Fapomed Ukraine cargo successfully crossed the border

Subject of complaint: Zakarpattia Customs of the State Customs Service of Ukraine 
 
Complaint in brief: A garment factory producing surgical gowns turned to the Business Ombudsman Council. The company’s cargo was detained at the border. 
Fapomed Ukraine LLC is a company with 100% foreign investment. It was established by Portuguese investors in 2007 by opening a factory in Rivne Oblast. As of now, the company employs over 260 employees. 
According to the complainant, all garments, which were shipped according to the customs regime of “re-export”, had been made from the foreign raw materials. Fabric, lining, velcro fasteners, packaging paper and other accessories come from a foreign customer and cleared as “to be processed in the customs territory of Ukraine”.  . In March 2020, the goods made from raw materials which had been received for processing in 2019 were sent for re-export. It should be pointed out the medical gowns detained at customs were intended to be used by surgical team members in the operating room to prevent transmission of bacterial agents, not viruses. These medical products were not anti-epidemic and suitable for use against Covid-19. 
However, after products having been detained at the border, the further company’s operations in Ukraine were under threat. The point is that provisions of the Cabinet of Ministers of Ukraine Resolution No.1109 dated December 24, 2019 (the “Resolution No. 1109”) relating to restrictions on export and import of certain products, did not give a clear idea of whether restrictions also apply to re-export of products.
 
Actions taken: The Council’s investigator carefully examined complaint materials and the legislation regulating it. In particular, according to the Customs Code of Ukraine, re-export and export are two different customs regimes. At the same time, the Law of Ukraine “On Foreign Economic Activity” defines re-export through the concept of export.
 
Upon the complaint receipt, the Council addressed the State Customs Service of Ukraine (“SCS”) and drew the attention to the existing inaccuracy in the text of the Resolution №1109 and possibility of its double interpretation. The SCS confirmed that, in their opinion, the provisions of Resolution №1109 should not apply to re-export. Afterwards, the SCS sent a corresponding letter to the Cabinet of Ministers of Ukraine (the “CMU”). 
 
Result achieved: As a result, in early April, the CMU adopted the Resolution No.268, which amended the Resolution No.1109. It was clearly stated in the new document that restrictions in the Resolution No.1109 did not apply to re-export. 
 
After the respective changes and clarifications of the SCS, the complainant sent a new truck with a batch of goods abroad. In early May, the complainant confirmed successful customs clearance and thanked the Council for assistance in resolving the issue: “This period of time was extremely tough for our company – we reduced our activities, broke delivery terms and risked losing customers and markets. In addition, Goshchanskyi District and Rivne Oblast budgets have already been underfunded by a substantial tax revenues amount, which will have an adverse effect in the periods to come, and all this is taking place in the background of a growing economic crisis. We thank the Council’s team for their support and assistance in resolving this case”.