Author: Olena Andriyko, lawyer at F&P
Cases on violation of customs rules are one of the most practically significant and at the same time underestimated categories of customs disputes. Often, entrepreneurs perceive the drawing up of a protocol on fuel and lubricants as inevitable: “we will pay the fine and forget about it”. But this is a wrong approach. Firstly, the amounts of fines can be significant (up to 150% of unpaid customs duties under Article 485 of the CCU, confiscation under Articles 472, 473). Secondly, not every protocol is drawn up legally. Thirdly, even a legitimately drawn up protocol does not mean that the fine cannot be canceled or reduced.
What is fuel and lubricants from a legal point of view
Violation of customs rules is an administrative offense under Chapter XVIII of the Customs Code (Articles 458-485). This is not a criminal offense (although in some cases, fuel and lubricants may border on smuggling under Article 201 of the Criminal Code, but that’s another story). Administrative penalties for fuel and lubricants are provided for: a fine and/or confiscation of goods.
Importantly, fuel and lubricants cases are considered either by the customs authority itself or by the court, depending on the type of violation and the amount of the fine. Cases involving confiscation or fines exceeding a certain threshold are considered exclusively by the court. This is important because your chances of defense in court are much higher than when the case is considered by the customs authority itself.
The most common reasons for drawing up a protocol
False declaration (Article 472 of the CCU). The quantity, weight, name, or characteristics of the goods are incorrect. This is the most common reason. The penalty is 300% of the unpaid customs duties. However, there is a nuance: if the discrepancy arose through no fault of the declarant (for example, a supplier’s error in the documents or a technical error in weighing), this may be grounds for exemption from liability.
Failure to declare commercial goods (Article 472 of the CCU). Failure to declare accurate and reliable information about goods subject to mandatory declaration in the prescribed form. The sanction is serious: a fine of 100% of the value with confiscation. But it must be proved that the failure to declare was intentional. If the goods were in the vehicle and the declarant did not know about them, this is a completely different situation. Cases under this article are considered exclusively by the court.
Violation of the terms of transit or temporary storage (Articles 469, 470 of the CCU). Фіксовані штрафи, зазвичай менш значні. Але навіть тут бувають ситуації, коли порушення строку відбулося з об’єктивних причин (форс-мажор, бойові дії, пошкодження інфраструктури).
Violation of the customs regime (Articles 474, 476, 477 of the CCU). For example, the use of temporarily imported goods for other purposes or failure to export them within the established time limit. Often applies to equipment, vehicles, and exhibition samples.
Sending prohibited goods in postal and express mail (Article 473 of the CCU). An article that is becoming increasingly relevant with the growth of international e-commerce. It concerns the shipment of goods prohibited for such shipment across the customs border in international postal and express shipments. The sanction is the confiscation of goods. Moreover, the protocol is often drawn up against the recipient, even if he or she was not aware of the ban. A typical situation: an entrepreneur has ordered a shipment of goods that has fallen under restrictions (for example, dual-use goods or certain chemicals) through an international platform, and learned about the ban at the post office along with the protocol. The defense here is based on the absence of intent and whether a particular product is actually banned.
Evasion of customs duties (Article 485 of the CCU). This is one of the most serious and frequent grounds for protocol. The article covers a wide range of actions: declaring false information regarding the weight, quantity, country of origin, UKTZED code or customs value of goods in order to reduce customs payments; providing documents with such information; failure to pay payments on time; and using preferential goods for other purposes. In essence, this is a “catch-all” article under which the customs authorities can cover a wide range of situations, from real evasion schemes to bona fide classification errors.
An important nuance regarding Article 485: previously, the sanction was a fixed 300% of the unpaid amount of customs duties. The Constitutional Court declared this non-alternative sanction unconstitutional, as it made it impossible to individualize liability based on the circumstances of the case, the form of guilt and the nature of the violation. Following this CCU decision, the sanction was changed to a fine of 50 to 150% of the unpaid amount. This is fundamentally important for the defense: now the court has the opportunity and obligation to take into account specific circumstances – whether the violation was intentional, the amount of actual damage, and whether there are mitigating circumstances. If you have been charged the maximum 150%, you can always appeal this with a request for a reduction.
Procedure: from protocol to resolution
Understanding the procedure is the key to effective defense. A case on fuel and lubricants begins with the drawing up of a protocol by a customs official. Then the case is considered either by the customs office itself (by the head or his deputy) or is referred to the court.
When drawing up a protocol, you have the right to: familiarize yourself with all case materials, provide explanations, submit evidence, file a petition, and use the assistance of a lawyer. These rights are expressly provided for in Article 498 of the CCU. Practical advice: if you are being drawn up a protocol, do not refuse to sign it, but be sure to include your comments and disagreement. The phrase “I do not agree with the protocol, I will provide explanations separately” is your minimum.
During the proceedings: you have the right to participate in the proceedings, give explanations, submit motions and evidence. If the case is being considered by customs, your presence is not mandatory, but recommended. If it is a court, be sure to have a lawyer present.
Defense strategy: what to rely on
The defense in fuel and lubricants cases is built on several levels:
Procedural violations. Have the terms of the protocol been met? Was the person properly notified? Have the rights been explained? Does the protocol contain all the mandatory details? Violation of the procedure is an independent ground for setting aside the resolution.
Absence of corpus delicti. Is there an intent? Is there a fault of this particular person? For example, if the discrepancy in weight is due to different methods of weighing (gross/net, with/without a pallet), this is not an inaccurate declaration.
Insignificance. Article 487 of the TCU provides for the possibility of exemption from liability for insignificant violations. If the actual consequences of the violation are minimal and the taxpayer acted in good faith, the court may limit itself to an oral warning instead of a fine.
Mitigating circumstances. Article 486 of the CCU contains a list of mitigating circumstances: voluntary elimination of consequences, commission of an offense due to a combination of aggravating circumstances, etc. The existence of mitigating circumstances may significantly affect the amount of the penalty.
Appeal against the decision
The decision to impose a penalty for fuel and lubricants is appealed to the court within 10 days from the date of its delivery (Article 529 of the Commercial Code). Please note: the term is calculated from the date of delivery, not from the date of the resolution. Missing the deadline is a serious problem, although the court may extend it if there are valid reasons.
The court can cancel the decision in full, change it (reduce the fine) or return the case for a new hearing. Important: in court, the burden of proof lies with the customs authority – it is the customs that must prove the fact of the violation, the guilt of the person and the legality of the penalty imposed.
What not to do
Some common mistakes we see in practice:
- Do not try to resolve the issue “on the spot” while drawing up the protocol. Any word you say can be used against you. Record your disagreement in writing and contact a lawyer before the case is heard.
- Do not ignore the protocol. Even if you think it is absurd, not appearing at the hearing and not appealing the decision means that you actually agree to the fine.
- Don’t confuse fuel and lubricants with criminal liability. If the amount of the hidden goods exceeds a certain threshold, it may be smuggling (Article 201 of the Criminal Code). This requires a completely different strategy and the mandatory involvement of a lawyer from the first minute.
Our team has experience in customs matters, including experience in the State Customs Service. If you have been issued a report on fuel and lubricants or received a fine order, send us your documents. We will analyze whether there are grounds for appeal and offer the best strategy.
Do you have a similar situation? Send us your documents and we will analyze your prospects for free.
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