Archive for August 4th, 2010

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Import and export Ukraine

August 4, 2010

Well dear readers,  one of your number has sent me a message about import and export to and from Ukraine…….despite this individual living permanently in Ukraine and has the ability to find out the answers themselves…….although he is foreign and thus far has been too lazy (or rude) to attempt to learn Ukrainian or Russian despite being here several years or “network” to the point of knowing who he needs to know!

Anyway, the system is ruled absolutely and completely by the Customs Service of Ukraine.

There will be serveral enjoyably interesting experiences awaiting those who import/export to or from Ukraine……I have assisted in several metals deals between foreign entities and a certain steel mill in the past.

Your first set of border hurdles obviously will relate to documentation (forget the standard international SGS requirements for commodities…..we will stick with purely Ukrainian laws and documentation).

This list will no doubt include, VAT (value added tax), excise tax and customs duties that you think you have factored into your margins when signing a contract……but that is actually very difficult to do……as you will see if you read further.

Now I have friends in the Customs bodies in Odessa particularly and with me they have always been good……but that is because my dealings with them started out at social gatherings rather than creating work for them by trying to get goods in or out of the country.  Nothing bugs a Ukrainian official more than creating work for them it seems!

So forcing these poor souls to do some work will generate at best an indifferent attitude to your actions and at worst “extreme scrutiny” of goods and more specifically documents.  Expect declared values to be “questioned” with a view to increasing customs duties as a punishment for them having to work.

Now there is a computerised data base, but there are issues with it when it comes to setting the “customs duty”.  Firstly, what you are importing/exporting needs to be on the computerised list.  I once imported 4 custom made gas fires for 4 large houses I was building for the local elite……all of course quite individual……houses and fires.

It seems nobody imports gas fires to Ukraine……at least not through Odessa.  (I know what you’re thinking……what difference does it make whether through Odessa, Lviv or Kyiv…….well sit tight, I am coming to that…….don’t be so impatient!)

The customs database is there to help customs officer determine the “real price” as oppossed to your “declared price”…….ergo when you thought you had enough in your profit margin to make things quite profitable, you are now beginning to see that profit chipped away.

To further complicate (or frustrate you) the customs data bases are not national but regional and even split down to individual customs points within a region meaning that there is the opportunity for customs staff to delete the minimum prices on their system……..as generally your “fees” will be taken as the “mean price” between lowest and highest prices on their system.

Of course, this is good for the customs officials and the national customs department as the amount of money they raise is one of the yard sticks by which they are measured……and that measure is by what  revenue they report (rather than that they actually take necessarily).

If you are incredibily unlucky or decide to fight the system then be prepared not only for a long fight whilst your goods sit empounded and racking up a storage fee……but also to provide a large range of documents as requested by the Customs Department……the same State organ you are in conflict with.

That said, you have 3 levels of the department to argue with……and the higher you go…..the greater your chance of success I would suggest…….as people at the top really hate problems more than those at the bottom who are having to work because of you.

Above the local customs officials are the regional officials and above them are the State officials…….but you need to know who they are if you are after a speedy resolution to your problem……..and remember you have an Ambassador and Embassy sat in Kyiv who may be able to help you as most have a business orientated team within them.

Anyway, that is how it is officially and unless you are importing/exporting prohibited goods or substances (in which case on your on head be it), your only problems will always be the paperwork and the guess you made at a profit margin large enough to accommodate the moving goal posts of the customs point you are exporting/importing at.

You can of course, try another customs point to import/export at……like I say the computer system for tariffs is not “joined up” and open to manipulation by customs staff regionally and locally.

Alternatively, you can do what many will do and that is arrange your “tax” with a customs official at their import/export location, before you start, add this “tax” to your declared price and that will tell you the real profit margin you have……before you then take off transportation costs etc.

My advice, do some due diligence on your chosen point(s) of import/export regarding costs before you start signing contracts with suplliers unless the suppliers have a proven and visible track record and will be able to “advise you” on the best place to import/export from.

If that is the case, start with small deals first so you don’t get any nasty surprises.  Only fools rush in where angels fear to tread.

Before you ask, I am not cheap if you are thinking of outsourcing these problems to someone who can deal with them face to face on your behalf!

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