Since the beginning of 2010 the State Customs Service of Ukraine (SCSU) transferred 70 billion hryvnias to the state budget, increasing its contribution by 17 billion hryvnias as compared with the previous year. Border guards report that the additional contribution became possible because “imports came out of the shadow.” In the meanwhile, business is speaking about increased pressure. So what is the real situation of our state budget and our borders? What will happen to the import of second-hand products and the export of grain crops? What “surprises” await business due to the preparation of the revised version of the Customs Code? The head of the State Customs Service of Ukraine Ihor KALIETNIK spoke about this and other issues in an exclusive interview to The Day.
How is it possible that the budget received an additional 17 billion hryvnias?
“Importers started declaring goods in full and indicating their real price in declarations. So, only owing to the real custom values being indicated, the payments increased by five billion hryvnias as compared with previous years.
“Besides, we managed to minimize the ‘black’ and ‘gray’ flow of contraband commodities to the country. Thus, the customs gate is actually closed for contraband. This is confirmed by the growth of the amount of declared goods of different groups. For example, the customs clearance of household equipment increased threefold, and the clearance of chemical industry products — by 32 percent. In addition, importers started indicating in customs declarations the goods that before, according to the customs statistics, didn’t cross the Ukrainian border at all. However, such ‘non-imported’ goods (for instance, expensive watches, brand things, etc.) were sold on the internal market without problems. All these factors show that import is moving into the ‘light.’”
What groups of goods are the most problematic in terms of determining the real value during customs clearance?
“Today the customs service administers about 90 percent of all goods based on the price indicated in the contract. Therefore we don’t have any specific problems.”
In the first nine months Ukraine’s budget showed a deficit of 52.8 billion hryvnias, which means almost entire annual limit was exhausted. Therefore, to successfully implement the budget the go-vernment will have to either borrow money (the main international creditors of Ukraine strongly object spending loans on balancing the budget), or increase revenues plans for the tax and customs services. Were you given this task already? Will you cope with it?
“Our payment plan to the budget was increased. Today, customs provide 40 percent of all revenues to the budget. Thus, we already gave 70 billion hryvnias to the state budget. By the end of 2010 we should reach the overall figure of 91 billion hryvnias. That is, we need to give 21 billion hryvnias more to the budget. I hope we will cope with this task, because the daily customs payments increased by 100 million hryvnias compared with 2009, and constitutes 350 million hryvnias. At present the overall goods turnover of Ukraine is about 76 billion dollars. Out of this 40 billion is import, and 36 billion is export. That is the increase of import constitutes 15 percent, and export — 23 percent. Such positive dynamics of export-import operations demonstrate the country’s recovery from the recession.”
Customs is required to increase payments to the budget, so should business get ready for rising good’s valuations at the border?
“No one will twist the arms of business. However, we will be meticulous in making sure entrepreneurs show the real value and amount of goods in customs declarations. It is not done through intimidation, as some would like to portray it, but through a civilized warning and establishing transparent rules.”
The task of the customs is controlling not only import but also export. What groups of export goods raise concerns?
“Ukraine is an export-oriented country. Therefore, customs officers by all means assist honest exporters. However, due to the order of the head of the state, a large-scale work on revealing exaggerated VAT has been recently initiated. Many criminal cases were launched based on the results of this work. Most concerns deal with export of some groups of metal products (for example, rods), which were imported to Ukraine for prices dozens or even hundreds times higher than their real value. Export deliveries of transit companies, which actually tried to move air through the border, take the second place. And the third group – export of grain crops, six criminal cases were initiated based on their examination. Today I don’t see any particular problems with export. The situation stabilized. Ukrainian exporters started dynamic work on markets of other countries.”
Which items in the revised draft of the Customs Code will the State Customs Service fight for? When will the document be approved?
“The State Customs Service together with the parliamentary committee for tax and customs policy elaborated amendments to this document for four months. During the last sitting of the board in the State Customs Service of Ukraine, the draft was presented and its details were discussed. After this, the next day the committee introduced the Customs Code for consideration in parliament.
“Regarding the terms, I agree with the head of the parliamentary committee for tax and customs policy Vitalii Khomutynnik, that amendments to the Customs Code can be approved in the first reading by the end of 2010. Since this very parliamentary committee, which is the core committee in the context of legislative support of carrying out customs policy, will make the decision regarding the optimal period of introducing the Customs Code for the consideration in the Verkhovna Rada of Ukraine. I expect its adoption will be easier than the adoption of the Tax Code, because the Customs Code was prepared on the basis of the draft of the code elaborated in 2002, which was approved by the World Customs Organization. Besides, the current version of the code takes into account proposals of business, it was prepared in compliance with the requirements of the Kyoto Convention and considering recent changes in the international customs legislation. That is the renewed Customs Code corresponds to the challenges of the time and will considerably simplify the procedure of crossing the border for honest entrepreneurs.
“In particular, the Customs Code will simplify customs procedures, it will decrease the influence of the human factor on customs clearance. It is also suggested to decrease the number of controlling bodies at the border. Today, at entry points, exporters are checked by phyto-sanitary services, ecologists, quarantine service, etc. And at the end a customs officer stamps the document attesting his/her responsibility (including criminal, if his/her actions will lead to losses to the state). At this, there are no laboratories or tests collection at entry points. All controlling bodies check only documents. But customs officers can do it themselves. Therefore, in the Customs Code we suggest leaving only two controlling bodies (customs and border officers) instead of nine, at this passing the functions of carrying out primary documents check to customer officers. But in case of necessity an extended test, involving relevant specialists, can be administered. This way the time for customs examination and clearance can be reduced to four hours (two hours for each stage). Europe and many CIS countries chose a similar way.”
Does the code presuppose criminal responsibility of customs officers for violations and bribery?
“It doesn’t, because only the Criminal Code gives the list of criteria, according to which actions of officials fall within definitions of crime. Customs officer’s failing to execute normative documents of the State Customs Service of Ukraine without inflicting losses to the state is considered a disciplinary offense or violation of the law on public service, what results in corresponding penalties, up to a dismissal.”
Was the point on operative-investigative activity added to the text of the revised Customs Code?
“No. Though I know that several MPs suggected introducing this idea to the text of the code in the second reading.”
What is your position regarding se-cond hand products? Should they be banned or not? Does the draft of the Customs Code presuppose a norm on banning this import?
“In my opinion, second hand imports shouldn’t be banned now, because a considerable number of Ukrainians wear such clothes. Therefore, the Customs Code doesn’t have this item. Perhaps this step should be taken later, when domestic light industry starts producing cheap clothes and shoes to meet consumers’ needs on the internal market.
“Determining the real customs value of second hand apparel and making sure new and expensive brand goods are not imported as second hand are the main tasks of the customs service at present.”
To what extent do you propose to increase the customs rate for second hand?
“Together with the parliamentary committee for tax and customs policy, by the end of the week we will thoroughly elaborate the issue of establishing the real customs value of second hand. According to preliminary estimates, it is expected that the cost of used clothes will be corrected on the level of 1.5-3 dollars per kilogram. In view of the amount of import of such goods, we plan that the budget will additionally get over 300 million hryvnias of customs payments.”
Every new head of the State Customs Service speaks about simplifying customs procedures for honest business. For example, your predecessor promised to introduce “white,” “green” and “black” lists. As far as The Day knows, you are against this approach and prepare your own version of division into honest and not honest subjects of foreign economic activity. Please tell us about it.
“Based on old lists, 400 subjects, who were supposed to pass a simplified procedure of customs clearance and examination, belonged to the ‘white’ list. However, except for the image benefit (belonging to these lists made it easier for them to hold negotiations with foreign companies and sign contracts with them), they didn’t get any real simplification of border crossing procedures.
“At present, within the framework of the realization of the concept for reforming the customs system and introducing amendments to the Customs Code, I offer to simplify customs procedures for all subjects of foreign economic activity. Today 96,000 subjects of export and import activity are registered in the customs service. Out of them, only 43,000 really function, and 5 percent of them give 90 percent of all taxes to the state budget. The State Customs Service suggests recognizing all 96,000 subjects as ‘white,’ and then observing how they abide by the law while crossing the border, and making conclusions for the future based on this information. If violations during border crossing are found, they will be logged in a special base of violations.”
What will be the criteria to determine who will belong to the “black” lists?
“Violations of the customs legislation (but not all, only those which result in considerable consequences for the state), initiating criminal cases for contraband against an entrepreneur or enterprise will be taken into account. Information about the violator (name, identification code, car number, broker who conducted customs clearance, etc.) will be added to special lists, which will form a complete database of potential violators. These indicators will signal them ‘in red’ on the computer’s display. Then a customs inspector will check documents of subjects engaged in export-import activity. In this case, such an entrepreneur cannot expect a simplified control procedure or absence of examination. Inspector will be obliged to carry out the entire complex of actions to prevent the risk of repeated illegal actions at the border.”
Does the Customs Code presuppose the mechanism of struggling against corruption?
“Legislative acts on counteraction to corruption determine mechanisms of overcoming corruption. The Customs Code defines only potential directions where corruption activities can appear.”
I apologize for being straightforward, but experts call the customs system one of the most corrupt in the country. What can be done about it?
“When one says that one state mechanism is more corrupt than the other, I have only one request — do not compare. The entire state is sick with corruption, and it destroys all spheres of life. Corruption is like radiation: it is everywhere, but you cannot see or touch it.
“Since March 2010 I started struggling against corruption in the customs service. As a result, 140 people were dismissed already (heads of human resource departments, deputy heads of customs, inspectors), whose illegal actions inflicted losses on the state. That is customs starts cleaning itself from corrupt officials.”
You worked on corruption issues for a long time. Where do you think one should look for reasons behind the massive corruption, which simply erodes all social spheres?
“In my opinion, corruption is not a result of mental factors. The problem is that the government system was unbalanced in the country, and officials stopped observing the law while fulfilling their official duties. This should be corrected. In my opinion, the end of work on improving the anticorruption legislation, which is to be in effect on January 1, 2011, will facilitate this.”
During the last sitting of the customs board you presented a two-year plan on reforming the customs system of Ukraine. It allocates half a year to fulfill 60 primary tasks. Don’t you think this schedule is too optimistic: many tasks, too little time? Since, for example, the “Electronic Customs” (one of the tasks) is being introduced for a long time in Ukraine, albeit mainly formally?
“In my opinion, half a year is enough for the drastic change of the customs system of Ukraine. The short terms for introduction of this concept shows that our intentions to carry out the claimed reforms promptly are serious. If 20 years were given, it would be clear that reforms would be lost halfway.
“Comfortable conditions of border crossing, the absence of caddishness, and appropriate infrastructure should be the key result of reforms for people; for business, the aim should be normal incomes and a transparent regime for working with customs; for the state — stable contributions to the state budget and introducing strict control over contraband.
“Regarding the ‘Electronic Customs.’ Its introduction requires 1.4 billion hryvnias. Only 20 million were allotted in 2010. Besides, its creation is restrained by one more factor — it is necessary to finish establishing the center for certification of electronic keys and shifting state bodies to electronic declaration. Today the customs service of Ukraine is ready to work electronically, but only four state bodies are ready to work with electronic declarations with us: the State Forestry, the National Commission for Communication Regulations, the Ministry of Economy, and the Ministry of Defense.”
How will you stimulate other bodies?
“I sent a letter to the Cabinet of Ministers of Ukraine with the request to charge these bodies with urgent providing technical and electronic possibilities for joining the program based on which the ‘Electronic Customs’ project was created.”
