There is a saying here in the Ukrainian capital: “The more I deal with the customs officers, the more I love the traffic police.”
The traffic police, or militsia, are the ever-present uniformed officers whose white-tipped batons are the signal to pull over to the side of the road. The process is always the same. Once a driver has stopped, a traffic offense—either real or absurd—is explained to him by the militiaman (this can include violations as trivial as “your license plate is too dirty”), money changes hands, and the driver goes on his way. The fines almost always end up in the pocket of the officer.
But as efficient as the militsia is at collecting money right and left from the public (at best this is indirect taxation and at worst it is a type of corruption) they are do-gooders when compared to the Customs Service.
The inventiveness of the Customs Service in finding new ways to collect money from companies and individuals trying to do business in Ukraine surpasses that of some of the worst kleptocracies in history. The issue finally boiled over in a July meeting between the U.S.-Ukraine Business Council—representatives of U.S. firms that have operations in Ukraine—and Deputy Prime Minister Sergei Tigipko.
The overall theme of the meeting was the irreparable harm done to the business environment by the Customs Service. But the specific focus was how their practices are a complete disaster for express mail and parcel services like FedEx, DHL, UPS, and others.
“There are only few countries in the world which ‘outperform’ Ukraine as the worst in the world. It is important to understand the impact of the shipments delayed at Customs which often result in lost revenues, additional costs for companies and the Customs Services itself. It generates numerous complaints from business community and private individuals. Last but not least it constantly deteriorates Ukraine attractiveness among potential investors,” said Vadim Sidoruk from DHL’s office here in Kiev.
“It has become common knowledge that Ukrainian Customs laws regulating express delivery are some of the most, if not the most, complicated in the world,” he complained. No other country requires payment of duties for all parcels addressed to private individuals. The duties are also—he pointed out—of doubtful value to the country's economy, as the costs of collecting them are often higher than the duty itself.
Sidoruk, like so many of us here, holds out little hope that the Ukrainian government would ever enact reforms that would rectify the situation.
“It is hard to imagine just what would lead the parliament and the Customs Committee to make the changes necessary to remove the roadblocks. However, I cannot help but think that if they understood the many development projects that have gone elsewhere in part because of the antiquated customs procedures, that alone would have a very strong impact on their thinking--and actions.”
In July, DHL moved into a new 8,000 square meter, $12 million package processing facility. It is one of the largest of its kind in the world for the simple reason that backlogs created by Ukrainian customs require this kind of capacity. Of all the packages held by customs in all of eastern and central Europe, 70 percent are being held in Ukraine, according to DHL.
The U.S.-Ukraine Business Council has compiled a list of horror stories of delays experience by shippers in recent years. It reads like a textbook of “how to destroy all interest in your country by foreign investors”:
• A major soft drink company imported samples of plastic bottle caps with their logo on them—a total of 6 pieces. The shipment was not released because Ukrainian customs required an official letter from the company stating that the bottle caps would not be used for medical purposes.
• A company imported communications equipment to Ukraine with a value $1,000,000. A CD with installation instructions was included in the shipment. Ukrainian Customs would not clear the shipment until the company produced a revised invoice with the following breakdown: $999,997.00 for the equipment and $3.00 for the CD. "This caused a delay of 7-12 days in the final delivery."
• Ukrainian customs would not allow another company that imports Play Stations to bring in a shipment without a special license. This because each device came with batteries included. The company spent two weeks in paper chase hell. The reason? Batteries are subject to licensing by the Ministry of Industrial Policy of Ukraine. The same goes for MP3 players, notebook computers, watches, mobile phones, etc.
• A representative of a foreign company planned to visit an exhibition in Kiev and sent some promotional brochures by express mail—addressed to the hotel where he had a reservation. The shipment arrived in Ukrainian customs one day earlier than the guest. To obtain such a shipment the businessman then had to generate five different documents and wait a minimum of a week. By the time all the documents were collected and the declaration submitted to customs, the exhibition was over.
My personal favorite is the story of the man who was on a business trip and left a pair of pants in his hotel before flying on to Ukraine. This hotel forwarded them to his hotel in Kiev by express mail indicating a value of $50. Ukrainian customs arbitrarily (which is how they usually operate) increased their value to $400. The man refused to pay the $40 duty required by Customs, and so the trousers were returned to the hotel where he left them in the first place.
Later this summer the Ukrainian government did make a change in customs procedures, but not the kind any of us were hoping for. Knowing that September 1 is the traditional beginning of the school year (and that each child by tradition brings a bouquet of flowers to his or her teacher on the first day of school), the Customs Service increased the duty to be paid on imported flowers 360 percent on August 10 and then by 500 percent on August 16. The service gave no explanation for the massive increase in the fee schedule and failed to provide written confirmation of the changes as required by law.
We all can figure out the real reason, however. It’s just another in a series of arbitrary and capricious changes designed solely to pick the pockets of the general population. In the meantime, if you are planning a trip to Europe that includes a stop in Kiev make sure you have not left a pair of pants—or worse, your wallet—behind before you arrive here.
Reuben F. Johnson is an aerospace reporter based in Kiev.