The Verkhovna Rada has amended the Criminal and Criminal Procedure Codes of Ukraine to criminalize smuggling of goods and excisable goods, which is one of the conditions for the last tranche of the EU’s EUR 1.5 billion macro-financial assistance to Ukraine.
According to MP Yaroslav Zheleznyak (Holos faction), the committee’s version of the draft law was adopted, which was amended in accordance with the letters from the Ministry of Finance that the business insisted on.
“1) It is proposed to raise the thresholds for smuggling 5 times. 2) The thresholds for excisable goods are to be raised by 2 times. 3) The entry into force (criminalization) of commodity smuggling is postponed until mid-2024. As I said, this is the deadline under the (memorandum with the) IMF on the BES reboot,” the MP listed the changes.
He added that the numerous wishes of the business community have also been taken into account, and that actions can only be classified as a crime if there is intent.
“Possible cases of prosecution under ‘smuggling’ articles for submitting documents with false information have been significantly limited – in the amended version, they must be the basis for the movement of goods, be subject to mandatory declaration under customs law, and have an impact on determining the amount of customs payments or compliance with non-tariff regulation measures,” Zheleznyak said.
During the voting, no amendments were made to the text submitted by the committee to the Rada for the second reading, but the text itself is not yet available on the parliament’s website.
According to the representative of the relevant committee, Oleksandr Bakumov (Servant of the People), the threshold for criminal liability for smuggling is set at UAH 6.71 million, which is 50 times higher than in the draft law adopted as a basis (UAH 113.5 thousand – IF-U). He added that the threshold for smuggling excisable goods (except for electricity) has been increased by “thirty-three and three and a half times” compared to the original draft (UAH 56.75 thousand).
Members of the European Solidarity and Batkivshchyna parties, who criticized the draft law, called the main problems of the law the presence of law enforcement agencies in the customs control zone with the addition of the Bureau of Economic Security (BES) and the unresolved problems that led to the adoption of the law on smuggling decriminalization in 2011.
“Ukraine is the only country in Europe and in the World Customs Organization whose customs authorities are not vested with pre-trial investigation functions… We could have left only what is transported outside the customs posts to be considered smuggling,” says MP Nina Yuzhanina (European Union). According to the current legislation, only the illegal transportation of cultural property, poisonous, potent, explosive substances, radioactive materials, weapons or ammunition, parts of firearms, as well as special technical means of covertly obtaining information is considered smuggling.
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.
Ukrainian President Volodymyr Zelensky has proposed to punish for amber smuggling with imprisonment from three to seven years and introduce an article on illegal extraction of amber to the Criminal Code of Ukraine.
This is outlined in bill No. 2059 amending the Criminal Code of Ukraine on criminal liability for the illegal extraction of amber or its movement across the customs border of Ukraine registered by the head of state in parliament.
So, it is proposed to introduce Article 240-1 (illegal extraction of amber). This crime is punishable by a fine of 700 to 3,000 tax-free minimum incomes of citizens (1 minimum is UAH 17), or imprisonment for a term from one to three years.
“The sale, acquisition, storage, transfer, transportation, processing of illegally obtained amber shall be punishable by a fine of 3,000 to 10,000 tax-free minimum incomes of citizens, or by imprisonment for a term from three to six years,” the president said in the bill.
The same actions committed with prior conspiracy by a group of persons, either repeatedly or on a large scale, as well as illegal amber extraction committed on the territories or objects of the nature reserve fund, shall be punishable by imprisonment for a term from four to seven years.
Prime Minister of Ukraine Volodymyr Groysman has called on the leaders of foreign diplomatic institutions of Ukraine to contribute to the fight against smuggling. “Prime Minister of Ukraine Volodymyr Groysman has urged the heads of diplomatic institutions of Ukraine abroad to join the campaign announced by the government dubbed “Ukraine without smuggling” by prompt response to cases of illegal actions and by providing information on the movement of goods taking into account their present price,” the press service of the Cabinet of Ministers said on the results of the meeting of the premier with heads of foreign diplomatic institutions in Kyiv on Tuesday.
Groysman, in particular, asked the diplomats to respond to the requests of the State Fiscal Service, customs office, law enforcement system and facilitate the rapid receipt of information from international partners.
