The Verkhovna Rada of Ukraine (hereinafter – the VRU) is considering Draft Law #5420 “On Amendments to the Criminal and Criminal Procedure Codes of Ukraine on Criminalization of Smuggling of Goods” dated 04/23/2021 (hereinafter – Draft Law #5420). The above draft law is currently being prepared for the second reading.
Adoption of the Draft Law No. 5420 without its finalization and without taking into account the comments expressed by the business community may harm law-abiding businesses, which today face significant problems when exporting and importing goods due to the blocking of Ukraine’s borders and the inability to carry out transportation by other means than land.
During the previous stages of consideration of Draft Law #5420 in the Parliament, Chamber Member Companies’ experts repeatedly provided comments and suggestions to the text of the document. The Chamber Member Companies’ experts are grateful to MPs and members of the relevant VRU Committees for taking into account some of the proposals of the business community (in particular, removing the article on “False Declaration of Goods” from the Draft Law #5420). At the same time, the business community reiterated its proposal to supplement the sanction of the proposed article of the Criminal Code of Ukraine (hereinafter – the CCU) with provisions on mandatory confiscation and destruction of alcoholic beverages and tobacco products that are smuggled. In addition, the Chamber Member Companies’ experts strongly oppose the wording of Article 201-3 of the CCU “Smuggling of Goods” (regarding non-taxable goods) contained in Draft Law #5420.
The Chamber Member Companies unequivocally support the government’s intentions to combat illegal schemes in customs clearance of goods, in particular, if the subject of the offense is excisable goods. Since tax revenues from excisable goods, in particular, help to fill the State Budget during the ongoing war, it is crucial to effectively combat illegal import of such products into Ukraine. In addition, the illegal export of excisable goods from Ukraine damages the reputation of our country in relations with international partners. For example, according to a recent study by KPMG, Ukraine is the second largest supplier of illegal tobacco products to the European Union (EU) market. At the same time, criminal liability for smuggling excisable goods is enshrined in the EU legislation.
At the same time, the introduction of criminal liability for smuggling of non-excisable goods in the wording proposed by the draft law will not only not contribute to the effectiveness of combating the shadow economy, but will, on the contrary, lead to numerous corruption risks and prerequisites for abuse by regulatory and law enforcement agencies, as well as illegal pressure on legally operating businesses.
In particular, the legal construction of the objective side of the crime of “moving goods across the customs border of Ukraine outside customs control or concealed from customs control” is an outdated norm of the USSR, and is also extremely vague, in fact allowing the registration of criminal proceedings in any disputable situations arising during customs control (including in the absence of criminal intent, as the current version of the draft law does not provide for an intentional form of guilt in smuggling).
Representatives of the business community sent numerous letters to MPs and public authorities asking them to substantially revise Draft Law No. 5420 and hold thorough discussions with business and experts.
The American Chamber of Commerce calls on MPs to finalize Draft Law #5420 and remove the proposed wording of Article 201-3 of the CCU “Smuggling of Goods” or significantly change the wording of the description of the objective side of the crime, providing that criminal liability is incurred exclusively for intentional customs fraud committed with the purpose of evading customs duties or avoiding non-tariff regulation.