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The draft law on criminalization of smuggling needs to be revised

27/ 07/ 2021
  July 27 is the last day for submitting amendments to draft law №5420 on the criminalization of smuggling of goods and excisable goods. It is worth noting that the European Business Association did not support this draft law because smuggling, like any economic crime, should be fought by analytical rather than forceful methods, namely – introducing fiscalization of supply chains instead of imitating total but ineffective control. Therefore, the business community has re-sent its detailed comments and suggestions to the Chairman of the Verkhovna Rada of Ukraine, the Verkhovna Rada Committee on Finance, Tax and Customs Policy, and the Verkhovna Rada Committee on Law Enforcement. They mainly concern the following. Business representatives do not support the introduction of liability for false declaration of goods as the provisions of Article 201-4 allow for the possibility of criminal prosecution for unintentional errors in customs declarations. Besides, the document envisages the prosecution only for actions aimed at illegal movement of goods across the customs border of Ukraine outside customs control or with concealment from customs control. Thus, the crime will be considered complete regardless of whether the goods were illegally moved across the customs border of Ukraine or not. Such broad wording, combined with the lack of specification of actions that qualify as criminal, can simply expand the grounds for bringing a person to justice. Meanwhile, it remains unclear who can be prosecuted for such crimes – the head of the company, the declarant, the customs broker, the carrier, and so on. The criminal prosecution will be applied when the value of objects of the offense exceeds 113,500 UAH (for excisable goods - UAH 56,750). According to the EBA experts, this threshold is unreasonably low, while sanctions are excessive. Therefore, the sanctions provided for in this draft law are quite severe and need to be softened. Business is particularly concerned of the fact that the pre-trial investigation of these criminal offenses may be carried out by tax police investigators even before the launch of the Economic Security Bureau of Ukraine. Business representatives emphasize that the investigation of cases of economic smuggling should be determined exclusively by the newly established Bureau of Economic Security of Ukraine. At the working group discussions in the Verkhovna Rada Committee, most participants overwhelmingly agree with the position that increasing the responsibility for smuggling is necessary only for excisable goods. Given the fact that the EBA experts propose to significantly revise the draft law in terms of establishing a clear list of counterfeit goods, namely the excisable ones; increasing the threshold value of items that are the objects of the offense which leads to criminal liability for smuggling of excisable goods, etc. Besides, it is important to supplement the draft law in part of Article 96-1 of the Criminal Code by introducing special confiscation and destruction of counterfeit items by analogy with the sanction of the current Article 204 of the Criminal Code, because smuggled excisable goods cannot be put into circulation legally due to non-payment of excise tax and non-compliance of such goods with the requirements of a range of legislative acts of Ukraine. For example, according to the EBA member companies, smuggled tobacco products, as a rule, are not marked in the prescribed manner with excise tax stamps. As a result, of import into the customs territory of Ukraine, storage, transportation, r commission for sale and sale at customs on the territory of Ukraine is prohibited. Business representatives emphasize that the fight against gray imports should be approached more broadly by implementing the following effective measures: the impossibility of selling goods without documents about their origin (supply chain), especially in e-commerce; obstruction of tax minimization schemes; the institutional development of the specialized authorities and increase the efficiency of their work. We hope the voice of business will be heard!   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

July 27 is the last day for submitting amendments to draft law №5420 on the criminalization of smuggling of goods and excisable goods. It is worth noting that the European Business Association did not support this draft law because smuggling, like any economic crime, should be fought by analytical rather than forceful methods, namely – introducing fiscalization of supply chains instead of imitating total but ineffective control.

Therefore, the business community has re-sent its detailed comments and suggestions to the Chairman of the Verkhovna Rada of Ukraine, the Verkhovna Rada Committee on Finance, Tax and Customs Policy, and the Verkhovna Rada Committee on Law Enforcement. They mainly concern the following.

Business representatives do not support the introduction of liability for false declaration of goods as the provisions of Article 201-4 allow for the possibility of criminal prosecution for unintentional errors in customs declarations.

Besides, the document envisages the prosecution only for actions aimed at illegal movement of goods across the customs border of Ukraine outside customs control or with concealment from customs control. Thus, the crime will be considered complete regardless of whether the goods were illegally moved across the customs border of Ukraine or not. Such broad wording, combined with the lack of specification of actions that qualify as criminal, can simply expand the grounds for bringing a person to justice. Meanwhile, it remains unclear who can be prosecuted for such crimes – the head of the company, the declarant, the customs broker, the carrier, and so on.

The criminal prosecution will be applied when the value of objects of the offense exceeds 113,500 UAH (for excisable goods – UAH 56,750). According to the EBA experts, this threshold is unreasonably low, while sanctions are excessive. Therefore, the sanctions provided for in this draft law are quite severe and need to be softened.

Business is particularly concerned of the fact that the pre-trial investigation of these criminal offenses may be carried out by tax police investigators even before the launch of the Economic Security Bureau of Ukraine. Business representatives emphasize that the investigation of cases of economic smuggling should be determined exclusively by the newly established Bureau of Economic Security of Ukraine.

At the working group discussions in the Verkhovna Rada Committee, most participants overwhelmingly agree with the position that increasing the responsibility for smuggling is necessary only for excisable goods. Given the fact that the EBA experts propose to significantly revise the draft law in terms of establishing a clear list of counterfeit goods, namely the excisable ones; increasing the threshold value of items that are the objects of the offense which leads to criminal liability for smuggling of excisable goods, etc.

Besides, it is important to supplement the draft law in part of Article 96-1 of the Criminal Code by introducing special confiscation and destruction of counterfeit items by analogy with the sanction of the current Article 204 of the Criminal Code, because smuggled excisable goods cannot be put into circulation legally due to non-payment of excise tax and non-compliance of such goods with the requirements of a range of legislative acts of Ukraine. For example, according to the EBA member companies, smuggled tobacco products, as a rule, are not marked in the prescribed manner with excise tax stamps. As a result, of import into the customs territory of Ukraine, storage, transportation, r commission for sale and sale at customs on the territory of Ukraine is prohibited.

Business representatives emphasize that the fight against “gray” imports should be approached more broadly by implementing the following effective measures: the impossibility of selling goods without documents about their origin (supply chain), especially in e-commerce; obstruction of tax minimization schemes; the institutional development of the specialized authorities and increase the efficiency of their work.

We hope the voice of business will be heard!

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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