Ukraine’s government decided to exclude base oils from an import tax implemented in late May, explaining they were mistakenly subject to the tax because of a misunderstanding about commodity codes.
One Ukrainian lawmaker said a “technical glitch” caused the incident, which stirred loud protests among industry participants and led the country’s largest lube producers to halt production in June.
The duty, which applies to a range of products, was established under federal law No. 466-IX, and it went into effect at the end of May, subjecting imported base oils to a levy of €213.5 per ton (U.S. $241). Lube marketers such as Azmol-BP and Agrinol reacted swiftly, saying it can cause an economic crisis in the lubricant industry that could prove devastating for them.
After carefully reviewing implementation of the duty, the country’s custom and tax services recently confirmed that base oils are excluded from the import tax, saying it was caused by a “technical glitch” when the lawmakers wrote the law.
Most likely, the inclusion of the commodity code that lists “other lubricating materials and other distillates” caused confusion among the customs service officers, who started to charge the new excise duty on the day it was imposed.
Danil Getmantsev, head of Ukraine’s parliament tax committee, explained to Ubr.ua news portal recently that the law is aimed not at base oils but at “mixtures” that violators use to avoid paying excess diesel fuel import duties.
As in some other countries, some diesel is sometimes imported to Ukraine labeled as other material – such as base oil or transformer oil – by individuals or companies trying to avoid the duty on the fuel.
“To expose the schemes, lawmakers used the commodity code, but because of disorganization between the different branches of the government, the customs officials were confused and started to charge the fees on imported base oils,” Getmantsev said.
While base oils are now exempted from the duty, some importers are complaining about delays for customs clearance at the terminals, according to Ukrainian media reports. Processing now requires laboratory analysis to confirm that parcels labeled as base oils are not diesel, and this can take up to 20 days.