On Key Amendments to the Customs Code of Ukraine Aimed at Establishing Regulatory Mechanisms for the Implementation of Sanctions by Customs Authorities

The draft Law of Ukraine “On Amendments to the Customs Code of Ukraine Regarding Certain Issues Related to the Application of Sanctions” was developed to ensure the proper implementation of decisions by the National Security and Defense Council of Ukraine on the application, revocation, or amendment of sanctions enacted by decrees of the President of Ukraine, and, in cases provided for by the Law “On Sanctions,” approved by a resolution of the Verkhovna Rada of Ukraine, as well as court decisions on the application of sanctions provided for in paragraph 11 of part one of Article 4 of this Law.

The draft law proposes:

• to establish an automated exchange of information regarding the imposition of sanctions and the determination of the ownership structure of legal entities through electronic information exchange between the central executive authority responsible for implementing state customs policy and the maintainers of the State Register of Sanctions and the Unified State Register of Legal Entities, individual entrepreneurs, and public organizations;
• define a clear procedure for customs authorities when carrying out customs formalities and making decisions regarding the application of sanctions in accordance with the Law of Ukraine “On Sanctions.”

Accordingly, the main change is a proposal to supplement the Customs Code of Ukraine with Article 1971, “Implementation by Customs Authorities of Special Economic and Other Restrictive Measures (Sanctions),” which is currently absent from the existing Customs Code of Ukraine. This article provides for the following provisions: 

1. Customs authorities, within the powers defined by this Code, shall implement sanctions imposed in accordance with the Law of Ukraine “On Sanctions,” taking into account information obtained from the State Register of Sanctions.

2. The central executive authority responsible for implementing state customs policy and the maintainers of the State Register of Sanctions, the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Organizations shall exchange information regarding the application of sanctions and the determination of a legal entity’s ownership structure through electronic information exchange between the state electronic information resources of the parties to such information relations.

3. If customs authorities receive, through the electronic information exchange provided for in this article, information regarding the application of sanctions, the customs authorities shall implement such sanctions within the scope of their authority in accordance with the requirements of decisions of the National Security and Defense Council of Ukraine on the application, revocation, or amendment of sanctions enacted by decrees of the President of Ukraine, and, in cases provided for by the Law “On Sanctions,” as approved by a resolution of the Verkhovna Rada of Ukraine, as well as by court decisions on the application of sanctions provided for in paragraph 11 of part one of Article 4 of this Law (hereinafter referred to as “Decisions on the Application of Sanctions”). If the information received by the customs authorities does not contain grounds for refusing to carry out customs formalities, the customs formalities and/or decisions by the customs authorities shall be carried out in accordance with the established procedure.

4. After the completion of customs formalities or the adoption of decisions by customs authorities, if there are reasonable grounds, customs authorities have the right to

send requests to authorized bodies (organizations), including those of foreign states, for information regarding foreign economic transactions carried out with the participation of foreign economic entities that are residents of Ukraine, to establish additional circumstances regarding a possible violation of the requirements of the Decisions on the Application of Sanctions. The identification, based on such requests, of circumstances regarding a violation of the requirements of the Decisions on the Application of Sanctions does not constitute evidence of improper performance of duties by officials of the customs authorities.

5. The central executive authority responsible for implementing state customs policy shall enforce sanctions imposed in accordance with the Law of Ukraine “On Sanctions” by:

1) refusing to accept a customs declaration (or a document used in lieu of a customs declaration) and/or a temporary storage declaration, or to perform customs clearance, release, or admission of goods or commercial vehicles, granting permission to conduct operations with goods located on the territory and within the premises of temporary storage warehouses, customs warehouses, warehouses of customs authorities, and other locations where goods and commercial vehicles subject to customs control are stored, — in the event of the imposition of a sanction in the form of asset freezing and/or restrictions on trade operations;

2) refusal to accept a customs declaration (or a document used in lieu of a customs declaration pursuant to Article 94 of this Code), the release or passage of goods and commercial vehicles—in the event of a sanction in the form of a restriction, partial or complete suspension of the transit of resources, flights, and transportation through the territory of Ukraine;

3) refusal or suspension of the refund of remaining funds from advance payments (prepayments), as well as amounts of customs duties and other payments that were erroneously and/or excessively paid, or the refund from the customs authority’s account of balances received from the sale of goods—in the event of a sanction in the form of asset freezing and/or suspension of the fulfillment of economic and financial obligations;

4) suspension, revocation, or cancellation of the guarantor’s registration, permit, or authorization provided for by this Code; temporary or permanent deprivation of the right to benefit from the provisions of the Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention) of 1975, the closure of a delivery point, or the suspension or cessation of operations at a central (regional) sorting station — in the event of the imposition of a sanction in the form of the suspension or revocation of licenses and other permits, the obtaining (possession) of which is a prerequisite for carrying out a specific type of activity, in particular the suspension or revocation of special permits for the use of subsoil resources. A sanction in the form of the forfeiture of assets to the state is enforced by customs authorities in accordance with a court decision that has become final.

In other words, these provisions establish a regulatory framework for the implementation by customs authorities of special economic and other restrictive measures (sanctions) defined by the Law of Ukraine “On Sanctions,” as well as ensuring that customs authorities promptly receive up-to-date information on entities subject to sanctions.

The proposed amendments are aimed at eliminating gaps in the legal regulation of customs authorities’ activities regarding the enforcement of decisions on the application of sanctions, establishing clear legal grounds for refusing to carry out customs procedures, as well as introducing systematic electronic interaction between state registries.

The implementation of these provisions will contribute to enhancing the effectiveness of the state’s sanctions policy, ensuring legal certainty regarding the actions of customs officials, and standardizing the practice of applying sanctions during customs control and customs clearance.

The adoption of the draft law will ensure the proper implementation of decisions by the National Security and Defense Council of Ukraine, decrees of the President of Ukraine, and court rulings in the area of sanctions, as well as strengthen the institutional capacity of customs authorities to protect Ukraine’s national interests.