Fine of Nearly 1 Million UAH Overturned: How We Defended an Agribusiness Executive in a Dispute with Customs

The Axel Legal Team Successfully represented the head of an agricultural company in a dispute with customs authorities regarding liability for customs violations. The customs authority’s decision was overturned in two instances, and the fine of nearly 1 million UAH was fully waived.

We’re sharing our practical experience: what the customs authorities’ claim was, how we built our defense, and what lessons every exporter should take away from this case.

The Essence of the Dispute

The exporting company shipped sunflower seeds using EUR.1 certificates of origin, which entitle the exporter to a preferential export duty rate.

Customs concluded that the preferential rate had been applied improperly, resulting in a reduction in customs duties of more than 311 thousand UAH. On this basis, the customs authority held the company’s director liable under Article 485 of the Customs Code of Ukraine and imposed a fine of 300% of the amount it considered unpaid—nearly 1 million UAH.

What was unique about the case?

Customs effectively held the company’s director responsible for circumstances involving other participants in the supply chain. The claims were based on doubts regarding the counterparties’ documents and certain data from tax databases—that is, on factors beyond the exporter’s control.

At the same time, the company acted with the utmost transparency and in good faith:

• A professional customs broker was engaged to handle the customs clearance for the export;
• the documents were submitted to the customs authority in accordance with established procedures;
• The EUR.1 certificates were accepted by customs and processed without any issues.

In other words, at the time of export, the company had no reason to doubt the legality of its actions.

The Defense's Position

The key argument we have consistently advanced in court is that the elements of the offense under Article 485 of the Customs Code of Ukraine require intent, and it is the customs authority that bears the burden of proving it—not the manager, who must rebut the allegations of guilt.

The regulatory authority’s mere doubts regarding the counterparties’ documents or discrepancies in the tax bases are not sufficient to establish liability. The customs authority had to prove that the company’s director:

• acted intentionally;
• was aware that the documents were false;
• intended to unlawfully reduce customs duties.

Customs did not prove any of these circumstances. On the contrary, the case file confirmed the company’s good-faith conduct at all stages of customs clearance.

Result

The court of first instance agreed with the defense's position: the customs authority's decision was overturned, and the case was dismissed due to the absence of the elements of an offense.

Customs filed an appeal, but the appellate court dismissed it and upheld the lower court’s decision.

As a result, the agribusiness executive was fully exempted from a fine of nearly 1 million UAH, and the ruling on the customs violation was definitively overturned.

Why This Is Important for Exporters

This case study highlights several practical takeaways for businesses involved in exporting:

1. Claims against business partners are not your fault. The mere fact that a regulatory authority has doubts about the documents of other participants in the supply chain does not automatically imply that the head of the exporting company is at fault.

2. The customs authority must prove intent. Liability under Article 485 of the Customs Code of Ukraine does not arise “automatically” as a result of the assessment of additional duties. Without proven intent on the part of an official, the elements of the offense are not present.

3. Good faith must be established in advance. Engaging a professional broker, proper documentation, and the absence of customs objections at the export stage—all of these became compelling arguments in court. The more thoroughly a company documents its processes, the stronger its position will be in the event of a dispute.

4. It is important to mount a vigorous defense. In such disputes, it is crucial to demonstrate not only that the documentation was prepared correctly, but also that the official acted without intent or personal fault—and to do so systematically, starting at the first instance.

Axel Legal continues to represent businesses in disputes with tax and customs authorities—from risk analysis and preparing legal arguments to providing full litigation support.

Author of the article: Vitaliy Bodiuk