On January 1, 2024, the new Customs Code approved by the Parliament of the Republic of Moldova in June 2021 will enter into force. The development and implementation of the new code were conditioned by the development partners and the commitments assumed by the Republic of Moldova in the EU accession process. The process of developing the new code started in 2017 and proceeded slowly, and its implementation was delayed by 2.5 years. Moreover, on January 1, 2024, the new customs code will be implemented only partially, continuing the application of the old customs code no. 1149/2000 and some related Government Decisions.
With the signing and application of the Association Agreement between the European Union and the European Atomic Energy Community and their member states, on the one hand, and the Republic of Moldova, on the other hand, in 2014, the Republic of Moldova assumed a series of commitments, including in the customs field. According to art. 201 thereof „Gradual approximation to EU customs legislation and certain international legal instruments shall be carried out by Annex XXVI to this Agreement.” Moreover, according to the respective annex, the approximation to the provisions of the EU Customs Code was to be carried out by the Republic of Moldova within three years from the entry into force of the respective agreement, i.e. until July 1, 2019. Consequently, the urgent approval of The new customs code, aligned with European standards, is primarily an international obligation, assumed by the Republic of Moldova in 2014.
The fact that the new Customs Code has not yet entered into force, but in the meantime, it has been amended by 10 other Laws and other amendments are in the process of examination by the Parliament, demonstrates its quality and the professionalism of the responsible team. All this indirectly points to certain problems and contradictions not resolved by the authors of the new customs regulations, which can negatively affect the entire foreign trade of the country, destabilizing the budget revenues and internal institutional procedures.
Thus, understanding the external pressure and the need to implement the new legal framework urgently, however, it remains imperfect, contradictory and lacks continuity based on previous practices and the need to develop and apply a secondary normative framework, so that the environment of business to feel the simplification and improvement of it.
However, we cannot say that the new Customs Code is destructive, imposed on the Republic of Moldova against its will, but neither can we qualify it as a document expected by society and the business environment, which only brings benefits and simplifications of procedures, the main shortcoming being its lack of correlation with the needs and specifics of our country’s national economy. More than that, during all the information sessions the Customs Service presented only the positive and necessary aspects, in the following we will try to review those aspects that worry the business environment that practices foreign trade, as well as some disadvantages and worsening of the situation on some aspects.
1. One of the biggest disadvantages to be pointed out is the bureaucratization, the difficulty, and the exaggerated tightening of the system of financial guarantees, operated in the customs field. We must admit that the current system of guarantees is also imperfect and adequately regulated, but its merit is that it is a less bureaucratic and liberal system. Economic agents who are obliged to present guarantees are not subject to any additional procedures for accepting guarantees or formalizing them. In the most sensitive cases, they are generally exempt from the obligation to guarantee import rights.
Unlike the current system, the new Customs Code provides for additional procedures (and quite difficult, bureaucratic ones that ultimately cost the business environment) for the recognition of guarantor status, with the customs authority having the right to refuse to grant this status. Understanding this, the representatives of the Customs Service at all its presentations try to lure economic agents, indicating that in the procedure for obtaining guarantor status, it will be possible to obtain certain facilities (for example – to obtain the right to guarantee only 50% or 30 % of the final amount of import duties). But even this does not entirely correspond to reality – the fact is hidden that to obtain these facilities the applicant will have to meet several requirements, such as no violations, no debts to the state, granting the customs authority online access for the agent’s accounting economic, etc. Under such conditions, it is difficult to estimate how many companies will be interested in requesting such facilities and benefiting from these discounts.
The way of setting up customs guarantees is also made more difficult if until now a (bank) guarantee is universal and can be used in any customs operation, then according to the new regulations the guarantor will have to specify in advance the exact amounts and the customs regimes (operations) for which it can be used. Once it is allocated for one scheme, the same guarantee will be impossible to use for another scheme, requiring the presentation of another guarantee. Consequently, the respective limitations will considerably increase the costs of using customs guarantees, and this, in turn, will be transposed to the final cost of all imported goods.
Another very important moment related to the guarantee is the exclusion of the exception from the obligation to present the guarantee for foreign goods temporarily introduced on the territory of the Republic of Moldova and placed under the customs regime of active processing. It should be noted that the level of re-exports from the country is at the level of 40% of the total exports. Thus, most processing industries will be affected.
Broadly speaking – the majority of processors in the Republic of Moldova use foreign raw materials, temporarily introduced into the customs territory and placed under active processing. Even though this raw material can be quite expensive, the fees for services charged by Moldovan operators for processing this raw material in most cases is quite modest, covering the minimum costs related to these services. The imposition of the obligation to guarantee the customs debt for this expensive raw material will result in the need to pay some major bank commissions, and this in turn will drastically reduce the competitiveness of domestic producers about similar producers in the region. Precisely for this reason, in 2005, in the process of drafting the first Regulation that provides for the obligation to guarantee import rights, the exception to the respective guarantee established specifically for the inward processing regime was formulated[1].
Despite the multiple comments and suggestions from the business environment on the new Customs Code, both in public discussions and in writing, there is the need to formulate some reservations regarding the guarantee of goods placed under active processing, the customs authorities have not shown open to understand and act in the interest of business, ignoring any flexibility from the authorities.
Finally, regarding the guarantees operated in the customs field, we would also like to point out that shortly (according to the customs authorities – even during the year 2024) the guarantee system will undergo another essential change, which this time will already hit the commercial banks of the Republic of Moldova. Thus, at the moment there is an active implementation of the NCTS system (New Computerized Transit System), which will replace the transit system in force at the moment. With its implementation, the customs authorities will only accept guarantees from organizations that are accepted throughout the territory of the European Union and, most likely, will be banks other than those from the Republic of Moldova. In this context, a revision of the legal rules on bank guarantees is necessary and urgent.
2. Another set of objections relates to the introduction of several new elements that make the procedures for entry/exit of goods more complicated and expensive compared to those currently applicable.
The new Customs Code took over the community standards regarding the obligation to submit the entry summary declaration (when entering) and the exit declaration (when removing the goods from the country). The only reason for the existence of such a declaration in the European Union is the need to ensure conditions and time for performing the risk analysis. More than that, submitting such declarations makes more sense, specifically in the geographical conditions of the European Union (long distances to travel from the border to the customs post of destination offer a lot of time for the analysis of the information obtained when the goods are introduced).
However, the introduction of similar obligations in Moldovan realities seems to us to be at least dubious. We can assume that the delivery of the respective information under the conditions in which a truck entered through Leușeni will arrive within an hour at the internal customs post will not allow efficient processing and the undertaking of appropriate measures if any signs of customs fraud are detected. On the other hand, the introduction of additional documents to be submitted by economic agents will inevitably contribute to the application of new tariffs for the services of creating and presenting the respective newly introduced documents. Here too we would like to draw attention to the elimination of the electronic customs clearance procedure as it is provided by the legislation in force at the moment[2], starting from January 1, 2024. The main advantage of this procedure consists in the partial elimination of the need to present the goods in customs terminals (approx. 95% of exported goods and almost 40% of imported goods using this procedure). The benefits of this exception are difficult to estimate, but despite the advantages offered over time, this procedure will no longer be able to be applied as non-compliant with European standards. This fact will cause an increase in cases of perfecting transit declarations (increasing the above-described financial guarantee request), as well as an additional burden on the internal customs terminals, which are currently overburdened.
All this will not help the comfort of participants in international trade and, in the longer term, will reduce the competitiveness of domestic economic agents.
3. Several concerns can be expressed about the change in the concept of temporary storage with effect from 1 January 2024.
According to art. 143 and 148 of the new Customs Code, in the case of the introduction of foreign goods, a new state, non-existent in the previous legislation, is necessary – temporary storage [3]. This occurs after the completion of the transit operation and before the submission of a customs declaration for placement in the customs regime. The entire period of temporary storage is also to be covered by the financial guarantee of the customs debt related to the stored goods. Therefore, this will be an enormous additional cost to the business related to the procedure of importing the goods and later included in the price of their sale to Moldovan consumers. Moreover, the state and private customs infrastructure cannot meet all the requirements imposed and comply with the new rules.
Also, there is the risk of possible problems in the customs administration of several temporary warehouses to be created according to the new customs provisions. The increased need for customs officers who will control these temporary warehouses will lead to the need for a corresponding increase in clerical staff to meet the new requirements of customs legislation.
4. A series of questions and challenges related to the manner and correctness of determining the customs value of goods. Unfortunately, the new Customs Code does not introduce more clarity and simplicity in the rules and procedures related to this process. More than that, neither the concept nor the mechanisms used in the process of determining the value of customs change, and in some cases – they even contribute to the worsening of the situation in this field.
An example can be the provisions of art. 73 according to which:
„(1) If the Customs Service has reasonable doubts that the declared transaction value represents the total amount paid or to be paid as mentioned in art. 72 para. (2), it requests the declarant to provide additional information.
(2) If the doubts of the Customs Service are not eliminated, it decides that the value of the goods cannot be determined by art. 72 para. (1).”
Analyzing in retrospect the practice of applying the legal provisions in the field of customs value determination, it can be mentioned that they caused the most abuses, and elements of corruption on the part of the customs authority and the private sector. Most of the disputes were on the given subject.
But in the future, the new Customs Code will not contribute to overcoming the existing challenges and problems, rather it will essentially increase the official and unofficial costs that importers bear. Additionally, the business environment has major expectations for the improvement of the communication system between business and the customs authorities and the right to an operative solution to the identified problems, extrajudicially.
5. Several deteriorations regarding the activity of the free zones are attested. Thus, with the application of the new customs provisions, according to art. 315 of the new Customs Code, the introduction and processing of foreign goods on the territory of free zones will be possible only under special customs regimes – the regimes of inward processing and temporary admission, as well as under the conditions provided by these regimes. This means that all raw materials, machinery, consumables, and other foreign goods will have to be brought in subject to the authorization, guarantee, and record (including – compliance with the closing terms) of the goods.
Nothing special to the free zone customs regime, all general requirements apply.
However, understanding the harsh impact of these provisions, as well as the need to comply with the legal guarantees of application of the current legal framework for 10 years after its deterioration, art.427 of the Customs Code allows the postponement of the implementation of the new requirements starting from January 1 1, 2034.
In this context, often government institutions involved in taking over and harmonizing national legislation with European norms and practices, confuse and distort the whole process, bringing the economic interests of the country, the business environment, and citizens. Any additional cost imposed on the business is reflected in the prices of products and services in the country. The process of harmonizing legislation must be dosed, based on the country’s strategic interests. A good part of the rules can be applied starting from the date of entry of the Republic of Moldova into the EU.
6. A sensitive element, multiplied politically, relates to the duty-free customs regime, which was excluded from the new Customs Code, even though it exists in European legislation.
The adoption of EU legislation, especially customs regimes, cannot be selective and at the mercy of politicians. Thus, art. 201 of Commission Delegated Regulation (EU) 2015/2446 of July 28, 2015, supplementing Regulation (EU) no. 952/2013 of the European Parliament and the Council regarding the detailed rules of certain provisions of the Union Customs Code provides:
„Authorisations for the operation of storage facilities for the customs warehousing of goods shall be granted on the condition that the storage facilities are not used for retail sale unless the goods are sold by retail in any of the following situations:
(a) with the exemption from payment of import duties of travelers to or from countries or territories located outside the customs territory of the Union;
(b) with the exemption from paying import duties of members of international organizations;
(c) with the exemption from the payment of duties on the import of NATO forces;
(d) with exemption from payment of import duties under diplomatic or consular agreements;
(e) remotely, including via the Internet.”
In such conditions, the Community legislation allows the introduction and sale of foreign goods to travelers with exemption from the payment of import duties. Thus, an addition to the Customs Code is recommended.
7. Several norms and practices that have shown their opportunity and necessity over the years were not included in the new Customs Code, in particular the provisions related to restrictions and guarantees regulated by Customs Code no. 1149/2000, which offered some protection for the private sector in customs procedures. As an example, art. 199 of the Customs Code in force can serve, which impose on the customs body a deadline for examining and verifying the customs declaration and the documents, goods, and means of transport subject to customs clearance. In the absence of any such deadline, the customs clearance procedure may be dragged out by customs officials, including abusively or with corrupt intentions. Norms are introduced regarding the responsibility of customs collaborators and the procedure for contesting their extra-judicial decisions, in the event of a disagreement.
The list of regulations with a negative impact on foreign trade activities contained in the new Customs Code could be continued and expanded considerably, some of the most sensitive provisions and impediments being presented here. All the identified impediments, the lack of a set of secondary rules for the implementation of the new Customs Code, and the lack of a full understanding of the related set of rules both on the part of the representatives of the customs authority and the business environment make its full application impossible starting from 1 January 2024, even in the partial version. More than that, the customs information system is not adjusted and updated to the new requirements, which will block the operational activity in the customs, delay the process, displease the business environment, and consequently higher costs for business and people and disrupt budget receipts as well necessary.
Despite the rush to report to the European Commission and implementations under the pressure of the already exceeded terms of commitments, a rational solution and recommendation would be to postpone the implementation of the new Customs Code until January 1, 2025, provided that institutional capacities are strengthened and the set of secondary rules and establishing an open and transparent dialogue with the business.
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[1] See point 204 of the Regulation on the application of customs destinations provided for by the Customs Code of the Republic of Moldova, approved by GD no. 1140/2005
[2] Government Decision no. 904 of 13.11.2013 regarding the procedures for electronic customs clearance of goods
[3] Not to be confused with the concept of temporary storage regulated by art. 149 – 160 of the Customs Code no. 1149/2000, which is an optional procedure, used at the request of the interested person
The Lex-Econ Consulting team
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