Fraudulent Documentation Exposes Trade Circumvention Tactics

Ukrainian customs authorities have uncovered a significant case of trade fraud involving falsified certificates of origin for steel products. Speaking at the "Trade Wars: Art of Protection" conference organized by Ilyashev & Partners in Kyiv, Deputy Head of the State Customs Service Vladyslav Suvorov revealed that Malaysian authorities have confirmed suspicions of document forgery. "Currently, out of hundreds of requests we sent to Malaysia, we have received only 26 responses confirming that the certificates of origin that were provided during customs control... were not provided by the Malaysian Chamber of Commerce and Industry. And here there is a clear forgery of the country of origin," Suvorov stated. The investigation has exposed what appears to be a deliberate attempt to circumvent trade restrictions and anti-dumping measures, likely targeting steel products of Chinese origin. This revelation highlights the increasingly sophisticated methods being employed to evade international trade regulations and the growing challenges faced by customs authorities in verifying the authenticity of import documentation.

Suspicious Import Patterns Trigger Investigation

Ukrainian customs officials became suspicious after noticing dramatic shifts in steel import patterns during 2024. Suvorov noted a sharp decrease in imports of coated rolled steel products declared as Chinese origin, coinciding with an extraordinary increase in supposedly Malaysian-sourced products of identical specifications. The timing of this shift raised immediate red flags, as it followed closely after the implementation of protective trade measures against certain steel products. "At the same time, before the Interdepartmental Commission on International Trade made a decision regarding such goods of Malaysian origin, there were none in 2023. We understand that the market of origin is being manipulated here," Suvorov explained. This abrupt change in trade flows, with no previous history of such imports from Malaysia, presented a textbook example of potential trade circumvention, a practice where goods are routed through third countries to avoid duties, quotas, or other restrictions imposed on their actual country of origin.

Substantial Volumes Highlight Scale of Operation

The scale of the suspected fraudulent operation is substantial, with Suvorov revealing that approximately 22,000 metric tons of rolled steel products and 1,500 metric tons of steel bars allegedly of Malaysian origin were imported into Ukraine during 2024. These significant volumes underscore the potential economic impact of such trade fraud, not only in terms of evaded duties and taxes but also regarding market distortion and unfair competition for domestic producers. The sudden appearance of Malaysian steel products in such quantities, when previously there had been none, further reinforced suspicions that these goods were likely of Chinese origin being misrepresented to avoid trade restrictions. The investigation has brought attention to how trade circumvention can rapidly shift substantial volumes of products through alternative channels when primary routes face regulatory barriers, creating challenges for enforcement agencies attempting to maintain fair trade practices.

International Verification Process Underway

The Ukrainian State Customs Service has initiated a comprehensive verification process, sending "hundreds of requests" to Malaysian authorities to authenticate the certificates of origin presented during customs clearance. This international cooperation represents a critical component of modern customs enforcement, particularly in combating sophisticated cross-border fraud schemes. "The requests to Malaysia are sent within the framework of the authority to verify certificates of origin. The responses received have already been sent for post-audit," Suvorov explained. While only 26 responses have been received thus far, all have confirmed Ukrainian suspicions of document forgery. The relatively slow response rate highlights the challenges of international customs cooperation, where differences in bureaucratic processes, priorities, and resources can impede timely verification efforts. Nevertheless, the confirmation from Malaysian authorities provides crucial evidence supporting further enforcement actions.

Legislative Amendments Strengthen Enforcement Capabilities

Ukraine has taken proactive steps to combat trade fraud through recent legislative amendments that came into effect in October 2024. These changes have empowered customs authorities with enhanced verification tools when suspicions arise regarding the authenticity of origin documentation. "By amendments to the legislation that came into force in October 2024, customs, if there is information about the falsification of certificates of origin, may require additional documents confirming the production of such goods in a specific country and the logistics of their delivery to Ukraine before registration," Suvorov noted. This shift from post-clearance verification to pre-clearance documentation requirements represents a significant strengthening of Ukraine's customs enforcement capabilities. By requiring importers to provide comprehensive evidence of production and logistics before goods can clear customs, authorities have created a more robust barrier against fraudulent trade practices.

Criminal Investigation Launched

The seriousness of the alleged fraud has prompted involvement from law enforcement agencies beyond customs authorities. In October 2023, the National Police of Ukraine initiated a criminal investigation focusing on the suspected forgery of certificates of origin for steel fasteners and coated carbon steel rolled products supposedly from Malaysia. This escalation to criminal proceedings indicates the gravity with which Ukrainian authorities view trade document falsification, treating it not merely as a regulatory violation but as potential criminal fraud. The involvement of police resources suggests authorities believe the scheme may involve organized criminal elements rather than isolated regulatory infractions. The criminal investigation will likely examine the entire supply chain, from document preparation to customs clearance, seeking to identify all parties involved in the alleged forgery operation.

Global Context of Trade Circumvention

This case emerges against a backdrop of increasing global trade tensions and proliferating protective measures, particularly in the steel sector. As countries implement tariffs, quotas, and anti-dumping duties to protect domestic industries, incentives for circumvention have grown substantially. The steel industry has been particularly affected by such measures, with major producing countries facing restrictions in numerous markets worldwide. China, as the world's largest steel producer, has seen its exports subject to various trade barriers, creating powerful economic incentives for circumvention schemes. This Ukrainian case illustrates how trade restrictions in one channel can quickly lead to the development of alternative pathways, often involving document falsification or transshipment through third countries. The sophisticated nature of these evasion tactics presents significant challenges for customs authorities globally, requiring enhanced international cooperation and intelligence sharing to effectively combat such practices.

Market Implications and Industry Concerns

The discovery of this alleged fraud scheme has significant implications for Ukraine's steel market and domestic producers. Fraudulent imports that evade proper duties and restrictions can artificially depress market prices, creating unfair competition for compliant domestic and foreign suppliers. Ukrainian steel producers have long advocated for stronger enforcement against circumvention tactics, arguing that such practices undermine the effectiveness of trade defense instruments designed to ensure fair competition. The case also raises broader questions about the integrity of international trade documentation systems and the potential need for more secure, possibly blockchain-based certification methods that would be more resistant to forgery. As investigations continue and more responses from Malaysian authorities arrive, the full scope of the scheme and its impact on the Ukrainian steel market will become clearer, potentially leading to retroactive duties or penalties for importers found to have submitted fraudulent documentation.

Key Takeaways:

• Ukrainian customs authorities have uncovered a major trade fraud scheme involving forged Malaysian certificates of origin for steel products, with Malaysian officials confirming that 26 certificates presented to Ukrainian customs were not issued by the Malaysian Chamber of Commerce also Industry

• Approximately 22,000 metric tons of rolled steel products also 1,500 metric tons of steel bars supposedly from Malaysia were imported into Ukraine in 2024, despite no such imports existing in 2023, strongly suggesting an attempt to circumvent trade restrictions on Chinese steel through falsified documentation

• Legislative amendments enacted in October 2024 have strengthened Ukrainian customs enforcement by allowing officials to demand additional documentation proving production location also logistics routes before clearing suspicious shipments, while a criminal investigation launched by the National Police in October 2023 is examining the forgery operation