An Export Operation Occurs When the Goods Actually Cross Ukraine’s Customs Border
⚖️ Ukraine | Commercial Disputes | Foreign Trade | Export Transactions
Case Details
Case No.: P/811/2370/15
Proceedings No.: K/9901/25888/18
Court: Supreme Court, Administrative Cassation Court
Decision Date: 27 February 2018
Case Category: Foreign Economic Activity / Administrative Law
Subject Matter: Sanctions for Violation of Foreign-Currency Settlement Deadlines
Sub-Subject: Export Operations / Moment of Supply / Customs Border / Foreign-Currency Proceeds
Exporter: Trading House Protein-Production LLC
Foreign Counterparty: CREATIV TRADING SA, Switzerland
Export Contract: No. PRO29/07 dated 29 July 2014
Goods: Hydrated soybean oil, first grade
Export Value: USD 2,273,455.52
Customs Declaration Date: 15 September 2014
Date Goods Crossed the Customs Border: 18 September 2014
Date Foreign-Currency Proceeds Were Received: 15 December 2014
Key Issue: Whether, for the purpose of determining compliance with statutory foreign-currency settlement deadlines, an export operation occurs when the customs declaration is completed or when the exported goods actually cross the customs border of Ukraine
Outcome: The Supreme Court held that the relevant moment of an export operation, including the supply of goods under that operation, is the moment when the goods actually cross the customs border of Ukraine. As the foreign-currency proceeds were received within the applicable period calculated from that date, there were no grounds for imposing liability on the exporter. Вставлений текст markdown
Background of the Dispute
A Ukrainian company entered into an export contract with CREATIV TRADING SA, Switzerland, for the supply of hydrated soybean oil.
Under the contract, the company exported goods with a total value of USD 2,273,455.52.
The relevant customs declaration was dated 15 September 2014. However, information contained in the customs declarations database established that the exported goods physically crossed the customs border of Ukraine on 18 September 2014.
The foreign-currency proceeds from the transaction were credited to the Ukrainian exporter’s account on 15 December 2014.
Following a tax inspection concerning compliance with Ukrainian foreign-currency legislation, the tax authority concluded that the company had breached the applicable 90-day period for receipt of export proceeds and issued a tax notification-decision.
The exporter challenged that decision before the administrative courts.
When Does an Export Operation Occur?
The central issue before the courts was the date from which the statutory settlement period had to be calculated.
The tax authority argued that the relevant period should run from the date on which the customs declaration for the exported goods was completed.
The exporter argued that the legally relevant date was 18 September 2014, when the goods actually crossed Ukraine’s customs border.
The distinction was decisive because it determined whether the foreign-currency proceeds had been received within the statutory period and, consequently, whether the exporter could lawfully be subjected to financial sanctions.
The Customs Declaration Date and Export Date Are Not Necessarily the Same
The Supreme Court examined the concept of an export operation under the legislation applicable at the relevant time.
Under the Law of Ukraine “On Foreign Economic Activity,” export of goods involved the sale of goods by a Ukrainian foreign-economic operator to a foreign business entity, whether or not those goods were physically exported across Ukraine’s customs border.
The legislation also separately defined the moment of export or import.
For the purposes relevant to the dispute, that moment was connected with the goods crossing the customs border of Ukraine or the transfer of ownership of the relevant exported or imported goods from seller to buyer. Вставлений текст markdown
Accordingly, the existence and date of a customs declaration could not automatically substitute for determining when the export operation legally occurred.
Actual Crossing of the Customs Border Was Decisive
The Supreme Court concluded that, for the application of Articles 1, 2 and 4 of the then-applicable Law of Ukraine “On the Procedure for Settlements in Foreign Currency,” the moment of an export operation — including the moment of supply of the goods under that operation — was the moment when the exported goods actually crossed the customs border of Ukraine. Вставлений текст markdown
This was the central legal conclusion of the case.
The Court therefore distinguished between:
completion of customs documentation; and
the factual event constituting the relevant export operation.
For the purpose of determining liability for violation of foreign-currency settlement deadlines, the latter was decisive.
Completion of All Customs Formalities Was Not Required
The legal significance of crossing the customs border did not depend upon the subsequent completion of every customs procedure relating to the goods.
The relevant event was the actual physical crossing of the customs border.
In practical terms, this means that the moment when goods enter the relevant customs-control process and physically cross the state customs border must be distinguished from the completion of procedures that may subsequently allow the owner to deal freely with those goods.
The export date therefore cannot automatically be postponed until every element of customs clearance has been completed.
Why the Date Matters for Foreign-Currency Settlement Deadlines
Ukrainian legislation applicable to the transaction imposed a deadline within which proceeds from an export transaction had to be credited to the resident exporter’s bank account.
Failure to comply with that deadline could result in financial liability.
The starting point for calculating the relevant period was therefore critical.
In this case, the tax authority effectively sought to calculate the period by reference to the customs declaration.
The Supreme Court instead applied the date of the actual export transaction — the date on which the goods crossed Ukraine’s customs border.
This distinction determined the result of the dispute.
The Evidence Established the Actual Border-Crossing Date
The courts established from the customs declarations database that the goods crossed the customs border on 18 September 2014.
The foreign-currency proceeds were received by the exporter on 15 December 2014.
The factual chronology was therefore:
15 September 2014 — customs declaration;
18 September 2014 — goods actually crossed Ukraine’s customs border;
15 December 2014 — export proceeds credited to the Ukrainian company’s account. Вставлений текст markdown
Using the actual border-crossing date as the legally relevant starting point, the courts found no breach of the applicable settlement period.
The Tax Authority’s Approach Was Rejected
The tax authority relied on the National Bank of Ukraine’s Instruction on control over export and import operations and argued that the period should be calculated from the date of customs clearance.
The Supreme Court did not accept that argument.
The statutory definition of the moment of export governed the determination of when the export operation occurred for the purposes of applying the relevant foreign-currency settlement legislation.
Accordingly, the tax authority could not impose liability by substituting the customs-declaration date for the legally relevant moment at which the exported goods actually crossed the customs border. Вставлений текст markdown
No Grounds for Sanctions Against the Exporter
Once 18 September 2014 was treated as the relevant date, the basis for the tax authority’s sanctions disappeared.
The foreign-currency proceeds were credited to the company’s account on 15 December 2014.
The courts therefore concluded that the company had not breached the applicable statutory settlement period.
There were consequently no grounds for imposing the liability contemplated by Article 4 of the Law of Ukraine “On the Procedure for Settlements in Foreign Currency.” Вставлений текст markdown
The Supreme Court’s Decision
The Supreme Court dismissed the tax authority’s cassation appeal.
It left unchanged the judgment of the Kirovohrad District Administrative Court of 22 September 2015, which had declared the tax notification-decision unlawful and cancelled it, as well as the ruling of the Dnipropetrovsk Administrative Court of Appeal of 9 March 2016. Вставлений текст markdown
The Supreme Court confirmed that the relevant moment of the export operation, including the supply of goods under that operation, was the moment when the exported goods actually crossed the customs border of Ukraine.
Because the goods crossed the border on 18 September 2014 and the export proceeds were received on 15 December 2014, the company could not be held liable for violation of the applicable settlement deadline. Вставлений текст markdown
Why This Decision Matters
The judgment demonstrates that identifying the correct legal and factual date of an export operation can determine whether sanctions for violation of foreign-currency settlement deadlines are lawful.
A customs declaration and the physical export of goods are related events, but they are not necessarily simultaneous.
The decision is particularly relevant where:
a Ukrainian exporter is accused of breaching statutory settlement deadlines;
sanctions depend on the date on which an export transaction occurred;
the customs declaration predates the physical movement of the goods across the border;
there is a dispute over the evidential significance of customs documentation;
the tax authority calculates a statutory period from the date of customs clearance rather than actual export; or
a company needs to establish the precise chronology of an international sale and export transaction.
Lions Lawyers’ Analysis
The practical significance of this decision lies in the evidence used to establish the starting point for regulatory deadlines.
In disputes concerning foreign economic transactions, several dates may appear in the documentation: the contract date, invoice date, customs declaration date, date on which goods are placed under customs control, physical border-crossing date, contractual delivery date and date on which payment is received.
Those dates should not be treated as interchangeable.
The Supreme Court identified the actual crossing of the customs border as the decisive event for determining the moment of the export operation under the legislation applicable to this dispute.
This can have a direct financial consequence. A difference of only several days between customs declaration and physical export may determine whether a statutory settlement period has been complied with and whether significant sanctions can lawfully be imposed.
For foreign companies contracting with Ukrainian exporters, and for Ukrainian businesses selling goods internationally, the case also illustrates the importance of maintaining evidence capable of establishing the actual movement of the goods, rather than relying exclusively on the formal date appearing on the customs declaration.
It should also be noted that the judgment applied the foreign-currency settlement legislation in force at the time of the disputed transaction. When dealing with current transactions, the applicable regulatory framework and settlement periods should therefore be assessed under the legislation currently in force.
Lions Lawyers advises Ukrainian and international clients on foreign economic transactions and disputes in Ukraine, including export and import contracts, foreign-currency settlement requirements, customs matters, regulatory sanctions, international sale of goods and disputes with Ukrainian public authorities. We provide full-service legal representation as well as standalone legal opinions, enabling clients to assess their existing strategy and, where appropriate, identify alternative legal approaches.
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