The Draft of a New Customs Code in the view of a Businessman


The Customs Code of Georgia is one of the strategic document regulating the general principles and providing guidelines for coherent and purposive policy of external economic relations of country and according to the information of the Ministry of Finance ensuring increase of budget revenues as well.

In this respect, the draft of a new Customs Code prepared by the Ministry of Finance of Georgia is differed from present one and has a number of positive directions such as optimization of customs regimes, detailed prescription of procedural provisions, formation of entire system for settlement of customs disputes and specification of types of violations of customs regulations, as well as systematization of forms of responsibilities.
The main directions and innovations of a new Customs Code of Georgia are:
Ø Reduction of number of customs regimes from 15 to 8, cancellation or transformation of number of them and prescription of corresponding provisions to different procedures.
Customs Regimes by the draft of a new Customs Code of Georgia are:
• Free circulation of goods (Import)
• Transit
• Storage of goods in warehouse
• Processing in customs territory
• Temporary import
• Processing out of the customs territory
• Export
Customs regimes transformed into customs processing operations are:
• Free zone
• Free warehouse
• Re-export
• Destruction of goods under the customs control
• Renunciation of the ownership right to the State benefit.
Customs regimes cancelled and prescribed by the different provisions are:
• Re-import and temporary export – integrated into customs preferences as a returned goods
• Duty free trade – integrated into customs warehouse in the customs regime
Ø Formation of the new systems for settlement of tax, as well as customs disputes by the Ministry of Finance of Georgia. The main basis of settlement of customs disputes is regulation of those by two official institutions: the Ministry of Finance of Georgia and a Court of Georgia. If customs declarant refuses to fulfil decision of customs body he/she is liable to send a claim in written form to customs body within 15-days period after making the decision in case if he/she decides to settle the dispute in the Ministry of Finance or address to the Court.1 The important innovation is that liability to pay disputable sum and appropriate fine is terminated starting from the customs dispute till its resolution, or till final adjustment of violation of customs regulations and corresponding forms of responsibilities the person is free from any sanctions. If customs dispute will not be settled for the benefit of person making customs procedures, a person is obliged to pay the disputable sum, penalties and fines for every overdue day in amount of 0,07% of the total sum;
Ø Definition of forms of customs violation and liability by Customs Code, as well as in case of Tax Code violation. The types of violations are: illegal circulation of goods in the customs territory of Georgia; illegal operations related to the goods carried into the customs territory or being under the customs control; violation of regulations related to customs warehouse, free zone or free warehouse; resistance to the customs official; violation of regulations in warehousing, storage or accounting; violation of customs rules related to transportation; voluntary removal of customs identification tools; violation of rules and terms defined by the customs body; violation of terms of keeping the documents; approach to the ship or other vessel not being under customs control and load/unload of goods without permission of customs body; failing to perform appropriate activities in case of accident, force-majeure or other unforeseen consequences; failure to pass the information to customs body concerning arrival/departure of means of transport; conduct illegal operations related to the goods not being under customs control; violation of declaration rules; breach of duties regarding the goods carried in and out; violation of rules related to the destruction of the goods being under customs control; illegal performance of customs broker’s activities; fines and penalties for every violation is varying from 200 to 1500 GEL. In case of violation for second times the amount of fines will be increased accordingly. For other types of violations stipulated by the draft Customs Code the person will be in charge, but the amount of fines and penalties is not defined and in this case the person has to pay fine in the amount of 300 GEL.
Ø Important innovation in customs legislation is the establishment of general, simplified and electronic customs declarations institution. General declaration implies general information on goods that is necessary for identification of goods before customs registration and for customs supervision and customs control. In order to simplify customs procedures, the customs body has the right to allow the declarant on the basis of his/her written request to submit the simplified customs declaration. The form of submission is written or electronic customs declaration. The above-mentioned forms of declaration will simplify the activities of businessmen involved in foreign trade much more, but the detailed forms of them are not known yet because they have to be approved by the Minister of Finance after adoption of the Customs Code.
Ø Examination procedures systematisation for means of transport, passenger, his/her belongings, and parcels. Above-mentioned procedures are included in the Customs Code only under one article for each part, however, in spite of this it is innovation in comparison with the present Code. To avoid problems during the examination it’s necessary to specify these articles and procedures corresponding to them.
Ø The right to revise the customs declaration by the declarant and postponing of customs liabilities for every conscientious declarant up to 1 month, or declarant will have the right to revise customs declaration without payment of penalties or in case of absence of financial resources to postpone the payment of fines for one month. The above-mentioned factors will help businessmen involved in foreign trade to avoid the responsibilities in case of mistake and will simplify their performance;
Ø Cancellation of customs carrier licensing procedure means that any person providing customs carrier will be able to ship without licensing and administrative barriers;
Ø Harmonization of customs legislation with EU legislation, evidence of which is approximation of many customs procedures and practice as well as structure of Customs Code to the EU customs legislation;
Ø Establishment of intensive procedures of customs guarantees for implementation of customs obligations. Three forms of guarantees are launched: bank guarantee, insurance policy for financial risk and deposit in State treasury. If declarant will not pay fines and penalties and will not guarantee, carry in forbidden, restrictions subjected goods or did not carry the goods out of customs control zone within 3 working days then customs body is given the right of possession of goods (including confiscation, realization, destruction under customs supervision or handover without payment). The above-mentioned factors in opinion of businessmen may cause reduction of movable shipments in the direction of Georgia or through the country as all persons will not have the opportunity to deposit guarantee amount and desire for shipment in harsh administrative conditions;
Ø Implementation of phytosanitary, veterinary and sanitary-quarantine control only by the customs body. According to this reform the number of border control institutions which are obliged to have relations with persons crossing border-line and required additional time and financial expenditures will be reduced a lot.
Furthermore, for simplifying and a better understanding of Customs Code of Georgia new terms and notions are established, as well as number of procedures are produced. In case of not fulfilment of customs obligations or delay in customs payments, the person is obliged to pay penalties and fines for every overdue day in the amount of 0,07% of the unpaid sum. As for conscientious payers, postponing of customs payment up to one month is considered. The period of keeping customs documents, customs payments or statute of limitation of customs sanctions, including additional customs payments or returned payments is 6 years. After adopting Customs Code detailed procedures on customs regimes and crossing of customs border shall be approved by the Georgian government and the Ministry of Finance of Georgia.

The draft of a new Customs Code is step forward towards harmonization of Georgian customs legislation with European legislation, and in view of simplification of several procedural provisions, however some issues are still left to be refined and modernized. There is a need to optimize resolutions to be adopted by the Georgian government and decrees to be issued by the Ministry of Finance, after Customs Code of Georgia is in force. Those issues that might be regulated by the Code should be defined by the Code itself. By this it will be possible to avoid a great number of by-law statutes the reason several complains of businessmen. The cooperation of the Centre for Privatized Enterprise Restructuring and Management Assistance (CERMA) with business sectors has shown that there should be elaborated a strict mechanism with dates for regulating the return of payment in excess of the sum also there should be an administrative body that will be responsible for return such payments in due dates. In view of businessmen the draft Code should also include provisions regarding those specific customs processing of goods (export, import, transit) such as oil, gas and electricity or it should be indicated in the Code how such issues shall be regulated by means of by-law statutes.

Despite important innovations, several procedural provisions liberalization, Customs Code of Georgia harmonization with European Union customs legislation, in view of businessmen there is still room for improvement in the Customs Code. CERMA client business sector representatives have their own comments and proposals regarding this issue.

In view of Ali Kelleci, General Director of “Geonitro”, Georgian-Turkish joint company, the draft of a new Customs Code of Georgia is an important innovation in the sphere of business regulation as it offers many novelties by the harmonization with legislation of European Union. Though establishment of new forms of guaranties such as bank guarantee, financial risk insurance and placement of deposit in State Treasury will be big burden for those involved in goods transportation. This in turn may cause reduction of shipment traffic. Thus by implementation of the above mechanism persons involved in transportation should have frozen guarantee accounts which they will not be able to use. This way is the basis of mobilization of budget revenues without loses, therefore government should choose between optimization of budget revenues and heavy load in business.