On 27 February 2017, the Ministry of Finance of Ukraine adopted Order No. 292 “On Approval of Amendments to Certain Legal Acts” (hereinafter referred to as the “Order”). The Order eliminates legal barriers for the cross-border transportation of natural gas for the purpose of temporarily storing it in Ukraine. The Order has recently been published and comes into effect from 4 April 2017.
Previously, the customs clearance of natural gas transported into the customs territory of Ukraine for its storage in the underground gas storage facilities (GSFs) was performed under the customs regime of “transit”. This meant that customers were fully exempt from the 20% import VAT and customs duties. However, on the other hand, they could not have the relevant amount of gas stored in Ukraine for more than 31 days due to the general limit on the applicability of the “transit” regime under the Customs Code of Ukraine. It goes without saying that such conditions were not economically acceptable for most foreign investors. For months the customs authorities and the Ukrainian Gas Transmission System Operator (Public JSC “Ukrtransgaz”, TSO) were negotiating various options to overcome the applicability of the 31-day limitation. Finally, a solution was found and outlined in the Order, which provides for the application of the special customs regime to GSFs and thus allows the avoidance of the the 31-day limitation.
In particular, the Order provides for the following rules and regulations:
- Customs clearance of gas transported to Ukraine by a non-resident shall be made in the regime of “customs warehouse”, which allows the customer:
(i) not to pay the 20% of import VAT and customs duties; and
(ii) to store the goods in this regime for 1095 days.
- Non-residents can transfer title to the gas kept in GSFs under the “customs warehouse” regime if the gas is further declared in the “import” customs regime (i.e., if it is sold to a Ukrainian resident who will be responsible for its customs clearance and payment of the 20% import VAT);
- Transportation of natural gas across Ukrainian customs border requires the filing of:
(i) a periodic customs declaration; and
(ii) an additional customs declaration (in the 15 days following the end of the calendar month when the gas was transported to GSFs under the periodic customs declaration);
- The following documents may be used as confirmation of transfer and acceptance of gas: (i) transfer and acceptance act executed by the shippers (i.e. TSOs); (ii) transfer and acceptance act executed by the parties under the foreign economic contract; (iii) transfer and acceptance act executed for the purpose of natural gas storage in Ukrainian GSFs; (iv) note from Ukrainian TSO on allocation of the amounts of gas between the customers; etc.
- Simultaneous storage of amounts of gas under different customs regimes in GSFs is expressly allowed by the Order;
- Prior to the 20th day of the month TSO shall be required to report to the customs authorities on the amounts of gas kept in the GSFs;
- On a weekly basis the TSO shall also provide the customs authorities with the relevant gas metering data, such data to be used by the customs authorities for performance of the actual control over gas transportation operations and also to compare the data indicated in the periodic and additional declarations, in the transfer and acceptance acts and in any other shipping documentation;
- The actual control over transportation of the gas shall be performed by the customs authorities only in case of any discrepancies in the available data and/or if such control is considered to be necessary according to results of the risk analysis conducted by the customs authorities;
- The Order provides for a separate set of regulations applicable to customs clearance of the balancing amounts of gas:
(i) the balancing amount is calculated as the difference between the amount of gas accepted in the cross-border entry points and transferred at the cross-border exit points; and
(ii) customs clearance of such balancing amounts must be performed by the resident (which is a party to the foreign economic contract) prior to the 30th day following the expiry date of the relevant foreign economic contract.
- Special rules are also established for customs clearance of the so-called “backhaul” operations:
(i) Backhaul is determined as the Operator’s replacement of the original amount of gas (transported under the periodic customs declaration) with the relevant amount of gas (already kept in GSF or located in the gas transportation system of Ukraine); and
(ii) Customs clearance of such gas shall be performed on the basis of the data on the original amount of gas, which is subject to replacement (provided that such clearance does not result in a decrease of the relevant customs payments).
LAW: Order No. 292 of the Ministry of Finance “On Approval of Amendments to Certain Legal Acts Adopted by the Ministry of Finance” dated 27 February 2017 (effective starting from 4 April 2017).