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Chemistry of discord. Why Tax Service blocks import of fertilizers to Ukraine?

Author : Mykyta Sinitsyn

While the domestic tax specialists and politicians decide whether it is possible to import mineral fertilizers to Ukraine, Ukrainian farmers are at risk of having problems with sowing
23:19, 8 January 2019

112 Agency

In December, the Ukrainian market of mineral fertilizers suffered a fever: the tax authorities on the state border of Ukraine suddenly began to halt the rail and road transports which imported mineral fertilizers. At first, cargo was stopped at the border with Belarus, then, by the middle of the month deliveries from several more directions were also blocked.

According to the deputy chairman of the All-Ukrainian Agrarian Council Mykhailo Sokolov, by December 30, half of the monthly import of mineral fertilizers to Ukraine was stopped at the border; that makes about 47 thousand tons, and this data was still incomplete.

By that time, the State Fiscal Service of Ukraine had already given an official explanation of the situation, but the cargo did not move any further. And the very explanation of the reasons for the blocking of imports by fiscal agents caused surprise among many market participants.

According to the SFS version, announced a week after the blocking of goods began, the reason for such situation was the suspicion of non-payment of customs duties and the lack of proper documents - certificates of origin of goods when importing fertilizers to the territory of Ukraine. At the same time, fiscal authorities emphasized that the subject of their interest was mineral fertilizers produced by the Russian Federation, subject to special anti-dumping duties.

In response to the comments of market participants about the retention of cargo fertilizers in all directions, and not just on the border with the Russian Federation, fiscal officials said they suspect re-export of mineral fertilizers from Russia under the guise of products made in other countries.

In the opinion of importers, repacking of Russian fertilizers will make them more expensive and therefore meaningless, and on suspicion of "re-export from the Russian Federation", lots of products of Georgian and Kazakhstani producers were detained.

Both sides could not convince each other, and the delay in the import of mineral fertilizers continued.

Import is crucial to farmers

So a compromise between SFS and fertilizer importers was not found and this prompted the importers to hold a press conference for the media on December 21, at which they would give their vision of the problem.

The participants of the press conference stressed that the situation with mineral fertilizers in Ukraine is at a low level, and that phosphate fertilizers are practically not produced in the country.

Production of mineral fertilizers at one of the largest enterprise - the Stirol, was stopped in 2014, and the enterprise turned out to be in the territory of Donbas uncontrolled by Ukraine. Production at the Severodonetsk Azot also stopped 4 years ago, resumed only in August 2018. The result was a shortage of mineral fertilizers, which in recent years has been increasingly satisfied by imports.

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It is not surprising that the import of fertilizers to Ukraine is growing every year: according to Serhiy Ruban, the head of the State Union of Agricultural Chemists of Ukraine, its level is 34% in 2017 and 40% in the current year.

At the same time, a special concern among domestic officials is linked with the growth of Russian fertilizer imports in Ukraine, which increased by 57% in 2018, which was announced in November by Igor Golchenko, adviser to the president of the Union of Chemists of Ukraine.

However, according to importers, along with Russian fertilizers, imports of mineral fertilizers from Kazakhstan, Uzbekistan, Georgia, Turkey, Lithuania, Belarus, and Poland are blocked.

The chairman of the All-Ukrainian Agrarian Council, Andriy Dykun, expressed doubts about the justification of the SFS statements regarding the fight against Russian fertilizer imports, citing as an example the absence of a ban on the import of ammonia produced at the Russian oligarch Rotenberg’s factories. On the contrary, according to Dykun, the lack of fertilizers is fraught with a lack of harvest in the agricultural complex of Ukraine, which brings up to 40% of the country's export earnings.

The expressions of Andriy Dykun did not go unnoticed, and at the end of the press conference he was attacked by unknown persons who inflicted several blows on his face.

The domestic policymakers noticed the situation that had arisen: People’s Deputy of Ukraine Serhiy Shakhov supported the actions of fiscalists, accusing the importers of defending commercial interests and lack of patriotism.

State Fiscal Service requires 43% of duties

According to the response of the State Fiscal Service to the request of 112.ua, they simply carry out the decision of the Interdepartmental Commission on International Trade No. AD-383/2018 / 4411-05 dated March 26, 2014 “On changing the antidumping measures regarding the import of ammonium nitrate into Ukraine from the Russian Federation."

According to the decision of the commission, in respect of mineral fertilizers and other products of the Russian Federation containing ammonium nitrate and nitrogen in terms of not less than 28% of dry matter in the amount, an anti-dumping duty of 42.96% is imposed.

The second requirement of the SFS to the mineral fertilizers delivered to Ukraine are certificates of origin or other documents about the origin of the goods. According to Part 3 of Art. 44 of the Customs Code of Ukraine, such documents must be provided when importing goods in respect of which anti-dumping barriers exist. In the absence of such documents, the import of goods, in this case, mineral fertilizers based on ammonium nitrate, is carried out only after paying anti-dumping duties. In the case of the availability of documents on the origin of the goods and doubts about their authenticity, the SFS can verify the authenticity of the documents provided.

"According to the results of laboratory studies conducted by the Department of Tax and Customs Examinations of the SFS, the selected samples confirmed the nitrogen content declared during customs clearance, lower than that specified in the Decision," the SFS said in response to the request.

Since, according to fiscals, the determining factor for applying the antidumping duty is nitrogen content of at least 28% in terms of dry matter, it turns out that the tested lots are not subject to barriers. Nevertheless, there are many problems with importers.

The first effect of the crisis

The commercial director of GROSSDORF and the chairman of the Union of Agricultural Chemists of Ukraine Serhiy Ruban told that the importers didn’t have official explanations of the reasons for the stops of goods at the border. Although the practice of blocking mineral fertilizers at the border is not new.

“We encounter something like this not for the first time: a similar situation occurred once when mineral fertilizers were produced in Uzbekistan. But even then, the SFS said that the checks were caused by some complaint about the violation of the rights of companies - exclusive suppliers of these fertilizers to Ukraine. This time, we have no explanations,” said Ruban.

According to him, the statement of fiscal agents about the fight against Russian fertilizers is surprising, since the cargoes of absolutely all manufacturers are blocked - Turkish, Lithuanian, Bulgarian and others, and the decision concerned all fertilizer groups.

According to the interlocutor of 112.ua, the difference in prices for ammonium nitrate from importers was about 10,000 hryvnia (357 USD), for national producers - 11,200 hryvnia (400 USD) per ton, before blocking at the border begins. According to Ruban, what is happening in the market seems to be a desire to create an artificial shortage or to establish a monopoly in the market.

“Despite Stirol’s falling out of the production chain, the full utilization of the existing production capacities is able to meet the domestic market’s needs for the most popular ammonium nitrate-based fertilizers by 100%. In carbamide sphere, production is still abundant. The problem is in phosphate fertilizers: their production is not enough, and we cannot live without imports. And in such conditions, the cargo of the mineral fertilizers is being stopped at the border. As a result, this frees up part of the market due to the absence of mineral fertilizers. According to our calculations, at least 40 thousand tons were blocked at the border. The blocking of wagon at the border costs several thousand hryvnias, that is, the loss from idle time during blocking is now estimated at millions of hryvnias. As a result, the market price of mineral fertilizers is risingt, at the moment the price of fertilizers based on ammonium nitrate has grown by 200-300 hryvnias per ton,” Ruban informed.

So, the intermediate result of the crisis was the increase in the market price of fertilizers. So far, the situation has not improved. However, now it is not a high season, and therefore the problem is not so big. But if the crisis drags on until spring the crop will be under threat.

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