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Country Commercial Guides for FY 2000: Ukraine |
Chapter VI: Trade Regulations and StandardsA. Taxation
The Ukrainian tax system has evolved continually since Ukraine's independence in 1991; however, it still remains far from coherent. In the words of one foreign businessman, "labor is very cheap here, but taxes remain very high. What costs a few cents becomes more than a few dollars after taxes. We pay some 16 different taxes."
The number of taxes in Ukraine decreased during the government of Ukraine's 1997 taxation reform and this trend continued in 1998. During summer 1998, President Kuchma issued several tax reform decrees. The reform measures included the introduction of a single uniform tax for small businesses, and a single uniform agricultural tax based on the value of the land; writing off and restructuring of VAT debts for agricultural producers; and reduction of the payroll tax to 37.5% beginning January 1, 1999. The most significant taxes are: a 20% value-added tax (VAT); a 30% corporate profit tax; a personal income tax based on an employee's income (ranging from 20-40% for most employees of foreign companies operating in Ukraine); and payroll taxes paid by the employers to the Social Insurance Fund, Pension Fund, and Employment Fund (total contributions to these funds amount to 37.5% of wages, borne by the employer). The State Tax Administration, responsible for the overall implementation of tax laws, was granted broader authority in 1997, becoming accountable directly to the president and incorporating the Ukrainian Tax Police.
The 1997 law "On Company Profit Tax" canceled automatic profit tax exemptions for companies registered prior to January 1, 1995, with qualified foreign investment of more than $100,000. The laws "On Value Added Tax" and "On Business Profits Tax" were passed by Parliament during the first half of 1997, formally providing for a more favorable VAT and corporate tax; essentially, a more similar tax structure to those found internationally. However, the language of the new laws and procedural issues, as well as numerous small amendments, often diminish the content of the laws and create additional problems for corporate taxpayers.
Income received from royalties and interest is subject to a 15% withholding tax. The withholding tax on dividends is 30%.
Both Ukrainian and foreign entities pay their taxes on a quarterly basis. It is important to obtain the services of experienced international accountants for tax-reporting purposes, as many local accountants have not yet made the switch to the international accounting standards required for new tax reporting.
A new tax code, with significant changes to the tax regime, is expected to be introduced in the year 2000. The complete text of the current draft tax code in Ukrainian can be viewed at the following web site: http://www.tax.com.ua. An unofficial English translation can be viewed at: http://www.tax.economy.org.ua.
B. Trade Barriers: Tariffs, Non-Tariff Barriers and Import Taxes
The daunting menu of a value added tax (20%), import taxes (ranging from 0 to 20%), and excise taxes (up to 300%) presents a major obstacle to trade with Ukraine. The VAT is levied at 20%, based on the customs value on the invoice, and is generally payable at the time of customs clearance by the importer. A promissory note can also be applied. Many agricultural enterprises are exempted from the VAT. As the list of goods exempted from VAT changes frequently, businesses should contact CS Kyiv for the most up-to-date list.
Import duties differ and largely depend upon whether a similar item to that being imported is produced in Ukraine; if so, the rate may be higher. Excise taxes are applied to a number of luxury goods, including alcohol, automobiles, jewelry, tires, and tobacco. 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. The value of excise duty should be calculated in the following way:
[(V+D+F) x R]/100 V = customs value of goods D = import duty F = customs fee R = excise rate (a percentage for goods other than alcohol, tobacco, and automobiles)
(V+D+F) multiplied by 20 (rate of VAT) and divided by 100 will give the amount payable of VAT.
Excise duties for alcohol, tobacco, and automobiles are not calculated by their customs value, but rather by volume, units, or weight (engine volume, in the case of automobiles) imported into Ukraine. These duties are declared in ECU (European Currency Unit) per unit and paid in local currency at the exchange rate effective on the date of payment. Ukraine prohibited the import of cars more than five years old, effective April 1, 1998.
During 1997, Ukraine increased import duties for the majority of agricultural and food products, as well as imported tires, clothes, and apparel. GOU policy to protect domestic manufacturers will probably result in gradually increasing import duties for other items produced in Ukraine. Import duties on certain types of gas meters, also manufactured domestically, were raised in 1998. In order to generate additional state budget revenues, the government increased excise duties on some categories of goods. A June 24, 1998 presidential decree "On Rates of Excise Duty on Petroleum Products" provided for raising excise duties on petroleum products.
C. Customs Valuation
Customs valuation in Ukraine conforms with 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.
D. Import Licenses
On January 4, 1999, the Cabinet of Ministers of Ukraine issued a resolution regulating import licenses. Goods subject to import licensing include: agricultural chemicals, pharmaceutical products (except dental materials and sutures), veterinary medicines, cosmetics, hygiene products, matrix forms used for manufacturing of audio production, ozone ruining chemical substances (including disperse sprays of paints and enamels, perfume, body lotions, etc., solvents for paints, fire extinguishers and fillings for fire extinguishers, oil and greases in sprays, conditioners and refrigerating equipment, and vending machines which have refrigerating units).
Most import licenses are granted through the Ministry of Foreign Economic Relations and Trade, or through one of its regional branches controlled by the State Customs Committee of Ukraine. Import licenses for sporting weapons and self-defense articles are issued by the Ministry of Internal Affairs. Import licenses are issued in coordination with:
A. The Ministry of Agriculture and Food, State Chemical Commission - for agricultural chemicals; Ministry of Ecology - if such substances are supplied in sprays; B. The State Committee for the Medical and Microbiological Industry for pharmaceutical products, cosmetics, and hygiene products; Ministry of Ecology - if such substances are supplied in sprays; C. The Ministry of Agriculture and Food's Main Department of Veterinary Medicine and the State Veterinary Inspection for veterinary medicines. D. The State Agency for Intellectual Property Rights under the Cabinet of Ministers of Ukraine - for matrix forms used for manufacturing of audio production. E. Ministry of Ecology - ozone depleting chemical substances (including disperse sprays of paints and enamels, perfume, body lotions, etc, solvents for paints, for fire extinguishers and fillings for fire extinguishers, oil and greases in sprays, conditioners and refrigerating equipment, and vending machines which have refrigerating units).
A copy of the contract and import certificate are basic documents necessary for obtaining an import license.
E. Export Controls
Export control is administered by Ukraine's Department of Analysis and Coordination of Export Policy, Cabinet of Ministers. The Ministry of Foreign Economic Relations and Trade of Ukraine also monitors and sets export prices for a number of Ukrainian goods.
Cabinet of Ministers of Ukraine Resolution #767, dated July 15, 1997, determines provisions for the examination of Ukraine's export and import goods. The controlled goods are understood as:
- military and other special commodities and "dual-use goods";
- military and special goods (armaments, material, explosives, components, and accessories thereof, and attendant technologies, also other products and technologies, works, and services designed to be applied in the military sphere or those qualified as state secrets);
- certain commodities, equipment, materials, software/firmware that may be used when developing weapons of mass destruction (e.g., nuclear, chemical, bacteriological, biological, and toxic weapons), delivery vehicles, or when developing conventional armaments and special equipment.
Export control is administered by authorities of the Government Export Control Policy Commission and the Derzhexportkontrol (National Export Control Committee) implementing national control over protection of national security interests in compliance with Ukraine's international commitments regarding non proliferation of weapons of mass destruction and delivery vehicles, restricted transfer of conventional armaments, and other measures aimed at protecting national interests.
Government and non-government expert examinations in the export control domain may be preliminary, basic, repeated, and supplementary.
Preliminary expert examination shall be carried out for identification of expert examination objects, among those submitted by the given business entity, as controlled goods entered in appropriate lists; assessment of the given business entity's observance of the export control laws and presence of appropriate regulatory documentation; and assessment of the possibility of delivery of goods designated by the given business entity to certain countries.
Basic expert examination is aimed at preparing substantiated findings to be used in deciding on the possibility and conditions of exporting/importing and/or transiting certain controlled goods.
Repeated expert examination may be carried out in the presence of transgressions of terms and conditions of preliminary or basic examination, or if requested by the customer ordering such expert examination, provided essential shortcomings have been discovered in such preliminary or basic expert findings. Supplementary expert examination is carried out in the presence of circumstances affecting or capable of affecting preliminary or basic expert findings.
A person/entity ordering a preliminary, basic, repeated, or supplementary expert examination has the right to: determine the need of such expert examination; request replacement of experts; and receive progress reports at all stages of such expert examination. Ukrainian law prohibits the disclosure of any information relating to the documents involved in the expert examination or produced as a result of this examination without the customer's written consent.
A preliminary expert examination in the export control domain is mandatory, and is carried out by the Derzhexportkontro l. This involves other central executive authorities and government bodies, along with legal entities authorized by the Government Export Control Policy Commission.
In order to have controlled goods examined using preliminary expert procedures, a business entity forwards a brief summary in writing to the Head of Derzhexportkontrol, along with:
- three copies of an application for such preliminary expert examination, executed using set form;
- notarized copies of the statute, constituent agreement, and official registration certificates of this entity;
- a technical affidavit specifying each object/item to be exported/imported, along with technical characteristics and a reference to an entry in the relevant list of controlled goods. Should this entity intend to export/import technologies, works or services, the said technical affidavit shall include summaries of these technologies/works/services. This technical affidavit should be signed by the official in charge of the given entity and by the commander of the military agency there (if any), and should be attested to with the official seals of this entity and military agency;
- reference (affidavit/statement) testifying to the degree of classification (secrecy) of the goods exposed to such expert examination, to be signed by the official in charge of this entity, head of its special departments and by the commander of the military agency (if any), attested to by the official seals of this entity and military agency;
- a list of countries to which such controlled goods will be exported or vice versa: reference/affidavit/statement identifying officials securing the giving entity's compliance with the current export control laws.
In addition to the documents indicated, non-government expert findings carried out as commissioned by the given entity should also be enclosed.
The term of such preliminary expert examination is determined on the assortment and amount of goods exposed to examination, and lasts up to sixty days from the date of presentation of the complete package of required documents by this business entity.
Basic expert examination is mandatory when deciding on the issuance of a permit allowing for the import, export or transit of controlled goods. This examination in the export control domain is carried out by the Derzhexportkontrol, other central executive authorities, and government bodies acting within their respective competence, also by legal entities and experts acting under appropriate authority (as submitted and justified or substantiated by the Derzhexportkontrol, or as resolved by the Government Export Control Policy Commission).
Basic expert examination is carried out as per documents submitted by the given business entity requesting permission to export/import controlled goods. Lists of these documents are determined in relevant provisions and regulations dealing with import/export/transit procedures with regard to controlled goods. These lists are subject to approval by the Cabinet of Ministers of Ukraine.
Cabinet of Ministers of Ukraine Resolution #15, dated January 4, 1999, lists goods subject to import/export quotas and licensing in 1999, which are issued by the Ministry of Foreign Economic Relations and Trade of Ukraine in coordination with the Ministry of Finance. The list of these goods is updated annually. Most of these commodities are:
- ferrous and non-ferrous metals and their scrap, ferrosyticomanganese;
- crude magnesium;
- flat section iron and plain steel;
- amber, precious metal ores and concentrates, precious metals in colloidal state;
- non-organic and organic compounds of precious metals with a definite or indefinite chemical composition;
- precious metal amalgams;
- cut or uncut diamonds, unmounted and unfixed;
- precious stones (except diamonds) and semiprecious stones, cut or uncut;
- silver (including gold or platinum plated silver), untreated, semi-treated or powdered;
- gold (including platinum plated gold), untreated, semi-treated or powdered;
- platinum, untreated, semitreated or powdered;
- scrap and waste of precious metals and those plated with precious metals;
- coins (only of precious metals).
The below listed goods, if exported directly by the State Treasury of the National Bank, are license-free:
- textiles;
- cotton yam, unpacked, for retail outlets;
- cotton cloth, except those using intermittent, terry weave, narrow woven fabrics, pile weave , chenille, tulle, and other cheesecloth like fabrics;
- garments;
- fabrics, except gray or bleached cloth;
- cloth made using natural and synthetic fiber;
- fabrics made using continuous synthetic composite threads;
- fabrics made of synthetic staple fiber;
- fabrics made of fleece or lamb's wool of fine animal hair;
- ropes, cables, cords, braided and otherwise, made of synthetic fiber;
- flax or tenter yam (for stretching cloth);
- flax or tenter fabrics.
A categorized specific listing can be obtained at the Ukrainian customs or Ministry of Foreign Economic Relations and Trade of Ukraine and Ukrainian State Export Control Committee.
Given the fluid environment in Ukraine, U.S. businesses are advised to contact the Ukrainian Center for Export and Import of Special Technologies, Machinery and Materials for the latest information concerning export controls.
Contact Oleksandr Siver, Director, 19/21, Frunze St., Kyiv, Ukraine; Tel: (380-44) 462-5558; Fax: (380-44) 463-7147.F. Import / Export Documentation
To the uninitiated, importing into Ukraine can prove to be a daunting experience of paperwork and frustration. Importers are required to complete a customs freight declaration for every item imported. Use of licensed customs brokers to navigate the morass of the Ukrainian customs bureaucracy is recommended, as constantly changing regulations and, in many cases, the mood of the customs officer, can hinder the successful import of a product.
Many U.S. companies with the intention to invest will import equipment, vehicles, and other goods under the aegis of authorized capital (or statutory fund), which will be exempt from customs duties. Goods that are to be re-sold in Ukraine, however, are assessed high value-added, import and, if applicable, excise taxes.
According to 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 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. Please note that the importation of alcohol and tobacco goods into Ukraine can only be cleared through the Sevastopol, Mariupol, and Ilichevsk ports.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.
The importer/freight forwarder should have all documents ready for presentation to the Ukrainian customs authorities, including:
- the signed contract; - cargo customs 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;
- import license, if required;
- if importing weapons, ammunition, explosives, or poisonous substances, written permission is required from the Ministry of Internal Affairs;
- if importing electronic radio and equipment and high-frequency devices, written permission is required from the Ministry of Telecommunications;
- if importing drugs, medical preparations, and sources of ionizing radiation, written permission if required from the Ministry of Health.G. Temporary Entry
Regulations pertaining to foreign companies and representative offices bringing in demonstration and exhibition samples are governed by the "Temporary Clause on the Regime for the Temporary Import of Goods, Property, and Transportation Means," issued by the State Customs Committee of Ukraine 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, this term can be extended by local customs authorities 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 can not 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 the quantity and description of goods matches that which was registered at the time of importation. The customs fee for temporarily imported goods is $30 for each customs declaration. When a large number of samples are imported, additional pages, costing $15 each, should be attached. Demonstration samples to be returned outside Ukraine are exempt from customs fees.
In 1997, Ukraine imposed additional limitations on the temporary entry of cars to Ukraine. Corporations and individuals may now bring only one car per company/individual in Ukraine, for a period of three years, exempt from customs fees.
H. Labeling and Marking Requirements
Ukrainian commercial legislation does not impose general labeling requirements on imported goods, except food items. All imported food products effective January 1, 1997 should carry labels in the Ukrainian language. The labels should include information about the manufacturer, product ingredients, and expiry dates for quality control purposes. In addition, some labels/markings which should be adhered on specific products, including labels for hazardous materials, labels indicating the contents and expiration date of foodstuffs, and markings indicating the voltage and frequency of electric appliances. Detailed information on labeling requirements for particular products can be obtained at corresponding Ukrainian ministries and agencies.
I. Prohibited Imports
The Ukrainian government strictly controls and restricts the import of weapons, narcotics, chemical and hazardous substances, certain pharmaceutical and communications related products (See Subsections D and E of Chapter 6).
U.S. companies wishing to import these goods should contact the relevant Ukrainian government ministry responsible for issuing licenses (i.e., 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.J. Standards
A 1994 governmental decree imposed compulsory certification requirements for goods imported into Ukraine. The decree specifies a list of goods subject to certification and regulates certification procedures. Certificates may be one of two types: (a) Certificate of Acceptance of a foreign certification issued by a Ukrainian certifying agency (DerzhStandard), and (b) Conformance Certificate issued by a Ukrainian agency upon certification of goods.
This decree states that certificates issued by foreign certification authorities are to be recognized in Ukraine only to the extent provided in international treaties to which Ukraine is party. Taking into account that there are currently no intergovernmental agreements on product certification between Ukraine and the U.S., a foreign certificate of acceptance will not be honored without first testing the product.
To apply for certification, the following documents issued outside Ukraine confirming a product's conformance to specific requirements are to be submitted to the DerzhStandard:
- an application stating that the company wishes to certify imported products;
- a certificate of conformance;
- standards (technical conditions) of production and the procedures for certification;
- a certificate of accreditation from the testing laboratory; - a protocol/summary of test results;
- a certificate of quality control;
- a certificate of origin (manufacturing).DerzhStandard has created a network of 93 certifying bodies and testing laboratories (centers), located throughout Ukraine. Each center is responsible for testing a particular item. For example, only the L'viv-based Electroncert Center issues certificates for TV sets and VCR's, while certificates for radio communication equipment should be obtained from a center in Sevastopol. However, companies seeking testing should first contact DerzhStandard, as they make the ultimate determination on certification.
As of July 1, 1996, DerzhStandard adopted as national standards the ISO-9000 series for production systems certification. Based on these standards, Ukrainian certification bodies can evaluate the quality of a production system rather than the quality of a single product.
The procedure for issuing ISO certificates requires a visit from Ukrainian standards specialists to the importer's production facilities to inspect the system's quality. Adoption of the ISO-9000 series should facilitate the process of certifying goods as system quality certificates are issued for a three year period.
According to DerzhStandard, the ISO900 standard certificate doesn't prevent the importer from certifying individual products. However, with this certificate, only selective goods will be certified according to the procedures described above.
K. Free Trade Zones / Bonded Warehouses
Free Trade Zones: Under Ukrainian Law "On Special (Free) Economic Zones," adopted in 1997, there are three types of special economic zones in Ukraine: 1) special (free) economic zones; 2) territories with a special investment regime; and 3) territories of priority development. They differ by tax concessions granted to business entities that choose to operate in the zones, but the key elements may be summarized as follows:
- Exemption from corporate profit tax during the first three to five years of project implementation and taxation at reduced rates during subsequent periods;
- Exemption from import duty and import VAT;
- Reduced rates of withholding tax on income derived by non-residents and on dividends;
- Exemption from mandatory conversion of revenues in foreign currency;
- Exemption from social insurance tax and payments to the state innovation fund;
- Exemption from land tax or taxation at reduced rates, and others.In addition, the territories of special investment regime and of priority development do not have independent customs borders as free economic zones do. Each zone is managed by an administration that also approves and registers all investment projects to be carried out in the zone. Normally, free economic zones are created for the period of 10 to 30 years.
As of July 15, 1999, five free economic zones were in operation in Ukraine:
- Syvash FEZ (in Northern Crimea)
- Azov (in Donetsk Oblast)
- Donetsk (18 towns in Donetsk Oblast)
- Zakarpattya (Zakarpatska Oblast including autoport "Chop" on Ukrainian-Hungarian border) - Port "Reni" (in Odesa Oblast)Four more special economic zones will be in operation as of January 1, 2000, as the relevant legislation has already passed parliamentary scrutiny. These are:
- Yavoriv (L'vivska Oblast bordering Poland
- Truskavets (L'vivska Oblast
- Slavutych (satellite-town of Chornobyl NPP) - Mykolayiv (including Ukraine's largest ship-building plant in the city of Mykolayiv)Despite earlier statements about not establishing new free economic zones (in compliance with IMF requirements not to grant new tax benefits), President Kuchma, in June 1999 alone, signed eight decrees creating new free economic zones and territories of priority development. If not rejected or amended by parliament within 30 plenary days, these decrees will become laws validating, as of January 1, 2000, special regimes on the following territories:
- FEZ "Interport Kovel" (in Volynska Oblast bordering Poland)
- FEZ "Port Crimea" in Kerch, Crimea, and the territories of priority development (that include Grand Yalta, Alushta, Sudak, Feodosiya, eastern Crimea)
- FEZ "Porto-Franco" in Odesa Sea Port
- Kharkiv (special investment regime)
- Territory of priority development in Volynska Oblast (includes Novovolynsk)
- Territories of priority development in Zhytomyrska Oblast (includes nine rayons in Zhytomyrska Oblast)
- Territories of priority development in Chernihiv Oblast (includes six rayons in Chernihiv Oblast )
- Shostka (special investment regime)
As of July 15, 1999, the parliament has turned down only one decree (on Shostka), but the president resubmitted the bill for reconsideration.
The Cabinet of Ministers of Ukraine approved a uniform contract for implementation of investment projects in free economic zones. The uniform contract has to be conducted between an investor and the FEZ administration. The contract lists tax, customs and other benefits to be awarded to an investor, specifies phases of project implementation, investment schedules, new jobs, etc. The contract should also list predicted annual volumes of production, sales or services. The contract should state as a condition that a project must begin no later than three months after the signing of a contract.
Ukraine has 18 ports that are located on the coasts of the Black Sea, Azov Sea, and on the rivers Danube, Yuzhniy Bug and Dnipro. Dorts are currently under the authority of the Ministry of Transportation's Department of Sea and River Transport. All seaports are state-owned, except Sevastopol. Most river ports have been turned into closed or open joint stock companies.
The government of Ukraine is attempting to turn the most successful seaports into free ports by establishing free economic zones around them, but the pace of reform is very slow. As of July 1999, only one - the Port of Reni, located on the left bank of Danube - had free port status. The other one - Porto-Franco, in Odesa - was created by presidential decree in June, but is still pending Rada approval. Two others - Mariupol (Azov Sea) and Ilichevsk
(Black Sea) - are being considered for free port status. Bonded Warehouses:
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, a great deal of paperwork, and possibly organized crime.
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 $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.
L. Special Import Provisions
A June 18, 1998, presidential decree gives the Cabinet of Ministers the right to amend excise and import duty rates on goods from a list approved by Parliament. It also stipulates that the Cabinet of Ministers is banned from setting "zero" rates of excise and import duties. The decree was signed in accordance with the "Transition Provisions" of the Ukrainian Constitution, and is slated to take force in 30 calendar days if Parliament does not vote down the bill by the same name.
Parliament amended the Cabinet of Ministers decree "On the Unified Customs Tariff of Ukraine," dated June 12, 1997, to establish that changes in rates of duties stipulated in the Unified Customs Tariff are to be made only by the Parliament. However, temporarily, "until legislative regulation of issues involving the Unified Customs Tariff of Ukraine," the Cabinet of Ministers is granted the right to change customs duty rates on goods, except excise goods and goods for which duty rates are established by Ukrainian laws. Meanwhile, lowering duty rates for separate juridical and physical persons or on separate contracts, or exempting them from payment of the duty, and postponing payment deadlines is prohibited.
M. Membership in Free Trade Agreements
Ukraine has signed free trade agreements with each of the former Soviet republics, excluding Kyrgyzstan and Tajikistan. Ukraine participates in the Black Sea Cooperation Council, along with Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, the Russian Federation, and Turkey. Currently, negotiations are underway for the establishment of a customs union with neighboring Moldova, as well as discussions for a Baltic-Black Sea cooperation agreement. 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. Ukraine is not planning to join the Commonwealth of Independent States customs union.
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[end of document] Note* International Copyright, United States Government, 1999. All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.
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