Grain exports will be limited through duties

Restrictions on grain exports will remain in Ukraine. Instead of quotas, which expire on March 31, export duties will be introduced, First Deputy Head of the Presidential Administration Irina Akimova said yesterday. The introduction of duties is also beneficial for grain traders, and, in addition, unlike quotas, it will not cause WTO claims, experts say.

The fact that duties on grain exports will be introduced in Ukraine was announced yesterday by First Deputy Head of the Presidential Administration Irina Akimova. According to her, President Viktor Yanukovych demanded that after March 31, grain export quotas be replaced with “customs measures.” “Since last year, the President has been discussing with the government about the advisability of grain export quotas, which are distributed non-transparently,” Irina Akimova emphasized.

Quotas for grain exports in Ukraine have been in effect since October last year, and expire on March 31. The leaders of grain exports of previous years - Cargill, Toepfer, Louis Dreyfus, Soufflet Group and Nibulon - were not able to take advantage of the distribution of quotas. The reason for this was the refusal of the Ministry of Agrarian Policy to confirm the availability of grain volumes for export (see Kommersant of January 28).

The government has already agreed on a bill “On Amendments to the Tax Code and Approval of Export Duty Rates” (a copy is available to Kommersant), which proposes to introduce duties. For wheat, a mixture of wheat and rye, and spelled, it will be 9% of the customs value, corn - 12%, barley - 14%. On March 21, the document was approved by the Cabinet of Ministers, but already on March 23, the government instructed First Deputy Prime Minister Andrei Klyuyev and First Deputy Minister of Agrarian Policy Nikolai Bezugloy to “further analyze the issue regarding the possible negative consequences” of the introduction of duties. Yesterday it was impossible to get comments from Messrs. Klyuev and Bezugly.

The bill will most likely be submitted to the Verkhovna Rada by the end of the week, says Grigory Kaletnik, head of the parliamentary committee on agrarian policy and land relations. He did not rule out that, due to its particular importance, the document could be put to a vote as a whole as early as next Monday.

Market participants also agree with the introduction of export duties. Taking into account the difference between prices on the foreign and domestic markets, grain traders will be able to significantly increase export volumes, says Yuri Gordeychuk, general director of the Volary company. Unofficially, grain market participants say that the proposed export duties allegedly correspond to the size of the bribes that companies were forced to pay to officials to obtain export quotas. If export duties are introduced, grain traders will shift the additional financial burden onto the shoulders of agricultural producers, President of the Ukrainian Agrarian Confederation Leonid Kozachenko is sure.

The authorities are hesitant to allow free exports, fearing rising prices for agricultural products and food products - bread, meat, milk, the Ministry of Agrarian Policy explained yesterday. To avoid this, Minister of Agrarian Policy Nikolai Prisyazhnyuk previously proposed extending the quota regime until the end of the marketing year (June 30). “If export restrictions are lifted, prices on the domestic market will be brought up to world prices, which could lead to an increase in grain prices by an average of 20-25%,” agrees Leonid Kozachenko. Feed wheat in Ukraine now costs an average of $270/t, while on the world market it is about $330/t, says Sergei Nalivka, director of the consulting company AAA. “The difference in prices between the domestic and world grain markets exists only due to artificial restrictions on exports; now there is enough grain in the country to meet the needs of the domestic market until the end of the calendar year,” Mr. Kozachenko emphasized.

The introduction of export duties in Ukraine, unlike quotas, is not a violation of WTO norms, lawyers say. “Unlike other goods for which Ukraine undertook to liberalize export duties upon joining the WTO, there are no such restrictions on grains,” says Natalya Mykolskaya, senior lawyer at the law firm Vasil Kisil and Partners. According to Oleg Malsky, a partner at the law firm Astapov Lawyers, the key point may be the duty rate: “If export duties are introduced at 150%, such a rate is interpreted as a hidden export ban. But the rates proposed by the Cabinet of Ministers look acceptable.”

Alena Golubeva, Yuri Panchenko

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