Loss of patience. Ukraine avenges Belarus with duties for licensed export

Photo: argumentua.com

Ukrainian consumers can forget about how products from Belarus look for the next two and half years. From July 26 to the end of 2016 an import duty of 55.29% of the customs value will be imposed on confectionery, dairy products, electric lamps, refrigerators and fertilizers made in Belarus that are delivered to Ukraine. Import duties in the amount of 60.05% are being imposed on beer, rubber tires and certain components of refrigeration equipment.

The corresponding decision was made by the Inter-departmental Commission on International Trade under the Ministry of Economic Development and Trade based on the results of the investigation into the discriminatory actions of Belarus against Ukrainian suppliers.

Backlash

The measures of the Ukrainian government are a response to the change in the rules of export of certain types of goods to Belarus. As Capital wrote earlier, Belarus imposed licensed import of beer for half a year from May to November 2014 and from May 16 on Ukrainian confectionery goods. The main condition for the issuing of a license is introduction of quotas on the volumes of shipments and the demand that Ukrainian importers raise the minimum retail price by several times.

Ukraine’s main exporters of beer (Obolon, Carlsberg Ukraine, Sun InBev Ukraine and Private Brewery No. 1) agreed to the new conditions of supply to Belarus in order to minimize their losses. “A part of the products did not pass through customs at the border between Ukraine and Belarus due to licensing that unexpectedly took force and got stuck in temporary storage warehouses. As a result, every producer signed an agreement with the state concern Belgospischeprom (Belarus State Food Industry) in order to be issued a license,” said Head of the Obolon Corporate Communications Department Oksana Pyrozhok.

Confectioners did not take the bait of the Belarus side. “Ukrainian confectioners insist on setting prices that are 50-100% higher than those of producers in Belarus. At the moment, they are not exporting their products. There is no sense in selling any products to Belarus as nobody will buy them,” President of the UkrCondProm association Oleksandr Badyniuk complains.

Besides Ukrainian confectioners and brewers the agricultural sector is also suffering from the regulations set by Belarus. As of July 10 the export of Ukrainian potatoes to Belarus was banned.

Producers are rejoicing

Ukraine is a strategic market for Belarus producers of fertilizers, dairy products and salt. Domestic players rejoiced that goods of its foreign competitors will be more expensive and become non-competitive after the introduction of duties.

As Director of the CEC Ukraine consulting company Oleksandr Lengauer said, domestic enterprises can compensate their losses suffered due to reduction deliveries to Russia, eastern regions of the country and Crimea. “We have massive reserves. If the purchasing power increases, our market should grow three-fold at minimum. If the market volume in 2013 was US $3.3 bn, our dairy market could grow by US $10 bn,” says Chairman of the Board of the Union of Dairy Producers Vadym Chaharovskiy.

According to statistics of the State Fiscal Service, 46% of milk and cream (US $1.3 mn), 42.6% of condensed milk (US $3.9 mn), 40.18% of fermented products from Belarus were delivered in the period of January-June.

The import of tires valued at US $24.08 mn accounts for 6.24% of the total import from Belarus. “We have many alternatives that are duty-free and of higher quality,” an owner of a gas station on the outskirts of Kyiv Oleksandr Nikitin assures.

Ukraine is dependent on the supply of fertilizers from Belarus, but domestic players hope to increase output of this product in Ukraine. “We believe protectionist measures on the fertilizer market are justified and meet international practices,” says Head of the Legal Department at Ostchem (a conglomerate with the nitrogen chemical Group DF) Ihor Holchenko.

Director of the InfoIndustria information company Dmytro Hordiychuk believes Ukrainian producers will not be able to cover the impending deficit. The share of Belarus shipments of the NPK-Fertilizer company were around 30%. “The total consumption of the NPK market (comprehensive mineral fertilizers – Capital) in Ukraine reached 1 mn t. Ukrainian production in the total share of the market did not exceed 360,000-365,000 t,” says Hordiychuk.

Talks are on the horizon

Minsk was perturbed by Ukraine’s decision. “Belarus did not take any measures against Ukraine. Moreover, we do not agree that our measures are construed as unfriendly,” it is said in comments of the Press Secretary of the Belarus Ministry of Internal Affairs Dmitri Mironchik published by the Interfax-Zapad agency.

In the opinion of Belarus officials, licensing is absolutely not a ban or setting of quotas, but merely putting the market into order. “Ukrainian partners plan to levy duties exclusively on Belarus products to the tune of 55-60% until December 2016,” says Mironchik.
“Earlier, our business was obstructed and we, just like Europe, were extremely concerned and held consultations and negotiations, but made no concrete steps to defend our producers,” says Director of the Analytical Department of the AAA consulting company Maria Kolesnyk.

Minsk has the right to review the licensing conditions, Baldyniuk says, seeing as Ukraine’s measures against producers in Belarus will not be more painful than licensing for Ukrainian producers.

In the end, it is totally possible that the threat of imposing duties is nothing but hot air and such duties may not be imposed at all. According to information that Capital possesses that has been confirmed by four sources, today the delegation of the Ministry of Economic Development and Trade will travel to Belarus to “cut a deal” with BelGosPishchProm.