Maersk returns large volume of cargo after Russia food ban

A global shipping company Maersk has announced that it needs to return a “significant” amount of produce out at sea needs  to its original senders after Russia imposed a ban on food imports from Western countries, reports Reuters.

Maersk, the largest containerised shipper in the world through its Maersk Line unit and also a port terminal owner via APM Terminals, did not specify the number of vessels or volume of goods affected by the ban.

Russia imposed the ban earlier this month in retaliation against Western sanctions for its actions in Ukraine, where pro-Moscow rebels are battling government forces. The West accuses Russia of fuelling the rebellion, a charge Moscow denies.

The Russian ban applies to imports of meat, dairy, fruit and vegetable products from the EU, the US, Canada, Australia and Norway, effective for one year as of 7 August.

“Maersk Line customers were completely unprepared for these sanctions and since they had effect immediately, a significant amount of cargo at sea needs to be returned,” Maersk Line said in the note sent late on Wednesday.

A Maersk Line spokesman said the costs of returning goods does not lie with the shipping company but gave no further details.

 

Russia to Ban All U.S. and Europe Food Imports

According to the Russian government, Russia is imposing  a  one-year-prohibition on the import  of  agricultural products, raw materials and food originating from the USA, EU, Canada, Australia, and Norway in response to sanctions over Ukraine.

The full list of banned products together with  TNVD (similar to harmonized codes) classification is below:

0201 Meat of cattle, fresh and chilled
0202 Meat of cattle, frozen
0203 Pork fresh, chilled or frozen
0207 Meat and food byproducts of poultry, indicated in the HS item 0105, fresh, chilled or frozen

0210 Meat salted, pickled, dried or smoked

0301, 0302 Fish and crustaceous, mollusks and other aquatic invertebrates
0303, 0304,
0305 , 0306,
0307, 0308,
0401, 0402 Milk and dairy products
0403, 0404,
0405, 0406,
0701 Vegetables, edible roots and tuber crops
0702 00 000,
0703, 0704,
0705, 0706,
0707 00,
0708, 0709,
0710, 0711,
0712, 0713,
0714
0801, 0802 Fruits and nuts
0803, 0804,
0805, 0806,
0807, 0808,
0809, 0810,
0811, 0813
1601 00 Sausages and similar products from meat, meat byproducts or blood; prepared meat products prepared from them
1901 90 110 0 Prepared products including cheeses and curd on the basis of vegetable oils
1901 90 910 0,
2106 90 920 0 Foodstuffs (containing milk, based on vegetable oils)
2106 90 980 4,
2106 90 980 5,
2106 90 980 9

The Ministry of Industry and Trade of the Russian Federation, Ministry of Agriculture of the Russian Federation together with executive authorities will organize and conduct daily operational monitoring and control over the status of the relevant markets of agricultural products, raw materials and food.

In addition to the food imports embargo, the Russian prime minister also announced a ban on Ukrainian flights transiting through Russian airspace, and warned that Russia could issue a similar ban on U.S. and European planes.

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EU Approves Sectoral Sanctions Against Russia

Itar-Tass reports that the European Union has approved new sanctions against Russia which will affect some sectors of the country’s economy. The sanctions are expected to become effective July 31.

According to an EU official, the EU is imposing a temporary ban on striking new defense contracts with Russia. The EU will also ban deliveries to Russia of military and dual use products.

The EU’s permanent representatives approved the European Commission’s proposal to close access for Russia’s state banks to financial markets in the EU member states. Additionally, the EU will also ban Russian state credit institutions from selling euro-denominated securities and issuing shares for shareholders in the EU

The new sanctions also envision restrictions for oil industry equipment exports to Russia. The EU’s sectoral sanctions may be revised in three months.

President of the European Commission Herman Van Rompuy said in a statement “the package of new restrictive measures agreed today by the European Union constitutes a powerful signal to the leaders of the Russian Federation: destabilising Ukraine, or any other Eastern European neighbouring State, will bring heavy costs to its economy”.

Earlier, the U.S. and EU imposed additional sanctions on Russia. The list included several Russian officials and representatives of the self-proclaimed People’s Republic of Donetsk. The sanctions mainly affected companies,  particularly industrial and petroleum ones. The list of sanctioned companies and organizations was expanded with Vnesheconombank, Gazprombank, Rosneft, Basalt, Feodosia Oil Company, Concern of Electronic Technologies KRET, company Constellation, NPO Engineering, Concern Almaz-Antey, Kalashnikov, Instrument Design Bureau, Uralvagonzavod, JSC Novatek, Donetsk and Luhansk People’s Republics.

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Russia to Cancel Duty–Free Trade with Ukraine

As Ria Novosti reports, the duty-free trade deal between Russia and Ukraine is coming to an end. Russia says fundamental changes mean that it will invoke Article 62 of the Vienna Declaration to terminate the understanding.

The move comes  after Ukraine signed the Association Agreement on June 27, which gives Kiev provisions for the creation of a free trade zone and the removal of import tariffs. Russia’s government has stated on multiple occasions that if Ukraine becomes part of a free trade zone with the European Union, Russia will need to protect its internal market from the tariff-free flow of European goods from Ukraine.

RIA quotes a source from the government familiar with the situation  as saying “the circumstances that existed in the time when the CIS free trade area agreements were signed have significantly changed for Ukraine which is historically the main trade partner of Russia being deeply integrated in many areas of the economy”.

The cancellation of the duty-free relationship with Ukraine will lead to higher import tariffs of approximately  7.8 percent.

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Indexation of Ukraine Export/Import Tariff

Our Ukranian colleagues have advied that the Ukranian Ministry of Infrastructure is increasing tariffs for export and import and transit shipments via its territory starting from July 23rd. This has been announced in the official decree from Ukranian Ministry.
This may result in higher rates for shipping; please be guided accordingly.

Ukraine to Close Crimean Ports to International Shipping

The Ukrainian government is planning to close all ports in Crimea to international shipping.  According to a circular from P&I club Skuld,  Ukraine’s Ministry of Infrastructure has issued a Directive No. 255 titled “On Closure of Sea Ports” , that would formally close sea ports in the Crimean region to international shipping. The directive affects the ports of Kerch, Theodosia, Sevastopol, Yalta, and Evpatoria.

The ports in the breakaway region are currently open and are effectively functioning as Russian ports.

According to a P&I Club correspondent, the directive means that if a vessel were to call at a port in Ukraine after a call at a port in the Crimean region, penalties could follow, such as delays, detention and fines. The circular added that formal prosecution steps could also be undertaken by Ukrainian authorities.

It’s too early to make predictions in respect of the consequences of vessel calls into Crimean ports, however the experts are unanimous that the closure of the ports may give Ukraine and other countries formal reasons to inspect or even detain vessels  under the requirements of ISPS Code for  vessels that have visited Crimea.

In addition,  the EU has introduced trade sanctions in respect of goods originating in Crimea or Sevastopol.

The UK P&I Club says that members who are subject to the scope of application of the EU sanctions are advised to seek advice before fixing contracts for voyages from Crimea and Sevastopol.

The International Group of P&I Clubs has issued  acircular on the EU sanctions that can be accessed HERE

 

Russia Approves Novorossiysk Port’s Ownership Division

Russia’s government has agreed to a plan to divide the country’s largest port operator, OAO Novorossiysk Commercial Sea Port, between its two controlling shareholders to end a battle that has stalled spending on oil terminals, according to two people with knowledge of the deal.

The Federal Property Management Agency requested President Vladimir Putin to approve the proposal to split off the port group’s oil terminals to state-run pipeline operator OAO Transneft. Businessman Ziyavudin Magomedov’s Summa Group would gain control over the port group’s remaining business.

NCSP Group, which handles about 33% of Russia’s crude exports, has been unable to approve investments to expand its oil division during the more than yearlong shareholder conflict. Russia depends on oil and gas for half of the government’s revenue.

Transneft and Summa together control 50.1 percent of NCSP through their jointly owned Novoport Holding Ltd. Transneft will receive the oil-loading facilities, including the Primorsk port on the Baltic Sea and Sheskharis terminal at Novorossiysk on the Black Sea, while Summa will buy Transneft’s stake in NCSP, which will keep the non-oil assets.

It has been said that after the deal, Summa will control 60 percent of the port operator.

As the Vedomosti newspaper reported earlier this year, the property agency proposed that NCSP pay out a special dividend before the deal to benefit minority shareholders.

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China Signs Natural Gas Contract with Russia

According to the news agency Reuters, China signed a $400 billion, 30-year deal with Russia to bring Russian natural gas to China beginning in 2018.

The agreement is for 38 billion cubic meters (about 1.34 trillion cubic feet) of gas annually, which is about 20 percent of Russia’s European gas sales. The deal is expected to further the strategic goals of Moscow and Beijing to diminish the status of the U.S. dollar by conducting world trade in critical commodities such as oil and gas using other currencies.

“This is the biggest contract in the history of the gas sector of the former USSR,” Russian President Vladimir Putin told reporters in Shanghai.

The pipelines, pump stations, and processing plants necessary to transport the world’s largest infrastructure project will be built jointly by the two countries. According to Washington Times,  the cost of building the infrastructure is expected to top $70 billion. Russian energy giant Gazprom plans to spend $55 billion and hire 11,700 people to build the pipelines, gas processing plants and other infrastructure. China may make an advance payment of as much as $25 billion toward the needed infrastructure in Russia. Further, the Chinese government is responsible for the pipeline on its own territory and will spend at least $20 billion on its construction. Russia and China are also expected to begin talks on a second pipeline to the west of the initial route.

The infrastructure being built will make Russia’s gas not only available to China, but also to Russia’s Pacific ports, where it can be liquefied and sold to Japan, South Korea and other Asian markets. The plan includes a liquefied natural gas plant in Vladivostok on the eastern coast of Russia that would provide liquefied gas to major port cities in China and to the rest of Asia. This project provides competition to U.S. exports of LNG to the Asia-Pacific. However, since both the Russian infrastructure and U.S. LNG plants are years away from completion, it is not clear how big the threat to North American projects is.

This gas deal provides Russia with a substantial stimulus for its economy, especially in its poorer regions in Siberia and the Far East, particularly since nearly all the steel pipe and other components will be manufactured in Russia.

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Russia Considers Issue of Return to TIR Convention

According to officials, Russia is considering the matter of return to the TIR Convention. The International Road and Transport Union (IRU) gave Russia the term to reinstate on its territory the system established by the Convention on International Carriage (TIR) before 1 July. Otherwise, IRU will withdraw this country from its guarantee.

The reason for such decision was actual withdrawal of Russia from TIR Convention due to the conflict between the Russian Federal Customs Service and the Association of International Road Carriers. IRU already excluded Russia from the system in 2002.

As we reported before, the Federal Customs Service (FCS) of Russia postponed the deadline of termination of the “Agreement on the obligations on the application of the Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention, 1975)”, concluded on 7 June 2004 between the State Customs Committee of the Russian Federation and the International Road Carriers Association, for 1 July 2014.

The FCS of Russia declared that it duly notified the IRCA about that decision in a letter dated 29 November 2013. In the coming period it is planned, in particular, to hold talks with the International Road Transport Union (IRU) on issues relating to the modernization of the Customs Convention on International Transport of Goods under Cover of TIR Carnets, in order to ensure properly the observation of Russian Federation’s interests.

As the FCS informed. “IRU’s debt of 20.8 billion rubles has not been settled . Further development of relations with the national guarantee associations will be built on the basis of open competitive procedures”.

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Russia Forms Trade Bloc with Belarus and Kazakhstan

As Bloomberg reports, Russian President Vladimir Putin signed a treaty with his counterparts from Kazakhstan and Belarus creating a trading bloc.

Russian President Vladimir Putin –  facing sanctions from the U.S. and EU for his annexation of Crimea from Ukraine –  said the three countries will “gradually align” their currency and monetary policies to facilitate trade and minimize risks.

The union, effective from the start of 2015, is intended to yield a free flow of goods, capital and workers, and will level tariff and non-tariff regulations.

The Russian leader has pushed for Ukrainian membership in the union and, before relations soured with the EU, urged the creation of a free-trade zone from Lisbon to Vladivostok on the Pacific Ocean.

Russia signed a separate protocol conceding $1.5 billion of oil revenue to Belarus, or about about half the export duties the smaller country levies on oil products made from Russian crude next year. Under the current rules, Belarus returns all such export duties to Russia. Belarus may be able to keep more for its budget when the countries revise the numbers in 2016.

Kyrgyzstan and Armenia are seeking to join the union by the end of the year, the countries’ leaders said at the signing ceremony.

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