AZMOL TOGETHER WITH OTHER UKRAINIAN LUBRICANTS PRODUCERS SIGNED AN OPEN APPEAL AND DECLARE TO STOP PRODUCTION11:40 | 29.05.2020
Ukrainian manufacturers of lubricants today are completely paralyzed. Starting May 23, 2020, they all have no right to store, buy, process, sell products made on the basis of imported base oils. And this is almost all the oils and greases in the country.
As experts predict, a sharp and ill-conceived introduction of an excise tax on base oil in Ukraine will provoke a tremendous reduction in domestic production of lubricants, thousands of jobs lost, will increase unemployment in the country, fill the Ukrainian market with low-grade falsification, and reduce tax revenues to the budget of Ukraine , and will provide significant profits to the import manufacturer. In addition, the imposed excise tax will be felt by all 10 million motorists of Ukraine, industrial and agricultural enterprises, and all Ukrainians after them.
The adopted law imposed excise on raw materials for domestic manufacturers to produce a wide range of products - oils and greases, while at the same time there is no excise tax on imports of the same types of products manufactured in other countries! This will inevitably lead to the final elimination of the entire domestic oil and lubricant industry in Ukraine.
In this regard, Ukrainian producers of lubricants and traders wrote an open Appeal of domestic producers to the leadership of the state, people's deputies of Ukraine and the heads of state executive authorities regarding the provisions of law No. 466-IX of 01.16.2020. The text of the appeal is given below:
To the President of Ukraine
To the Prime Minister of Ukraine
People's Deputies of Ukraine
Chairman of the Finance Committee,
tax and customs policy
To the Chairman of the Budget Committee
Chairman of the Committee on
To the Chairman of the Committee for Integration of Ukraine with the European Union
Head of the Main Scientific Expert
Office of the Verkhovna Rada of Ukraine
Deputy Chief of Staff -
Head of the Main Legal Department
The apparatus of the Verkhovna Rada of Ukraine
Aсештп Chairman of the State Customs
services of Ukraine
Chairman of the State Tax
services of Ukraine
An open appeal of domestic producers and official suppliers of industrial oils and lubricants to the government, deputies of Ukraine and heads of state executive authorities regarding the provisions of Law No. 466-IX of January 16, 2020.
On May 23, 2020, Law No. 466-IX of January 16, 2020 “On Amending the Tax Code of Ukraine Regarding Improving Tax Administration, Eliminating Technical and Logical Inconsistencies in Tax Legislation” came into force, the main committee on which was the Finance, Tax and customs policy.
When considering the draft of this law, amendments were made to it, which, in the practical implementation of the law, turned out to be such that they do not comply with the current regulatory framework of Ukrainian legislation and have the signs, most likely, of a technical slip or error: regarding changes to . 215.3.4 Art. 215 of the Tax Code of Ukraine.
So, on January 13, 2020, during a meeting of the Committee on Finance, Tax and Customs Policy when considering a proposal and amendments to draft law No. 1210 “On amendments to the Tax Code of Ukraine regarding the improvement of tax administration, the elimination of technical and logical inconsistencies in tax legislation” a group of deputies - members of the Committee on Finance and Tax and Customs Policy, DA Getmantsev and others .., the amendment of 1898 was introduced into this bill, which was fully supported, and thus was introduced as amendments to subparagraph 215.3.4 of the Tax Code of Ukraine, namely:
Subclause 215.3.4 shall be supplemented with numbers and words:
«2710 19 62 00 –
2710 19 68,
2710 19 99 00
2710 20 31 00,
Liquid fuels based on gas oil (diesel fuel), less than 85 vol.%, Which, including costs, are distilled at a temperature of 350°C (according to ISO 3405 equivalent to ASTM D 86), except for household heating fuel.
213,50 Euro per 1000 liters»
In this form the bill was proposed for consideration by the Verkhovna Rada of Ukraine in its final version and adopted as a whole.
As indicated above, in particular paragraphs. 215.3.4 Art. 215 of the TCU was supplemented by a list of HS codes for which excise taxes are levied. Among the indicated codes of the HS codes, a code that does not correspond to the description of the goods (products) according to the HS code was indicated, namely, code 27 10 19 99 00, which in accordance with the Ukrainian classification of goods of foreign economic activity, approved by the Law of Ukraine of September 19, 2013 No. 584- VII “On the Customs Tariff of Ukraine” is described as “- - - - - - - other lubricants and other distillates”, and under this product code, base and industrial oils are imported into Ukraine.
In the adopted law, code 27 10 19 99 00 was mistakenly placed in the classifier of goods with a description as “Liquid fuels based on gas oil (diesel fuel), less than 85 vol.%, Which, including costs, are distilled at a temperature of 350°C (according to ISO 3405 equivalent to ASTM D 86), except for household heating fuel.”
That is, products with a classifier, according to UKT FEA as “other lubricants and other distillates”, were mistakenly included in the group of products by description, which corresponds only to liquid fuels based on gas oil (diesel fuel).
Thus, while accepting amendments for such categories of goods as “liquid fuels based on gas oil (diesel fuel)”, an almost maximum excise rate of 213.5 euros per 1 thousand liters was actually introduced for the product category by code 27 10 19 99 00 “Other lubricants and other distillates”, which, in fact, being base and industrial oils, until that moment did not fall into the excise category, they were imported into Ukraine, processed and sold without the implementation of procedures specific to excisable goods.
This already introduces significant restrictions and excise taxes on the import of basic and industrial oils in Ukraine, and this is 90% of all types of oils present on the Ukrainian market. These codes cover all basic and industrial oils, with the exception of some specific types. For 1000 liters, enterprises will have to pay excise tax in the amount of 213.5 euros, which means approximately plus 47% of the price per ton. That is, the current price will increase almost one and a half times, which will significantly affect the large list of sectors of Ukrainian industry, agriculture, automobile, railway and other sectors of the domestic economy, which will be felt by every Ukrainian family that is a consumer of products of the Ukrainian manufacturer.
Of particular concern to us is that the amendments to the Code create discriminatory factors and put the work of domestic and foreign manufacturers in unequal conditions, providing a significant advantage for the latter.
The adopted law imposed excise taxes on raw materials for domestic producers to produce a wide range of products - oils and lubricants, while at the same time there is no excise tax on imports of the same types of products manufactured in other countries!
This will inevitably lead to the final liquidation of the entire domestic industry for the production of oils and lubricants in Ukraine.
This Law has already completely stopped the process of production of lubricants in Ukraine. The law does not provide for a transitional period to work in such conditions. To fulfill the requirements of the law, market participants will need from 6 months to 1 year to complete all the necessary permits and undergo procedures - enterprises need today:
- Register as payers of excise duty;
- Equip and arrange an excise warehouse;
-Equip capacitive storage parks of products with specific individual rather expensive means of accounting;
- Get a license.
Today, without performing the above procedures, enterprises have no right to store, buy, process, or sell products made on the basis of base oils. And this is almost all industrial lubricants and oils in the country.
As of 05/27/2020, a customs code of 27 10 19 99 00 “other lubricants and other distillates” was idle at Ukrainian customs, and officials of the Customs Service of Ukraine, who are guided by the Law of Ukraine of September 19, 2013 No. 584-VII “On the Customs Tariff of Ukraine”, they understand that there is a technical error, but, without appropriate official explanations on the rules of procedure for processing such goods, they are required to charge excise taxes on base oils at the rate of import of fuel.
Taking into account the foregoing, in order to prevent collapse in the state economy, we urgently ask:
Take measures to correct a technical error in the text of the Law of Ukraine No. 466-IX of 01.16.2020 “On Amendments to the Tax Code of Ukraine regarding the improvement of tax administration, elimination of technical and logical inconsistencies in tax legislation”, namely: delete code 27 10 19 99 00 from the description of the product group “liquid fuels based on gas oil (diesel fuel), less than 85 vol.%, Which, including costs, are distilled at a temperature of 350°C (according to ISO 3405, equivalent to ASTM D 86), except for household fuel "From subparagraph 215.3.4 of the Tax Code of Ukraine.
By the time technical amendments are made to this law, provide official clarifications and recommendations:
2.1. The State Customs Service of Ukraine for administering the process of customs clearance of a group of goods according to classification code 27 10 19 99 00 “other lubricants and other distillates” according to HS Code.
2.2. The State Tax Service on the procedure for accounting for excise duty payers of enterprises engaged in financial and economic activities with goods according to classification code 27 10 19 99 00 “other lubricants and other distillates” according to the UK Foreign Economic Activity without the status of excise duty payers.
With respect, and hope for a speedy resolution of the situation:
LLC "UKRAINIAN-BRITISH JOINT VENTURE AZMOL-BRITISH PETROKEMIKALS", Berdyansk, Acting Director: Tarasenko M.V.
LLC "LUBRICANTS COMPANY" SIOL" Kherson, the head: Samborsky S. E.
LLC “LEBEDINSKY NEFTEMASLOZAVOD”, Lebedin, Director Zhdanov E.A.
LLC "XADO-TECHNOLOGY", Kharkov, Executive: Valkova I.V.
KSM-TRADE LLC, Kyiv, Executive: Buynitsky A. L.
KVOLITI INDUSTRIAL LUBRICANTS LLC, Kiev region, Executive: Lisitsa B. A.
RESURS-OIL-A LLC, Kyiv region, Executive: Frank L. N.
ZAKHIDPROM LLC, Transcarpathian region, Executive: T. Golovko
LLC "DMS-TRADE", Zaporozhye, Executive: Strizhko R.V.
LLC "ECOTECHNICA TRADE", Dnipro, the Head: A. Polinko
LLC "JV YUKOIL", Zaporizhia, the Head: O. A. Yaroshenko
LLC "SCIENTIFIC-INDUSTRIAL ENTERPRISE AGRINOL", Zaporizhzhya region., Director: Polishchuk V.V.
PE Lyubin R.G. (LLC PLANT Auto chemical goods and technical oils GROM-EX), Kharkov, Director Lyubin R.G.
LLC "ARLANDA GROUP", Kyiv, Executive: Lysenko Y. A.
PE Tchaikovsky I.I., Ternopol
LLC "COMPANY VIP-OIL", Lviv, Executive: Kisil A.V.
LLC "DYNAMICS GP", Kiev, the Head: Malanyuk B. A.
LLC "QUORUM-OIL", Nikolaev, the Head: Klevan I.I.
PML "MLS", Rivne, Head: Melnichuk L. S.
LLC "SVITMA", Khmelnitsky, Executive: Krinitsky S. M.
LLC "AUTOLIGA PLUS", Ternopil, Head: Wolk I.Z.
LLC "MIROIL", Kiev, the Head: Vobolis M.V.
LLC "PLANT OF TECHNICAL OILS" ARIAN ", Kyiv region, manager: Rudik E. G.
LLC "BERLI LTD", Dnipro, the Head: Oleynik A. B.
OILSERVICE LLC, Dnipro, the Head: E. Vakulenko
LLC UKRHIMRESURS, Vinnytsia region, manager Music A.K.
OOO "NAFTAPRODUKT", Sumy region., Executive: Kamchatny A. N.
LLC "PROMOIL", Dnipro, the Head: Shvatsky V.V.
LLC "GPL", Poltava, Executive S. Babich