Issue 5, 2018. October-November


Georgia Drafts "European" Customs Code

The Georgian government has presented the draft of a new customs code, developed in cooperation with the European Union's Taxation and Customs Unit. spoke with transit and shipping experts about the weaknesses in the current code and their expectations for the new draft.

The Georgian government has drafted a new customs code that it says will help the country integrate into the European market.

"The new customs code will become an important stimulus for attracting European investments and will support the integration process of Georgian businesses on the European market," Prime Minister Mamuka Bakhtadze said.

The Prime Minister said that Georgia will be the first country in the region to adopt European customs infrastructure and legislation, which will contribute to the "development of international trade."

John Braeckeveldt, Director of Gosselin Group in Georgia, noted that it is "quite logical" that the government wants to adopt a European-type customs code, given the potential to increase trade with a large, neighboring market.

"The customs code itself was already quite evolved. I presume the new customs code will only be technical changes; [. . . ] [T]hey worked directly with Europe [on the draft customs code]. I presume it will be streamlining and making sure everything is correct," he said.

David Lezhava, Public Policy Sector Director at PMCG, agreed that, in general, Georgia's tax and customs laws are well regarded in the region and beyond. "The current customs code cannot be considered to be one of the major obstacles for economic development. However there is always room for improvement. Complaints often floating in the air were [about] ambiguity and the possibility of dual interpretation of individual provisions. Whether this issue was addressed or not should be seen during practical implementation," he said.

Braeckeveldt underscored that the secondary legislation will be the most important, because it defines how the law is interpreted on the ground.

He noted that the challenges "traditionally" appear in the secondary legislation and the business community should be involved when such legislation is written.

FH Bertling Logistics Georgia's Natalia Nikitina noted that there are several changes she would like to see in the new customs code but at this stage it is too early to speak about specific amendments in the new version.

"The current customs code draft is very general; when [a customs code] comes into force, usually a lot of additional instructions are issued in order to clarify individual articles," she said, adding that the Revenue Service is not making any comments at this stage because the document is only a draft.

Positive Direction

Lezhava added that at this point it appears that all the planned changes "are in a positive direction."

"One of these changes is a harmonization of the Customs Code with the requirements of international conventions. This will result in documents and guarantees produced by local banks, customs and insurance companies to be recognized in other countries. This is very much in line with the goal to better integrate with the world," he said.

Lezhava also noted that Georgia needs to make certain changes under its Association Agreement with the EU.

"It should be noted that currently Georgia doesn't have a Customs Code as a separate document, but it is a part of the Tax Code. Customs regulations were spread throughout the Tax Code, the government's and ministers' decrees. Now everything will be combined under the Customs Code. That should be helpful for businesses," he said.

He noted that while there is some concern the transition will be difficult for businesses, because they are used to dealing with the current legislation, the long-term impact of the changes should be good.

"In our opinion, this transitional cost is outweighed by the benefit of having the entire [body of] regulations under one code," he said.

Help Across the Board

Lezhava noted that some of the projected changes should benefit business "across the board." For instance, he noted that plans to simplify border crossing formalities (general declarations will be allowed 150-200 days in advance) "will benefit both exporters and importers by the reducing time needed for border crossing[s]."

"Some categories of producers who were disadvantaged due to uneven tax treatment of imported inputs and final goods, now will be able to choose similar treatment for inputs and final goods, thus eliminating [such earlier] disadvantages; this should stimulate imports of inputs and local production rather than imports of final goods. Introduction of a new type of guaranty will benefit mostly SMEs, while a new type of data exchange between private businesses and the customs [authorities] will mostly benefit importers who have large volumes of imported goods," he said. "The full extent to which the new code is better than the old legislation will only become clear when the new code becomes operational and is tested in practice," Lezhava concluded.