Customs Disputes in Ukraine: How Foreign Companies Can Challenge Customs Decisions and Additional Duties

Nataliia Kyreieva

Attorney at Law, Ilyashev & Partners Law Firm

For foreign companies importing goods into Ukraine, customs disputes with Ukrainian customs authorities remain one of the most common yet underestimated legal risks. Additional customs assessments, customs valuation adjustments, tariff classification disputes, and increased import duties may arise even when a shipment is properly documented and commercially transparent.

Practice shows that even a perfectly documented and commercially transparent shipment does not guarantee smooth customs clearance and may result in significant additional charges if, for example, the customs authority disagrees with the customs value declared by the declarant or with the classification of goods under the Ukrainian Classification of Goods for Foreign Economic Activity (UCGFEA – Ukraine’s commodity classification system based on the Harmonized System (HS) and the EU Combined Nomenclature).

Although a decision on customs value adjustment or determination of a commodity code is formally addressed to a Ukrainian resident declarant and, if unlawful, directly infringes that declarant’s rights, its consequences may affect foreign companies in several typical situations. These include cases where a foreign company imports goods through its own separate subdivision in Ukraine (which is considered a resident under Article 4 of the Customs Code of Ukraine), supplies goods to a Ukrainian distributor for whom additional customs charges increase costs and put pressure on the agreed price, or operates under delivery terms such as DDP (Delivered Duty Paid), where the seller bears financial responsibility for customs clearance.

Negative consequences arise almost immediately. In the case of a customs value adjustment, to release the goods for free circulation despite a disputed customs decision, the declarant may pay customs duties based on the independently determined (declared) customs value and provide a guarantee for the difference between this amount and the customs authority’s calculation. Even at the customs clearance stage, this freezes working capital, while any delay in goods release may result in additional commercial and financial losses. This is why a prompt legal response and a properly prepared evidence base are critical.

Where the customs authority determines a commodity code, the relevant customs decision is binding. There is no option for a “conditional” release of goods secured by a guarantee covering the difference in customs payments. Therefore, to release the goods, the declarant is usually forced to pay customs duties based on the commodity code determined by the customs authority, even if the declarant intends to challenge that decision and seek recovery of the disputed amount after the case is resolved in its favour.

Although the customs authorities usually take a purely fiscal approach, Ukrainian legislation provides effective and practical mechanisms for overturning such decisions. In this article, we analyse the practical steps for administrative and judicial appeals which enable businesses to successfully protect their interests and minimise losses.

Why Do Ukrainian Customs Increase Import Duties?

The main grounds on which customs authorities increase customs payments in practice are:

• Customs value adjustment. This is the most common ground. If the customs authority considers the declared value of goods understated, it independently determines the customs value. This is done usually by relying on information from its own database regarding the value of identical or similar goods.
• A specific type of customs value adjustment is the inclusion of royalties and licence fees in the customs value. Customs authorities add such payments to the value of goods if they believe payment is a condition of sale. They also believe that they were not included in the price.
• Related-party transactions affect customs valuation, as the application of the primary valuation method (the transaction value method) may be refused if the buyer and seller are related parties and their relationship may have influenced the price of the goods.
• Incomplete documentation is formal but common ground for customs assessments. Customs authorities may claim that the submitted documents do not confirm the numerical components of the customs value of the goods. As a result, they determine the customs value independently.
• Determination of the commodity code under the Ukrainian Classification of Goods for Foreign Economic Activity (UCGFEA). A change in the commodity code may lead to an increased customs duty rate, as the applicable duty depends on the specific commodity code assigned to the goods.
• Country of origin and preferential treatment. Refusal to apply for preferential treatment due to doubts regarding the certificate confirming the preferred origin of the goods may result in customs duties being assessed at the full rate.
• Anti-dumping duties apply to specific goods originating from specific countries; disputes often come down to whether the goods in question fall within the scope of such duties.

Which Customs Decisions Can Be Challenged?

Customs disputes concerning the amount of additional assessed customs payments do not always involve challenging a tax assessment notice directly, as companies sometimes mistakenly believe. The scope of customs authorities’ decisions that may be challenged is much broader and includes, in particular:

• decisions on the adjustment of customs value;
• decisions determining the commodity code under the Ukrainian Classification of Goods for Foreign Economic Activity (UCGFEA);
• refusal cards rejecting the acceptance of a customs declaration, customs clearance, release or passage of goods or commercial vehicles. These cards are usually issued when decisions on customs value adjustment or commodity code determination are adopted;
• decisions regarding the determination of goods’ country of origin, including refusals to issue an EUR.1 movement certificate;
• tax assessment notices issued following post-clearance audits.

A separate category of dispute concerns challenges to rulings in cases involving violations of customs rules, in which individuals are held liable. If a company is concerned about whether customs authorities may seize imported goods, temporary seizure is only permitted in cases involving violations of customs rules. The temporary seizure of goods or vehicles may be challenged by their owners.

As to whether a foreign company may challenge decisions of Ukrainian customs authorities before a court, the answer is generally yes, except for rulings on violations of customs rules imposed on specific individuals. Such rulings may only be contested by specific individuals who have been held liable. The key issue in such disputes is proving that a particular decision violated the company’s rights. Such violations generally arise where the challenged decision results in additional customs payments, which a specific company must pay. It is this company that must act as the complainant or claimant in court. Naturally, it is also imperative to engage a Ukrainian attorney as a representative who will act on behalf of the company in accordance with Ukrainian law.

Customs Valuation: The Most Common Source of Disputes

A significant share of disputes with customs authorities arise from disagreements over decisions adjusting customs value.

Under Ukrainian law, the obligation to determine the customs value of goods imported into Ukraine rests with the importer. Ukrainian legislation provides for six possible customs valuation methods, with the primary method – the transaction value method – playing a key role. If this method cannot be applied, five secondary methods are used sequentially.

The application of the primary method is mandatory unless the customs authority proves legally established grounds for rejecting it. Such grounds usually include discrepancies or deficiencies in the submitted documents that prevent the customs authority from verifying the components of the declared customs value.

Secondary customs valuation methods are:

• Customs valuations are based on transaction value of identical goods. Under this method, the customs value is based on the transaction value accepted by the customs authority for identical goods exported to Ukraine from the same country during a comparable period, provided that the goods are similar in terms of physical characteristics, quality, reputation, country of production and manufacturer (minor external differences are disregarded). If several relevant values are available, the lowest value is applied.
• Customs valuation is based on the transaction value of similar (analogous) goods. This method involves identifying a transaction value accepted by the customs authority for goods that are not completely identical. However, they have similar characteristics, consist of identical components, perform the same functions and are commercially interchangeable. The key factor is not formal identity but functional and market comparability, considering the quality, trademark and reputation of the goods. If several relevant values are available, the lowest value is used for calculation.
• The deductive value method means that the starting point is the price at which the imported goods (or identical or similar goods) are sold in Ukraine in the largest aggregate quantity to an unrelated buyer at the time closest to importation (but no later than 90 days after importation). Commissions or usual trade mark-ups (profit and general expenses), transportation, loading and insurance costs within Ukraine, as well as applicable taxes, are then deducted from this domestic price.
• The computed value method is based not on market sale prices but on the actual cost structure established by the manufacturer. It involves constructing the customs value by adding three key components: the cost of materials and production expenses; the profit and general expenses normally reflected by producers of goods of the same class or kind when exporting goods to Ukraine; and the costs associated with delivery to the place of importation into the customs territory of Ukraine.
• The fallback method provides that the customs value is determined using methods that do not contradict Ukrainian legislation. These methods are consistent with the principles and provisions of the GATT. This is done with mandatory reliance on customs values previously recognised by the customs authorities. At the same time, the law clearly establishes “red lines”: it is prohibited to rely on domestic prices on Ukrainian or foreign markets, minimum or arbitrary values, the highest of alternative prices, or other artificial indicators.

Customs authorities do not have discretionary powers to choose the customs valuation method. The law establishes a strict sequence: moving to each subsequent method is permitted only after consistently proving that all previous methods cannot be applied. The burden of proving such impossibility rests solely with the customs authority.

Based on the experience of Ilyashev & Partners Law Firm, refusal to apply the primary method is usually triggered by unreliable or insufficient documentary evidence confirming the numerical components of the customs value, which raises doubts regarding the declared value. Importers make the following mistakes:

• lack of documents confirming payment for the goods;
• inconsistencies in the documents submitted to customs authorities, for example, different information stated in the invoice, contract and transport documents;
• discrepancies in delivery terms (Incoterms);
• absence or insufficiency of documentary evidence confirming transportation costs (including freight) and insurance expenses;
• failure to include royalties and licence fees in customs value;
• the existence of a relationship between the buyer and seller that could potentially influence the price.

At the same time, a decision to adjust customs value is not always due to importer mistakes. In practice, even a perfectly prepared set of documents does not always guarantee successful customs clearance under the primary method. The main systemic “trigger” for reviewing the customs value remains the availability of information held by the controlling authority indicating higher price levels for similar goods, in particular in the Central Database of the Unified Automated Information System (UAIS) of the State Customs Service of Ukraine.

The mere existence of information in the customs automated system showing a higher price for similar goods is not, in itself, a statutory ground for rejecting the primary method. However, the fiscal approach often encourages customs authorities to use such data as a reason for adjusting customs value. This is even where there are no actual deficiencies in the declarant’s documents.

Administrative Appeal vs Court Proceedings

Ukrainian legislation provides for two ways to challenge customs decisions that result in additional customs assessments: administrative and judicial appeals. These mechanisms are not mutually exclusive but differ in terms of deadlines, procedure, sequence of application and effectiveness.

Administrative Appeal

A complaint against a customs decision is submitted to a high-level customs authority – the State Customs Service of Ukraine. The complaint may be filed within 30 days from the date when the person became aware or should have become aware of the violation of his rights. However, it must be filed no later than six months from the date of decision adoption. Failure to meet this deadline without valid reasons leaves the complaint without consideration.

During the review period, enforcement of the challenged decision may be suspended at the applicant’s request. However, this does not happen automatically: it is necessary to prove that the challenged decision does not comply with Ukrainian customs legislation or that there is a risk of significant harm to the person filing the complaint.

The complaint must be prepared exclusively in Ukrainian and signed by the applicant or their representative (with mandatory attachment of documents confirming the representative’s authority). It may be submitted in paper form (in person or by post with an inventory of enclosures) or electronically using a qualified electronic signature.

The complaint must include the name of the higher-level customs authority, full contact details of the complainant and their representatives, justification of the subject matter of the appeal (the nature of the violation), specific claims, the date of the complaint and a list of attached documents. The complainant is entitled to submit any evidence in support of the complaint.

In customs disputes, the administrative appeal mechanism is largely formal. Based on the experience of Ilyashev & Partners Law Firm, higher-level customs authorities rarely overturn decisions by subordinate customs offices in practice, limiting such cases mainly to obvious and serious legal violations.

Despite its generally low success rate, this mechanism allows companies to promptly correct obvious technical or calculation errors without attempting to go to court. The main advantages of an out-of-court resolution are the absence of court fees and clearly regulated timeframes for reviewing the complaint – 30 days from receipt, with a possible extension of up to 20 additional days.

Rejection of an administrative complaint does not prevent the company from bringing the case before a court.

Court Proceedings

Administrative courts are the main and most effective forum where businesses and customs authorities act as equal parties. A claim is filed with the district administrative court at the location of the customs authority that adopted the challenged decision. The decision of the court of first instance may be appealed to an administrative court of appeal and subsequently to the Administrative Cassation Court within the Supreme Court. However, cassation review is subject to procedural filters and may be unavailable in minor complexity cases.

The general time limit for filing a court claim is six months from the date when the person became aware or could have become aware of the violation of their rights. However, if an administrative complaint was filed first, a shorter three-month period applies, calculated from the date of adoption of the decision following the administrative review. How long does a customs dispute take? Timelines vary, but court proceedings usually last approximately 4 to 12 months, depending on the complexity of the particular case.

The court fee is calculated as a percentage (1.5% for companies and 1% for individuals) of the value of the claim, which the Supreme Court defines as the difference between the customs payments calculated by the declarant and those determined by the customs authority based on the disputed decision. If the claimant wins the case, the court fee is reimbursed in full, while legal fees are usually recovered partially.

At this stage, foreign clients most often have two practical questions: whether the additional customs payment must be paid before moving to court and whether goods may continue to be imported while the customs dispute is ongoing. In the case of a customs value adjustment, payment of the extra customs duties is not mandatory. It is sufficient to provide a guarantee, which is returned if the claim is fulfilled. Therefore, the dispute primarily concerns funds recovery, and initiating such proceedings does not prevent goods delivery. In practice, the only exception is the temporary seizure of goods in cases involving liability for customs violations.

Evidence That Makes or Breaks a Customs Case

A distinctive feature of customs disputes in Ukraine is the allocation of the burden of proof: the obligation to prove the legality of a decision rests with the customs authority. For example, according to established court practice, in cases involving customs value adjustments, merely referring to internal databases or previously cleared customs declarations with higher goods values is not sufficient. A decision must be based on specific discrepancies that cast doubt on the declared value. References by customs authorities to formal inaccuracies that do not affect the numerical components of goods value are insufficient. In addition, the customs authority bears the burden of proving the impossibility of applying the primary method and each of the preceding secondary methods of customs valuation.

However, this does not mean that the claimant company has nothing to prove. On the contrary, the case’s success depends on a strong evidence base. Clients often ask which documents should be retained. In customs value adjustment cases, these are primarily documents that, when considered together, verify the correctness of the declared customs value: the agreement with annexes (specifications), invoice, proof of payment, including SWIFT confirmations, transport and insurance documents, and correspondence with the supplier.

To strengthen the legal position, it is advisable to provide export declarations, manufacturer price lists, accounting documents, as well as the opinions of specialised experts. At the same time, the consistency of all submitted documents is crucial: they must not contain discrepancies regarding goods description, quantity or value.

Collecting all of the above documents is the answer to the question of what foreign companies should do immediately after receiving a customs assessment. In addition, obtaining advice from a Ukrainian lawyer is essential, as they will identify which documents are critical in a specific case, determine the applicable appeal deadlines, and advise which procedure – administrative or judicial – would be more effective considering all circumstances.

How International Law Firms Can Work with Ukrainian Local Counsel

For international law firms and in-house teams, a practical question is how to handle a Ukrainian matter from abroad. Local counsel provides representation before the customs authorities and courts. At the same time, Ukraine has clear restrictions: with limited exceptions, only Ukrainian advocates may act as representatives in court.

Beyond compliance with formal requirements, engaging Ukrainian lawyers also has practical importance: preparing procedural documents and evidence, communicating with customs authorities and courts, and participating in court hearings require knowledge of Ukrainian law and experience working within the Ukrainian legal system.

The most effective model is joint case management. The international law firm maintains the client relationship and assists with evidence collection on its side, particularly evidence originating abroad (manufacturer’s documents, correspondence with foreign counterparties, export documentation, etc.). Local counsel, in turn, provides full procedural support throughout the case.

Conclusion

Success in resolving customs disputes is determined long before a case reaches the courtroom. The key to a successful outcome lies in a properly prepared evidence base and prompt action immediately after receiving notification of additional customs assessments. This is regardless of the grounds on which they were imposed.

In an environment where a fiscal approach prevails in Ukraine and even flawless documentation does not guarantee protection against additional assessments, companies must be prepared to defend their interests from day one.

International businesses need to integrate customs compliance into the procurement and logistics chains. Only a comprehensive evidence base collected in real time will enable a company to effectively protect its interests in court.

Ilyashev & Partners is a leading Ukrainian law firm providing comprehensive customs law services in Ukraine, with strong expertise in customs disputes, customs compliance, import and export regulations, and representation of businesses before Ukrainian customs authorities. The firm advises international companies, manufacturers, traders, logistics operators, and investors on all aspects of Ukrainian customs regulations and cross-border trade.

Our customs lawyers and customs litigation attorneys represent international clients in complex customs disputes in Ukraine, including cases related to customs valuation adjustments, tariff classification, country of origin issues, additional customs duties, post-clearance audits, and challenges against decisions of Ukrainian customs authorities. We have extensive experience defending businesses in administrative proceedings and customs litigation before Ukrainian courts, helping clients protect their interests and avoid unjustified financial exposure.

A key area of our expertise is advising foreign companies importing goods into Ukraine on customs compliance, including preparation of documentation, risk assessment, supply chain structuring, and interaction with customs authorities. We help clients build a strong evidentiary basis to support declared customs value, confirm compliance with Ukrainian import requirements, and effectively respond to customs inquiries and inspections.

In addition, Ilyashev & Partners supports clients in international trade matters involving Ukraine, including export controls, trade restrictions, sanctions compliance, customs aspects of cross-border transactions, and regulatory issues affecting the movement of goods across Ukrainian borders. Combining deep knowledge of Ukrainian customs law with extensive litigation experience, we help international businesses minimise customs risks, resolve disputes efficiently, and ensure smooth operations in Ukraine.

To learn more, please visit the Ilyashev & Partners Law Firm website or contact Nataliia Kyreieva directly.