On July 17 members of SUP met with the new Head of the State Customs Service (DMS) of Ukraine Maksim Nefyodov. We discussed how reforms of customs will be carried out and shared our thoughts about solutions to key problems in the customs sphere.
What will customs be like under the leadership of Maksim Nefyodov? The Head of DMS emphasized five key policy directions:
- Total electronization, reducing the subjective work of inspectors.
- Customs infrastructure. This is not just scanners, but also automatic scales, automatic scanning of numbers, and turning cameras. It is necessary to create infrastructure that will allow for no queues. If there are lines at the border, corruption incentives appear.
- Personnel reforms. Currently the potential of staff made complicated by constant reorganizations and leadership changes, and this leadership is not always oriented toward development of the Service. A realistic timeline for hiring new staff (after the completion of competitive hiring processes) will take to the end of the year. One of the incentives for corruption in customs is low salaries, and Nefyodov plans to raise them to a competitive level.
- European integration. Cooperation and exchange of data with other countries, unification of tariffs, shared control, protection of intellectual property.
- A new Customs Code and functional changes in customs itself: unification of regional customs into a single legal entity, a change in philosophy from exclusively fiscal to, among other things, security and encouraging trade. Customs officials should understand their responsibility for exports and imports. Nefyodov plans to instill in customs a product-based approach: customs should provide a wholistic service for export and import. This is not just about stamping things, but about ensuring a quality process for crossing the border.
It is worth noting that the discussion of participants and the Head of DMS was very productive, and, besides discussing problems, participants also voiced several initiatives and a willingness to help reform customs with resources: IT-solutions, sending specialist from the company on business trips, providing analytics, participating in working groups.
Entrepreneurs shared their desires and learned the position of Maksim Nefyodov on issues like:
- Open access to depersonalized data regarding the customs quality. Open access to it all!
Nefyodov is convinced that, given the very low level of trust of businesses and citizens in the government, the government must open up as much as possible, and also all data should be made available. In Prozorro he did the same thing with his team. If opening depersonalized customs data about the quality of the product does not encounter insurmountable legal complications (lawyers will study the issue), after starting work the new DMS should be able to do this fairly quickly. In addition, in the future it would be good to have an online database of all foreign economic operations. Due to the reduced customs quality, registering some goods under the watch of others will also help to exchange information with other countries. - Unification and reduction of tariffs.
Currently one of the obvious methods of fraud is miscoding goods. The same two goods in customs can be classified differently. Therefore, it is easier and completely logical to create a general identical tariff for most goods, which the new customs team will work on. SUP already has a worked-through concept for reducing tariffs and unification, creating four customs tariffs for all groups of goods. - Waiting times for cargo at customs.
To solve this problem there will be changes in the criteria for risk-management, and automatic economical operators and new infrastructure will be created. - Private postal services.
To work with this market, Nefyodov is prepared to meet separately and craft solutions to solve existing problems: it is not clear how customs control will be carried out on packages, some companies do not have any procedure for controlling cargo whatsoever, there is a problem of substitutions of invoices. The competitive advantage of at least some postal companies is a lack of any kind of control over what is sent at all. And it is necessary to slowly reduce this, in the opinion of the Head of DMS. “It is necessary to find an optimal solution, which will work. I support opening this market, for maximum competition here, but in the form of quality work, not in the from of competition to get around the rules,” added Nefyodov. Additionally, former decisions regarding reducing the limit on the value packages, according to Nefyodov, has not had any positive effect, and has only further burdened customs. - Black-market import, contraband.
This is not so much an issue with legislation, as much as the goals set by leadership for staff and basic processes. Authorized economic operators, shared transit, and harmonization of tariffs will help take care of some of the “white” traffic, so that efforts can be concentrated on the grey and black segments. The top priority for the Head of DMS is creating efficient conditions for legal business, and then deal with the grey and black markets. Very soon the DMS will start working on specifically dealing with contraband electronics, insofar as this problem has macroeconomic effects. As for lumber, solutions are already ready. Complete chipping of wood, sale exclusively on auctions, and forbidding forestry companies to do any sort of activity besides their primary business have already significantly reduced export of wood.
In the words of Nefyodov, it is not worth expecting quick changes: in the first two months he will only be working on creating a new customs service, only after that (another 2-3 months) will be a selection of new management personnel on a competitive basis. Additionally, the Head of DMS emphasized:
“Currently I do not feel a lack of political will for reforms. No one has given me any instructions or recommendations (including regarding staff appointments). I am responsible for the result from the very start, and all misfortunes and problems are my own. You can expect real changes by about the end of the year.”
We thank Maksim Nefyodov for a productive and meaningful discussion, and for willingness to work together! The Union of Ukrainian Entrepreneurs, in turn, is ready to help develop and support consistent decisions and reforms to create a transparent customs policy.
