Information for fruit and vegetables business in CIS
The State Customs Service of Ukraine states they are not to blame for increase of prices for citrus fruits
The State Customs Service of Ukraine denies its involvement in increase of prices for imported fruits and vegetables, particularly for citrus fruits. The Service explains growth of prices with harvest failure and artificial overpricing from the side of traders.
That was the key point of operational meeting held by the State Customs Service managers on Friday, October 1.
As ATH was informed by press office of the Service, cost of imported fruits and vegetables is directly depended on prices at global markets that increased due to harvest failure. So, according to Ministry of Agriculture and Land Reclamation of Egypt, due to change of climate conditions, harvest of fruits and vegetables fell by 70% in the country. Production volumes decreased also in USA. As for Brazil that is a major exporter of citrus fruits, current orange crop is the lowest for the last 9 years. Harvesting in Spain will start with delay – in November. China, a major exporter of garlic to Ukraine, predicts harvest failure that may lead to increase of prices for produce by 30%.
“Considering social orientation of these products, we established a working group that conducted a complex analysis of situation with customs value of fruits and vegetables, and retail prices at domestic market”, - Ihor Kaletnik, chairman of the State Customs Service of Ukraine, told.
According to him, conducted analysis showed that customs value is understated in most cases, as overwhelming part of fruit and vegetables is imported with use of resellers, offshores and other schemes. Only 27% of fruits and 39% of vegetables were imported under direct contracts with producers.
As to analysis results, retail prices for products and their customs value (inclusive of payed taxes) differ several times. For example, African grapefruits cost UAH 24/kg (EUR 2.21/kg) at market, while their customs value, inclusive of taxes (20% VAT), is UAH 12/kg (EUR 1.11/kg). Retail prices for Argentinian tangerines are UAH 23.70/kg (EUR 2.19/kg), but, according to customs service, their price is UAH 7.78/kg (EUR 0.72/kg). The same situation is observed with sweet peppers: price for them varies within UAH 34-38.40/kg (EUR 3.14-3.54/kg) in retail chains, while, according to customs' data, it is UAH 17/kg (EUR 1.57/kg). It appears that price of a product is 2-3-times higher than value, inclusive of customs charges, payed by importers. According to the State Customs Service opinion, this indicates significant level of artificial profitability.
“In other words, fluctuations of customs value levels and, therefore, increase or decrease of customs taxes don't affect price for product at market, as importer, who imports product, will anyway fix a price solely for the purpose of making a maximum profit”, - I. Kaletnik thinks.
“In my opinion, if we fully abolish import taxes, sum of their nonpayments will simply transfer to importer's profit, and price for consumer will not fundamentally change. Correction of customs value isn't a reason for significant growth of prices, in case, of course, of optimal level of profits and profitability of an enterprise. We think that agio over fruit and vegetable imports was artificially raised by importers with the purpose to justify groundlessly overrated prices and is provoked by unwillingness “to cut down appetites” concerning making excess profits”, - chairman of the State Customs Service of Ukraine summarized.