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​Can import of medicines turn out to be import of foodstuff?

publication . 15 March 2018

For importers of medicines, it may be a surprise that medicines imported into Ukraine may turn out to be food additives, or even beverages, but not the pharmaceutical products. This customs authorities’ know-how is related to their changing the codes of the UCG FEA (the Ukrainian Classifier of Goods for Foreign Economic Activity) for imported goods. Below, we will tell what to do in this case and find out whether such actions are lawful.


Iryna Kalnytska

Partner, Head of tax practice, Attorney at law

A Foodstuff or a Medicine?

The position of the customs authorities is that the importers make a “methodological mistake”, which consists in the wrong determination of the tax base due to the incorrect classification of the goods (medicines), which results in the incomplete payment of import duties and value added tax.

In particular, quite often the controllers change the UCG FEA codes for the group of medicines (3004) subject to a 0% customs duty, various foodstuffs (2106), or beverages (2202), which, respectively, are subject to higher duty rates.

As a rule, this concerns the medicines produced on the basis of plant raw materials or active substances such as vitamins, minerals, essential amino acids, or fatty acids, as well as homeopathic medicines. This is associated with certain specific requirements for the qualification of these goods defined by the Additional Note 1 to Group 30 of the Law of Ukraine ”On Customs Tariff of Ukraine”.

In particular, according to the UCG FEA, the abovementioned goods may be classified as medicines, provided there is an appropriate indication on their label, packaging, or in user instructions (for homeopathic medicines, it is enough to meet the requirements 1-3):

1) Specific diseases, illnesses, or their symptoms for treatment of which this product should be used;
2) Dosage;
3) Method of application;
4) Concentration of the active substance or substances.

One of the main arguments the customs authorities advanced when changing the code of the goods attributed by the importer to the abovementioned category is that although the medicine is claimed to be aimed at treatment of specific diseases and illnesses, it just provides a positive tonic effect on a human organism. Such opinions are usually confirmed by experts of the special department for tax and customs expertise of the State Fiscal Service (SFS) of Ukraine or recommendations for the classification of goods issued by the World Customs Organisation.

At the same time, we do not share this point of view, as according to Article 69 of the Customs Code of Ukraine the abovementioned opinions and recommendations should not play a determining role for the customs authorities in controlling the correct classification of goods.
As evidence for refuting the customs authorities’ allegations that a product is not a medicine and is not aimed at treatment of certain illnesses and diseases, we recommend to use the following:

- Registration as a medicine of the goods in respect of which the dispute arose;
- Indication of specific illnesses, diseases, or their symptoms, for treatment of which this product should be used in the user instruction and the registration certificate.

Information from the International Classification of Diseases of the World Health Organisation can be used to confirm the fact that a particular indication/prescription is a specific illness/disease.

The Ruling of the High Administrative Court of Ukraine of March 15, 2017 in the case No. 810/2393/15 is an example of successful resolution of such a dispute. The Court did not take into account the opinions of the Specialised Examination and Research Laboratory of the Ministry of Income and Charges of Ukraine and found the customs office’s decision to determine the UCG FEA code as a foodstuff to be groundless. The High Administrative Court of Ukraine came to similar conclusions in its Ruling of March 16, 2017 in the case No. 810/4744/15: when providing its assessment of the SFS referencing to the recommendations of the Secretariat of the World Customs Organisation as evidence of the fact that the product is not a medicine, but contributes to human overall health and well-being, the Court noted that the courts of previous instances were right by claiming that the said recommendations were not binding on the defendant.

Beverages or Medicines?

When considering disputes regarding the change of the UCG FEA code of the medicine containing alcohol and classification thereof according to the code of group 2208 (beverages containing alcohol), courts primarily pay attention to the consumer purpose of the product. For medicines, it is treatment, but not usage as an alcoholic beverage. The abovementioned Ruling of the High Administrative Court of Ukraine of March 16, 2017 in the case No. 810/4744/15 is an example of such a judicial approach.

In order to confirm the status of a medicine, in addition to providing the evidence mentioned above, we recommend that you submit the following documents to the court:

- Documents confirming the medicine registration in the country of export;

- Export customs declarations, which specify the appropriate classification of the imported goods;

- Opinions of experts;

- Documents confirming the unimpeded clearance of the respective medicine, without changing the UCG FEA code by the customs authorities in previous periods.

In our opinion, by relying on the Basic Rules for the Interpretation of the UCG FEA, the courts currently take up the correct position, according to which the goods classification is carried out as a result of comparing the goods description in the UCG FEA and the characteristics and description of the declared goods. Herewith, the advantage is given to the commodity item in which the goods characteristics are provided to the fullest extent possible.

In view of the above, in the event the customs authorities change the UCG FEA code without any grounds, representatives of the pharmaceutical business have a fairly high chance to gain their point in court. In this case, it is important to properly confirm the classification of the product as a medicine when submitting documents for customs clearance of the respective goods.


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