Customs is for railway

Andrei Belyaninov, head of Russia’s Federal Customs Service (FCS), in his interview to ‘Rossiyskaya Gazeta’ stated the necessity to redirect foreign trade cargo flow from motor transport to railway. 

“ In the sector of motor transportation excess profit is made by lots of carriers not willing to think about national interest,” – FCS head said. – Motor transportation is now being developed at the expense of the domestic economy. Let’s take the railway – it bears numerous social responsibilities on a nationwide scale while motor carriers are not responsible for anything and live in easy street. It is an evident imbalance».

According to Belyaninov, it is necessary to prohibit trucks with 40-feet containers enter Russia at all having redirected the cargo the railway. “At least, it will enable Russian Railway to cope with more social issues. Besides, the air will become cleaner and the load on the road bed will decrease.

Indeed, when speaking about containerized cargo we see that the share of container transportation by railway has increased considerably during the recent years. To a great extent it is explained by large batches of containerized cargo supplied mainly for car assembling companies. With such bulk deliveries it is more profitable and convenient to transport containers by railway. 

According to experts’ estimates, Russia’s largest railway container carriers today are Transcontainer and FESCO Transportation Group.

Nevertheless, container trains arrive in Russia not only from Russian ports (like St. Petersburg) but to a great extent from foreign ports (Muuga, Riga). For example, in October 2012 the first container train (with Mitsubishi components) left Estonian port Muuga for Kaluga. In 2013 this line is expected to carry 200 containers per week which is about 3 container trains. 

In the result we see that despite closeness of Russian ports (St. Petersburg, Ust-Luga) to Moscow and Kaluga (with some exceptions, see below), logistic schemes cover foreign terminals.

As the market players explained PortNews IAA, this should be attributed to the fact that customs clearance of cargo crossing RF border by railway towards the Central Federal District is the responsibility of the Central Customs Administration (CCA). As for the cargo arriving in Russian ports of the Gulf of Finland – they are processed by the Baltic Customs (BC). The policy of CCA and BC are quite different, being tougher at the latter one where risk profile is actuated more frequently. Therefore it is more preferable to carry cargo from the ports of the neighboring states in order to avoid the Baltic Customs.

The situation may become even worse with Russia's entry into the World Trade Organization. The accession resulted in cancellation of earlier discounts for cargo transportation towards port stations as compared with those towards border crossings. The tariffs are to be calculated on the basis of the distance now. And the distance is not always an advantage of Russian ports against foreign ones. For example, railway link between Riga Krasta and Kaluga is 906 km long while that between Luzskaya station and Kaluga is 1,007 km. However the distance of these stations from Moscow is the same (the difference makes only 5 km). 

As of the end of 2012, railway tariff for cargo transportation from Ust-Luga to Moscow is about $1,000 less per one container as compared with transportation from a foreign port. Taking into consideration that freight costs are almost the same, the competitive advantage of the Russian port was evident, and partial redirection of the container flow (which is a high paying freight) could be expected in favor of the national. This advantage will be lost in compliance with WTO requirements. 

So, “thanks” to the policy of the Customs Service and to WTO accession, the strategic aim to redirect the majority of Russia’s foreign trade cargo may fail. According to the market players, Russia may lose up to one forth of the cargo flow which will go to the ports of the neighbouring states. Therefore, before applying administrative measures to transfer containers to the railway it would be better to solve the above problems. All the more so, as part of them is within the competence of the authority headed by Belyaninov himself.

Vitali Chernov