Ukraini­ans smug­gle Ap­ple de­vices from abroad to save money

Kyiv Post Legal Quarterly - - News - By kras­nikov@kyiv­post.com

De­spite av­er­age salaries of only $2,000 per year, many Ukraini­ans still long to pos­sess an iphone.

But while U.S. cus­tomers can buy a new iphone 6S for $549, Ukraini­ans have to pay $730 for the same model at an of­fi­cial dis­trib­u­tor’s store. So many Ukraini­ans opt for cheaper, smug­gled Ap­ple gad­gets.

Hand-held elec­tron­ics are easy to trans­port and pound-for­pound are more prof­itable than other goods. As a re­sult, de­vices such as Ap­ple smart­phones, tablets and watches are pop­u­lar with Ukrainian smug­glers.

But even though the smug­gling gives Ukraini­ans the pos­si­bil­ity to buy a de­vice they would prob­a­bly put off buy­ing due to its high price, it’s the con­sumer who ends up with­out any guar­an­tee of the gadget’s proper func­tion­ing in the fu­ture.

Most de­vices are ‘gray’ The vol­ume of smug­gling of Ap­ple de­vices is vast. Just in the last seven months, from Jan­uary to July, the State Fis­cal Ser­vice recorded 41 cases of vi­o­la­tions of cus­toms pro­ce­dures while such de­vices were brought into the coun­try. Over this pe­riod it con­fis­cated 435 smart­phones worth Hr 2.5 mil­lion ($100,000) - and all of them were Ap­ple de­vices.

Back in 2014, the State Fis­cal Ser­vice seized 7,506 units of var­i­ous makes of smart­phones worth Hr 15 mil­lion ($600,000). Over 1,300 units worth Hr 14 mil­lion ($560,000) were con­fis­cated in 2015. And over the last year, the au­thor­i­ties have searched at least six dif­fer­ent shops and ar­rested Ap­ple gad­gets worth over Hr 10 mil­lion ($400,000).

How­ever, ex­perts say the scale of the il­le­gal trade is even larger than that.

Viktor Sholoshenko, the mar­ket­ing direc­tor at Cit­rus, a Ukrainian chain of elec­tron­ics shops, claims that most in­ter­net re­tail­ers in the coun­try sell “gray” gad­gets, and those pro­duced by Ap­ple are in high de­mand.

While it has in-coun­try op­er­a­tions in Ukraine’s neigh­bors, Rus­sia and Poland, Ap­ple does not work di­rectly with Ukraine. In­stead, the tech com­pany has cer­ti­fied two firms to dis­trib­ute the com­pany’s de­vices to lo­cal ven­dors. These are ERC and ASBIS.

But Sholoshenko says roughly 85 shops out of 95 probed on the in­ter­net of­fer iphones that are not autho­rized by the of­fi­cial dis­trib­u­tors. It’s the same story with off­line sales.

“Ap­ple and of­fi­cial dis­trib­u­tors would never cer­tify the nu­mer­ous stalls that sell iphones in open mar­kets or in­side un­der­ground metro pas­sages,” he said.

Sholoshenko added that only Ap­ple can know the real pic­ture of il­le­gal sales of its gad­gets in Ukraine, as it knows how many de­vices it has sold to a par­tic­u­lar coun­try and how many of them have been ac­ti­vated there.

Ap­ple Inc. did not re­ply to a voice mes­sage and three e-mails seek­ing com­ment.

Cor­rup­tion is in­volved Yu­lia Maru­shevska, the head of Odesa Oblast’s cus­toms ser­vice, be­lieves that a huge amount of il­le­gal Ap­ple gad­gets are avail­able on the Ukrainian elec­tron­ics market. She knows at least two ways of im­port­ing com­modi­ties into Ukraine dodg­ing taxes: sim­ple con­tra­band, and bring­ing in goods in vi­o­la­tion of in­tel­lec­tual prop­erty rights. But both op­tions, ac­cord­ing to her, def­i­nitely in­volve cor­rup­tion. “No­body would smug­gle in just 100 phones. They bring in batches – thou­sands,” Maru­shevska told the Kyiv Post. “That can’t go un­no­ticed. It is clear that there must be some agree­ments.”

Maru­shevska said that the so­lu­tion would be to en­sure the proper work of Ukraine’s bor­der ser­vice and in­ter­nal au­thor­i­ties.

“(This means) stop­ping con­tra­band at the bor­der and, at the same time, con­tin­ual pun­ish­ment in­side the coun­try – seiz­ing this prod­uct from the market and shut­ting down small shops,” she said.

A Kyiv Post source, whose com­pany works with of­fi­cial dis­trib­u­tors but who wished to stay anony­mous be­cause of fears that au­thor­i­ties would search his com­pany, said that “more than 60 per­cent of Ap­ple prod­ucts are shady” and that most of the de­vices “get in Ukraine through kick­backs” on the bor­der.

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