant’s application in cases when the customs procedures are performed outside of the customs authority location and/or during non-working time. For the performance of customs procedures outside of the customs authority the following hourly rates are applied:
- During working hours – 20 Euros
- During non-working hours, at night and on weekends – 40 Euros
- During the holidays and non-working days – 50 Euros
For the performance of customs procedures at the location of customs authority, but outside working hours:
- During non-working hours, at night and on weekends – 40 Euros
- During the holidays and non-working days – 50 Euros