23% of consumer electronics are illegally imported to Ukraine

16/ 03/ 2020

From October 9 to November 5, 2019, the GfK Research Company, on the initiative of the European Business Association and the Ukrainian Importers of Consumer Electronics Association, conducted an expert survey of market participants on volumes and trends of the gray import of consumer electronics in Ukraine as for 2019. Today, March 16, the results of this study were officially presented. According to the data received, the sales volume of gray consumer electronics, imported without proper customs procedures and full payment of taxes and fees, is $ 792 million (UAH 20.5 billion) or 23% of the total sales of the product categories studied. The smartphones account for the largest share of gray imports worth $ 328 million. According to research, 29% of smartphones are imported under gray schemes. Flat-panel televisions take second place with the volume of illegal imports worth $ 102 million. Thus, every fifth TV in Ukraine is imported illegally. A high share of gray imports (above 30%) is also observed for the category of photographic equipment and accessories (headphones, portable speakers). At the same time, the average share of “gray” imports (about 20%) is distinctive for the following categories: small appliances for home and kitchen, built-in kitchen appliances, air-conditioners, and vacuum cleaners. Such categories as refrigerators, washing machines, small appliances for personal care, tablets, laptops, computers, and monitors account for about 15% of “gray” imports. In most of the categories studied, “gray” imports prevail in price segments above the average and premium levels (for example, 55-inch TVs, gaming laptops, professional photographic equipment). Lower-priced products are generally less referred to as gray imports. The exceptions are the climate control equipment, accessories and small household appliances for personal care. These categories tend to be imported illegally on the level with the products of mid- and upper-middle-price segments. According to the study, the main growth in the share of gray imports was in 2018. The growth slowed down in 2019. This trend can be seen in the categories of smartphones. In the category of laptops, tablets and small appliances, experts also noted a tendency of a shrinking share of gray imports. At the same time, the share of gray imports has been stable in the category of desktops and monitors and has not changed for the last two years. Also, the dynamics of growth in the share of gray imports remained the same in the category of refrigerators and accessories. According to the data obtained, the main sales channels for “gray” products are online retail stores, with or without distributor identification. Viktoria Kulykova. EBA Consumer Electronics Committee Manager. We estimate that about 80% of online retail stores violate e-commerce laws and do not provide information on the websites that would identify them as a trade operator and can be used to hold them liable if necessary. The main reasons for gray imports are the corruption of the customs authorities, the difference in the prices of products in Ukraine and neighboring countries, the opportunity for the seller to earn a higher margin by avoiding the payment of customs duties, etc. Participants of the press conference expressed the opinion that illegal import can be minimized only by a consolidated effort, which will be directed both to shut down the schemes of illegal import at customs and control final sales within the country. Laws 128 and 129, adopted in 2019, make it possible by imposing real responsibility for the failure to issue a fiscal check, instead of issuing a nominal fine of one-hryvnia, as it was previously practiced, for the obligation to have documents confirming the origin of the goods and consumer monitoring. At the same time, the business community is concerned about the registration of several draft laws in Parliament, which negate the aforementioned progressive norms, said Victoria Kulikova. In addition, we hope that the state authorities will be able to start the full implementation of Laws №128 and 129 from October 1 this year, including the opportunity for buyers to check the legality of the fiscal check and obtain the fiscal cashback in case of receiving a forged document.

According to the data received, the sales volume of gray consumer electronics, imported without proper customs procedures and full payment of taxes and fees, is $ 792 million (UAH 20.5 billion) or 23% of the total sales of the product categories studied.

The smartphones account for the largest share of “gray” imports worth $ 328 million. According to research, 29% of smartphones are imported under “gray” schemes. Flat-panel televisions take second place with the volume of illegal imports worth $ 102 million. Thus, every fifth TV in Ukraine is imported illegally.

A high share of “gray” imports (above 30%) is also observed for the category of photographic equipment and accessories (headphones, portable speakers). At the same time, the average share of “gray” imports (about 20%) is distinctive for the following categories: small appliances for home and kitchen, built-in kitchen appliances, air-conditioners, and vacuum cleaners. Such categories as refrigerators, washing machines, small appliances for personal care, tablets, laptops, computers, and monitors account for about 15% of “gray” imports.

In most of the categories studied, “gray” imports prevail in price segments above the average and premium levels (for example, 55-inch TVs, gaming laptops, professional photographic equipment).

Lower-priced products are generally less referred to as “gray” imports. The exceptions are the climate control equipment, accessories and small household appliances for personal care. These categories tend to be imported illegally on the level with the products of mid- and upper-middle-price segments.

According to the study, the main growth in the share of “gray” imports was in 2018. The growth slowed down in 2019. This trend can be seen in the categories of smartphones. In the category of laptops, tablets and small appliances, experts also noted a tendency of a shrinking share of “gray” imports. At the same time, the share of gray imports has been stable in the category of desktops and monitors and has not changed for the last two years. Also, the dynamics of growth in the share of “gray” imports remained the same in the category of refrigerators and accessories.

According to the data obtained, the main sales channels for “gray” products are online retail stores, with or without distributor identification.

Viktoria Kulykova EBA Consumer Electronics Committee Manager

We estimate that about 80% of online retail stores violate e-commerce laws and do not provide information on the websites that would identify them as a trade operator and can be used to hold them liable if necessary.

The main reasons for “gray” imports are the corruption of the customs authorities, the difference in the prices of products in Ukraine and neighboring countries, the opportunity for the seller to earn a higher margin by avoiding the payment of customs duties, etc.

Participants of the press conference expressed the opinion that illegal import can be minimized only by a consolidated effort, which will be directed both to shut down the schemes of illegal import at customs and control final sales within the country. Laws 128 and 129, adopted in 2019, make it possible by imposing real responsibility for the failure to issue a fiscal check, instead of issuing a nominal fine of one-hryvnia, as it was previously practiced, for the obligation to have documents confirming the origin of the goods and consumer monitoring.

“At the same time, the business community is concerned about the registration of several draft laws in Parliament, which negate the aforementioned progressive norms,” said Victoria Kulikova. “In addition, we hope that the state authorities will be able to start the full implementation of Laws №128 and 129 from October 1 this year, including the opportunity for buyers to check the legality of the fiscal check and obtain the fiscal cashback in case of receiving a forged document.”