8. Smuggling

Alcohol and Drug Information Centre (ADIC - Ukraine)

8. Smuggling

Overview of tobacco smuggling in Ukraine in 1993-2001 is presented in http://adic-ukraine.narod.ru/adic/reports/econ/ch-4/chapter_4.htm.

Since 2001 processes of smuggling TO and FROM Ukraine develop in the opposite ways.

Smuggling to Ukraine

Smuggling to Ukraine has decreased from 20% of general consumption in 2000 (http://adic-ukraine.narod.ru /adic/reports/econ/ch-4/4-1.htm) to 2-3% in 2005 according to tobacco industry estimates (http://dsnews.com.ua/?action=article&r_id=24&article_id=26427 ). Tobacco industry states, that the excise tax rates should be stable in Ukraine to prevent cigarette smuggling from Russia due to tax rate differences. However, in 2006 the excise tax rate in Russia is higher, than in Ukraine, and in 2007 the specific tax rate difference will be UAH0.14 per pack of filter cigarettes and UAH0.065 per pack of non-filter cigarettes and this creates incentives for cigarette smuggling from Ukraine to Russia, but not from Russia to Ukraine.

Smuggling from Ukraine

As it was mentioned above, legal cigarette sale in Ukraine (production + import – export) was 116 billion, while consumption was just 84 billion. It means that 32 million cigarettes were first sold in Ukraine (with payment of all taxes) and then smuggled to other countries, predominantly Poland, Hungary and other EU countries, where cigarette prices are much higher, than in Ukraine. This kind of smuggling is called bootlegging, while in Ukraine it is committed not only by individuals, but also by organized criminal groups. Here are some reports of Ukrainian customs authorities:

	320,000 packs of LM, West, Saint George and Pall Mall cigarettes (made in Ukraine) were seized on Hungarian border (13 March, 2004);
	470,000 packs of Marlboro and L&M cigarettes were seized in a lorry, which was going to Latvia (27 August, 2004);
	96,000 packs of L&M cigarettes were seized on Polish border (25 December, 2004);
	116,540 packs of Marlboro cigarettes were seized on Polish border (6 March, 2006);
	75,000 packs of Priluki and Next cigarettes were seized on Hungarian border (3 July, 2006).

400,000 packs of Ukrainian-made cigarettes (where Ukrainian health warnings were stuck up with British ones) were seized in Poland (http://hosted.ap.org/dynamic/stories/P/POLAND_CIGARETTE_SMUGGLING?SITE=CARED )

Transit smuggling

Ukraine is also used for transit smuggling of cigarette brands, which are not produced in Ukraine. The Ukrainian customs reports:

	77,500 packs of Regal cigarettes, which value was estimated as 240,000 euro, were seized on Hungarian border (19 October, 2005);
	450,000 packs of Super Kings cigarettes were seized by the Odessa custom (19 August, 2005);
	200,000 packs of Super Kings cigarettes were seized near the Moldova border (6 September, 2004);
	137,600 packs of Super Kings cigarettes were seized on Hungarian border (7 August, 2004).

Regal and Super Kings are British brands. These cigarettes are made in the UK, later they are exported to such countries, where no market exists for them. Then they “disappear” and through the third countries (including Ukraine) illegally return to the UK.

Content 'Tobacco or Health in Ukraine. Economic issues, 2006 update'