4.3. Ukraine as transit country for cigarette smuggling
Large-scale smuggling generally takes advantage of the “in transit” system that has been developed to facilitate international trade. This system allows for the temporary suspension of custom duties, excise taxes, and VATs payable on goods originating from and/or destined for a third countrywhile in transit across the territory of another country. However, in countries with poor control over the in-transit cigarettes, substantial leakages take place, with many of the exported cigarettes failing to arrive at their intended destination.
4.3.1. Legal transit
According to the State Customs Service data in the year 2000, 10.7 billion cigarettes were transited through Ukraine (Table 4.4). Unfortunately, the country of their origin is not indicated. The analysis of the countries of destination suggests that a substantial part of these legally transited cigarettes will be eventually sold illegally. The total cigarette consumption in Moldova is about 6 billion pieces, and Moldova is tobacco producing country. It is obvious that most of the transited cigarettes come to the Trans-Dnister Republic and then illegally continue their way to Ukraine and other countries. Among the neighbors of Ukraine, only Belarus is indicated as a country of destination. As to the rest, Yugoslavia, Belgium, Turkey, Cyprus, Latvia, and the United Arab Emirates are well known as “high risk” countries of transit cigarette smuggling.
Table 4.4. Transit of cigarettes through Ukraine in 2000
|
Country of destination |
Number (million cigarettes) |
Value (million $) |
Price (USD per 1000 cigarettes) |
|
Moldova |
5185 |
76.3 |
14.72 |
|
Yugoslavia |
2744 |
1.9 |
0.69 |
|
Belgium |
742 |
11.9 |
16.10 |
|
Turkey |
636 |
9.3 |
14.65 |
|
Bulgaria |
451 |
7.4 |
16.39 |
|
Cyprus |
279 |
4.4 |
15.74 |
|
Latvia |
140 |
3.1 |
22.08 |
|
Belarus |
125 |
0.8 |
6.52 |
|
Greece |
97 |
1.6 |
16.47 |
|
Lithuania |
94 |
1.7 |
18.12 |
|
Iceland |
66 |
0.89 |
13.43 |
|
Lebanon |
43 |
0.59 |
13.82 |
|
UAEmirates |
29.0 |
0.45 |
15.47 |
|
Italy |
18.5 |
0.43 |
23.50 |
|
Niger |
13.9 |
0.15 |
10.65 |
|
Ireland |
12.7 |
0.22 |
17.23 |
|
Slovenia |
10.9 |
0.22 |
20.00 |
|
USA |
9.5 |
0.13 |
13.70 |
|
Armenia |
3.8 |
0.09 |
24.20 |
|
TOTAL |
10700.3 |
121.57 |
4.3.2. Illegal transit
Ukraine is also used for the illegal transit of cigarettes. According to the “LASSO-2000” report “Review of cigarette smuggling in Europe”, smuggling activities in Central and Eastern Europe are dominated by the phenomenon that cigarettes mainly produced in the United Kingdom, Netherlands, and Germany are exported legally and then combined with a legal load (called –“coverloading”), are smuggled back to Western Europe.
The following pieces from British newspaper explain the problem and involvement of Ukraine.
The potential profits are high. A carton of 200 cigarettes legally costs somewhere in the region of Pounds 40 but a large-scale purchaser buys them in for Pounds 2. That may sound like a fantastic mark-up but the purchaser is also taking an enormous risk. To ensure that he receives what he’s been promised by someone, say, in the Baltic States, he has to grease palms all the way from the Ukraine to the UK. He’s also got to organise hiring and shipping the container, as well as delivery, transport and storage of the cigarettes. All that costs money. By the time his stock arrives in Scotland his profit has been cut from Pounds 38 per carton to between Pounds 15 and Pounds 20. But even at that figure he still makes a vast profit when he sells them on to a wholesaler - the owner of the comfortable house and caravans in the west of Scotland, for example - for around Pounds 20 per carton. The wholesaler passes them on to a network of low-grade distributors, who in turn sell them for whatever the illegal going-rate is - currently around Pounds 25. By the time the cigarettes reach the markets, car-boot sales or corner shops, the profit is still almost Pounds 20 more than the duty-paid versions would provide.
In 2001 a port of choice for smugglers is Cyprus. Last year nine billion cigarettes were shipped to Cyprus, most of which came from two British companies, Gallaher and Imperial, although Cypriots hardly smoke British brands. In fact the cigarettes are being shipped (with a little local leakage for the tourists) to Israel, the Ukraine, Syria and Egypt. Again, none of these countries is a substantial consumer of UK tobacco brands. They are simply staging posts for cigarettes, which end up in a container bound for the UK. (The Scotsman /FT, August 4, 2001).
In July and September 2001, 800,000 and 1,200,000 packs of British brand “Superkings” (unknown in Ukraine) were seized in Odessa. The cigarettes were hidden in big lorries with wire as a coverload and Germany was indicated as the country of destination.
According to the “LASSO-2000” report “Review of cigarette smuggling in Europe”, Ukraine is also used as transit country from Russia and China to Western European countries.
4.4. The involvement of the tobacco industry in tobacco smuggling
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