Why is it easier to export scrap metal to the EU?

The situation with the export of ferrous scrap from Ukraine can radically change. After all, as it turned out, the export duty rate for exporting this raw material to the European Union countries is much lower than EUR 30 per ton.

Last year, after prolonged confrontation of various groups of influence, in Ukraine it was radically changed the procedure for the export of ferrous scrap. Instead of an obscure and corrupt system of quotas, there was introduced, as if, a uniform export duty rate of 30 euros per 1 ton. It proved to be obstructing, the supply of scrap metal to foreign markets was almost stopped. However, as it turned out earlier this week, the situation can change quickly enough.

The Vice Prime Minister for European and Euro-Atlantic Integration of Ukraine Ivanna Klimpush-Tsintsadze told in an interview with the agency "Interfax" that the law adopted by the Verkhovna Rada of Ukraine on extending the duty fee for exporting scrap of ferrous metals in the amount of 30 euros for 1 ton will not apply to exports to the European Union member countries.

"As for the scrap metal the situation is as follows: even during the additional duty of 30 euro/ton, exports to EU countries were carried out in accordance with the" Association Agreement Ukraine-EU "with a duty of 9.5 euro/ton," she said.

There was an impression that this statement was a surprise for industry experts and market participants.

They began to discuss the statement of the official in social networks, expressing doubts that this rule applies in practice.

According to the Deputy Prime Minister, the increased duty will not be applied in the future, since the Association Agreement is an international treaty and has greater legal force than the domestic law. Thus, this law does not violate the norms of the free trade zone.

On July 13, 2017, the Verkhovna Rada prolonged the effect of the increased export duty on scrap of ferrous metals in the amount of 30 euro/ton for another year. The document has not yet been signed by the President of Ukraine Petro Poroshenko. But given the circumstances discovered, British Scrap Metal Portal decided to find out whether this rule is being applied in practice.

According to the State Statistics Service (GosStat) of Ukraine, in 2016 272.6 thousand tons of ferrous scrap was exported from our country for $ 48.6 million. In tonnage - it is by 77.5% less than in 2015. It is noteworthy that almost all the volume was delivered not to the EU countries, where a lower duty was applied, but to Turkey. This is a traditional market for Ukrainian metal scrap dealers. The reason for this geographical vector may be that the main deliveries were made even before the introduction of the increased duty - in the first half of 2016.

Why did not the European Union become a new destination for Ukrainian scrap metal? Interviewed metal scrap dealers could not answer. "Since the" Association Agreement" was adopted, it took so long that we managed to forget its conditions," the head of one of the scrap collecting companies joked to the question of the representative of British Scrap Metal Portal http://metalscraps.co.uk .

Metallurgical holdings also reacted with restraint to our questions. "We've heard similar statements before, and we are finding out how this can work in practice," said Dmitry Kisilevsky, the "Interpipe" director of corporate relations.

Let us recall that from January 1, 2016, the economic part of the "Association Agreement between Ukraine on the one side and the European Union, the European Atomic Energy Community and their Member States on the other side" (hereinafter referred to as the Agreement) is temporarily applied. According to this document, a transition period for a term of 8 years of reduction to zero level of export duty on ferrous scrap is established.

For 2017, the export duty rate is set at 9.5 euros per ton on the basis of calculations that were received by the State Fiscal Service in the letter of the Ministry of Economic Development.

But can this rate be applied in practice?

"According to the third part of Article 1 of the Customs Code of Ukraine, if the international treaty of Ukraine, the consent to be bound by the Verkhovna Rada of Ukraine, establishes other rules than those provided for by this Code and other laws of Ukraine, the rules of the international treaty of Ukraine apply.

"Thus, when exporting waste and ferrous scrap http://metalscraps.co.uk/scrap-steel-b587.html , originating from Ukraine to EU member states, the requirements of the Agreement are applied," the State Fiscal Service said in the response.

"If the certificate "Eur.1" on the origin of the goods is issued, the provisions of the Association Agreement should be applied," said Vladimir Bubley, the president of the association "UAVtorMet".

Such a document can be issued in a few working days.

The State Fiscal Service confirms that the Agreement defines several requirements for applying reduced export duty rates:

 the goods must be of Ukrainian origin and fall under the rules of origin set forth in Protocol 1 to this Agreement (Article 26 of Chapter 1 " National treatment and access of goods to markets" of Section IV "Trade and Trade Related Matters" of the Agreement)

the preferential treatment provided for in this Agreement applies only to goods transported directly between the European Union and Ukraine (Article 13 of Protocol 1 "On the definition of the concept of "origin of goods" and the methods of administrative cooperation" of the Agreement).

Taking into account the foregoing, the State Fiscal Service explains, "as of January 1, 2016, for waste and scrap of ferrous metals, originated from Ukraine when exporting them to the EU member states is set by the rates of export duty calculated in accordance with the schedule established in Annex IC to this Agreement".

In 2018, the rate of duty for the supply of scrap in the EU will drop to 7.5 euro per ton.

And according to the "Schedule of cancellation of export duty", published on the website of the State Fiscal Service, since 2024 it will be zero.

The European Union has never been a priority for the export of ferrous scrap from Ukraine. The main buyers of Ukrainian scrap were Turkey and Moldova (Transnistria). Only in 2015 Gosstat recorded a relative variety of deliveries: to Poland, the UK, Slovakia, Estonia, Latvia and the Netherlands. In the European Union, by the end of 2016, only 64.3 million tons of steel were produced in electric steelmaking furnaces (Worldsteel data). According to the accepted standards of raw material consumption, this could require about 70 million tons of scrap (excluding hot briquetted iron and liquid iron). However, the EU is a net exporter of scrap. The Worldsteel estimated that in 2016, 28.9 million tons of scrap were imported to the EU countries, and 43.7 million tons were exported. Note that one of the two largest exporters is the UK - 8.1 million tons. And this state, as you know, is preparing to leave the EU.

Despite the apparent redundancy of the EU market, some domestic business groups already have experience in the procurement of scrap metal in European countries and its supply to local consumers. For example, the group "KVV" after buying a metallurgical plant in Latvia (the story ended unsuccessfully, the company was nationalized) tried to develop its own scrap collection network. The PJSC "Keramet" even now operates procurement sites in Poland and Hungary. Therefore, Ukrainian scrap collectors are able to find consumers in Europe.

Even without taking into account the possible appearance of "schemes" of re-export to Turkey or Moldova (Transnistria).

"This once again shows that bills prepared in a hurry rarely achieve their full value, having more PR effect. To protect the interests of specific industries, it is necessary to have quality cooperation of all stakeholders, an accurate statement of the problem and a painstaking legal analysis," complained anonymously one of officials of the Ministry of Economic Development and Trade of Ukraine.

But for metallurgy lobbyists such a situation is an occasion for the resumption of a comprehensive struggle for the interests of domestic industrialists.

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