Russia’s bunker suppliers complain against actions of Central Energy Customs
Bunkering companies have addressed Boris Titov, RF Presidential Commissioner for the Rights of Business People, with a complaint against the actions of the Central Energy Customs (CEC). As Vladimir Sergeyev, executive Director of Russian Association of marine and river Bunker Suppliers, the complaint was caused by the limits set by customs authorities – duty-free bunker supplied to the ships is limited by the amount needed to get to the nearest port indicated in the vessel’s sailing direction.
Bunker suppliers say that both the previous and the current legislation (Customs Code of Russia and Customs Code of the Customs Union) have had and still have the only criterion to limit duty-free bunker supplied to the ships as stores – its amount should not exceed the volume of ship’s nominal tanks (taking into consideration the remained fuel declared by a foreign flagged vessel entering the territory of the Customs Union).
However, law enforcement practice has changed from 2014. CEC started to consider the calls of transit vessels to the ports of the Russian Federation for bunker stores replenishment as the abuse of the right for its duty-free exports. From the beginning of 2015, after a long period of time since CEC was releasing foreign vessels with duty-free bunker it has been initiating re-inspections of bunker suppliers and claiming ‘arrears’ for customs duty on previously supplied bunker.
Bunker suppliers believe this is illegal under the laws in effect. The only document regulating the amount of exported bunker is the Order of the Federal Customs Service of Russia dated 29.12.2007 No 1665) “On approval of the procedure for certain customs operations under the customs regime applied to transportation of stores”. Clause 11 of the document says that bunker amount should not exceed the volume of ship’s nominal tanks.
Bunkering companies says this practice implications are seen in the fall of bunker sales at the port of Vladivostok. In January-May 2016 bunker sales in Vladivostok plunged about 3 times to 159,000 t against 460,000 t sold over the same period of 2015. The number of bunkering operations did not change considerably – 1,376 in 2016 against 1,408 in 2015.
The bunkering market of Russia is decreasing to the advantage of neighboring ports of other countries, says Vladimir Sergeyev. In 2014, Russian market of bunkering was about 17.5 mln t (some 3.5 % of the global market with Russia being among the fist countries in terms of the coastline length). In 2015, the bunkering market of Russia reduced to 14.8 mln t (a 15-pct decrease). Meanwhile, the port of Singapore, a competitor of Russia’s Far East ports, sold over 40 mln t of bunker; the port of Rotterdam, a competitor of Russia’s North-West ports – over 24 mln t. The year of 2016 is seeing a faster decrease of bunker sales in Russian ports.
Besides, profitability of bunkering operations amid the decreased bunker prices at neighboring ports of foreign countries is about $5-$10 pmt which is very low as compared with possible arrears claimed by customs authorities. In 2013-2016 average customs duty was about $250 pmt, in 2015 – about $90, in 2016 – about $50. “It is therefore clear that in this situation the majority of small, medium and even large companies seem to face bankruptcy proceedings in the result of unreasoned claim of huge arrears. The adverse consequences expected in the result include considerable reduction of jobs and budget allocations, deterioration of investment climate in the country”, says Vladimir Sergeyev.
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