De-shadowing of exports in Odesa region: Nibulon says it was difficult, but now it is even profitable

Five months have passed since the Odesa Regional Military Administration made an unexpected decision to de-shadow grain exports at the height of the season, within a tight and even somewhat rigid timeframe. By his order, the head of the Odesa Regional Military Administration, Oleg Kiper, obliged exporters to confirm the origin of the goods before the ship leaves Ukraine, not afterwards as it was before. The vast majority of market players did not like this, and some still do not like it. UNN asked one of the country's largest agricultural holdings, Nibulon, whether the new export rules are really so strict that they make it impossible for farmers to work.

Details

"Nibulon has been a direct participant in grain exports for many years. Over the 32 years of its operation, Nibulon has invested more than USD 2.3 billion in the Ukrainian economy. However, with the outbreak of Russia's full-scale war against Ukraine, the company's economy suffered significant losses due to export restrictions caused by the blockade of Ukrainian ports in the Black and Azov Seas by the Russian Navy. Up to 70% of Ukrainian exports and a significant portion of imports were carried out through these ports, Nibulon says. In the current environment, grain exporters face many obstacles in their work. These include the functioning of the grain corridor, a limited number of grain storage warehouses and transshipment facilities, constant shelling of Ukrainian ports, chartering of vessels with military risks, and delays in railroad cars en route to ports. In addition to all these force majeure circumstances, for many years the work of legitimate companies was also hampered by shadow grain producers. Therefore, Nibulon welcomed the initiative to de-shadow exports.

In such circumstances, the existence of so-called shadow exports further complicates the functioning of businesses that operate transparently and pay taxes to the national and local budgets. Accordingly, we consider it useful to introduce measures to combat the shadow market, in particular, the Order of the Head (Chief) of the Odesa Regional State (Military) Administration and the Commander of the Odesa Operational and Strategic Group of Troops of August 18, No. 19 "On Some Issues of Financial Discipline under the Legal Regime of Martial Law" (hereinafter - Order No. 19) 

They added that in the first weeks of the Order, it was difficult to adapt: documents could take up to seven days to be processed, but later the procedure was edited and now documents are processed day after day, in a few hours.

"We are now witnessing a mechanism in operation that allows transparent clearance of export cargoes day in and day out, significantly enhances the state's ability to combat shadow exports and effectively complements the Procedure for Implementing a Pilot Project on Verification of Agricultural Entities under Martial Law, which was put into effect on November 1, 2023 by the Cabinet of Ministers of Ukraine in accordance with Resolution No. 1132 of October 31, 2023 (hereinafter - Resolution No. 1132)," Nibulon said.

However, along with the intermediate positive results of the above regulation, the "shadow market" must be effectively combated by law enforcement agencies, Nibulon believes. 

Context

In August 2023, the head of the Odesa Customs Office, Oleh Kiper, issued an order obliging exporters to confirm the origin of their goods. He justified his decision with impressive figures: 30-40% of export grain market players were operating in the shadows. From now on, all customs declarations are registered before the export goods are loaded, so it is almost impossible to export grain bought for cash from an anonymous farmer. Given that every third farmer in the country was in the "shadows," the response was not long in coming. However, the criticism of the de-shadowing of exports backfired. First, the Cabinet of Ministers, and now the Verkhovna Rada, want to adopt this experience by legislating it for all regions of Ukraine.

As UNN previously reported ,several draft laws are currently being considered by MPs, including the idea to link VAT refunds to the return of foreign currency earnings.