Foreign trade between Ukraine and Poland: why do numbers not add up?

This is stated in an article by the acting Head of the State Customs Service of Ukraine Serhii Zviahintsev.

One of the arguments repeatedly cited to support large-scale smuggling of goods is the excess of the value of foreign exports over the value of the corresponding Ukrainian imports from certain countries.

With the border blockade in place, the focus of attention has shifted to Ukrainian-Polish trade relations, and misconceptions about illegal border crossings are now largely based on the volume of mutual trade with this neighbouring country.

Thus, according to the European Statistical Agency Eurostat, in 2023, Polish exports of goods to Ukraine amounted to USD 12.3 billion. At the same time, according to the official data of the State Customs Service of Ukraine, imports of goods from Poland amounted to USD 6.6 billion. This is a difference of more than USD 5 billion, which can sometimes be called "smuggling" or "black" or "gray" imports.

It is noteworthy that the situation is similar with all EU countries bordering Ukraine: Romania (exports - USD 2.7 billion, imports - USD 1.6 billion), Slovakia (exports - USD 2.0 billion, imports - USD 1.8 billion) and Hungary (exports - USD 3.2 billion, imports - USD 1.6 billion).

Discrepancy also has a flip side of the coin

For some reason, however, no one mentions other countries that are members of the European Customs Union, which have consistently shown exports to Ukraine that are lower than their corresponding quantity of Ukrainian imports.

According to similar Eurostat data for 2023, these countries are:

Italy - exports to Ukraine amounted to USD 1.8 billion, and Ukraine's imports from Italy were USD 2.3 billion;

France - exports to Ukraine amounted to USD 1.2 billion, and Ukraine's imports from France were USD 1.8 billion;

Bulgaria - exports to Ukraine amounted to USD 1.0 billion, and Ukraine's imports from Bulgaria were USD 2.2 billion;

Greece - exports to Ukraine amounted to USD 0.9 billion, and Ukraine's imports from Greece were USD 1.4 billion;

The situation is similar with Spain, Belgium, Portugal, Ireland, Luxembourg, Malta, and Sweden, where the volume of mutual trade is somewhat lower.

Export data includes goods of both domestic and foreign origin, while import data is generated exclusively by country of origin

Returning to Poland, in 2023, according to the customs statistics of Ukraine, goods worth USD 13.7 billion were exported from Poland to Ukraine "by country of dispatch", which already correlates with Eurostat data, including by weight (6.6 million tonnes of Polish exports versus 6.7 million tonnes of Ukrainian imports from Poland).

Of these, goods from Poland amounted to only USD 2.7 billion. Another USD 3.7 billion were goods where the country of origin of the EU or the country of origin "unknown" was declared. According to the internationally accepted methodology, these goods are considered Ukraine's statistical imports from Poland.

Additionally, in 2023, Ukraine exported goods from other EU countries worth USD 2.6 billion and USD 4.7 billion worth of goods from third countries, which are accounted for in Ukraine's imports by their countries of origin.

The main reason for the discrepancy is that according to the methodology, statistical exports consist of exports of goods of domestic origin and re-exports of goods originating in third countries.

For example, when exporting goods from Poland to Ukraine, shipments of goods from Poland are considered, regardless of the country of origin declared (Poland, China, Germany, etc.).

At the same time, import data is formed by the country of origin (production) of goods, not by the country of dispatch. In other words, goods originating in China but shipped from a warehouse in Poland are accounted for in Ukraine as goods from China.

Today, electronic services allow an entrepreneur, for example, from France, to arrange the export of goods to Ukraine in Poland, practically at the border, without leaving his office. At the same time, in the EU, this product will be accounted for as an export from Poland to Ukraine - at the place of customs declaration, while in Ukraine it is considered an import from France according to the country of origin.

Other objective reasons for discrepancies in statistics

Another reason for the discrepancies in customs statistics is the different currencies in which the data is compiled. In the EU countries, it is the euro, in Ukraine - the US dollar. Differences in currency conversion significantly affect statistical indicators.

The significant amount of humanitarian aid sent to Ukraine is an equally important factor in the discrepancies. In the EU countries, including Poland, humanitarian aid is often registered by filing a customs declaration for export to Ukraine. And in Ukraine, it is done by filing a simplified customs declaration, which does not even provide for information on a clear nomenclature of goods and their value, and therefore is not taken into account in statistics on imports of goods from "donor countries" such as Poland or the Baltic states.

So there is no "glaring" discrepancy between the customs statistics of Ukraine and Poland. There is a lack of awareness of these issues.

In general, the interstate comparison of customs statistics on mutual trade and the identification of the causes of discrepancies between them is a whole range of measures that requires significant time spent by qualified specialists. Therefore, only a limited number of customs offices around the world have conducted such comparative data analysis.

The place of smuggling in the discrepancy between customs statistics

The number of attempts to smuggle goods on both sides of the border detected by customs officers leaves no doubt about the existence of smuggling flows.

The State Customs Service of Ukraine is constantly convincing the customs authorities of the EU member states of the need for a comprehensive approach to combating "goods smuggling". We rely on the exchange of preliminary customs information. After all, obtaining online information about cargoes and vehicles that have cleared customs in the country of departure and are heading to Ukraine is of great importance for risk analysis and combating customs offenses.

So far, there has been no significant progress in making a systemic decision at the European Commission level to establish such an exchange regularly. At the same time, with the participation of European Commission projects, a pilot project on the exchange of preliminary customs information with Romania was implemented in 2023.

In addition, we are cautiously optimistic that such an exchange with Poland will be established in the near future. The creation of tools for this was discussed during a recent meeting of the customs administrations of Ukraine and Poland.

At the same time, it should be noted that the economic basis for the illegal movement of goods is, in most cases, the possibility of selling such products on the domestic market at a lower price than those imported legally. Therefore, effective control over the legality of the origin and movement of goods in the domestic market is the way to make the smuggling of goods less economically viable.

A specially created working group of customs and tax authorities is working in this direction, monitoring the financial and business operations of taxpayers and assessing their tax risks. Such comprehensive measures are aimed at preventing the minimization of tax liabilities within the country, including when selling imported goods.

Serhii Zviahintsev, Acting Head of the State Customs Service of Ukraine