NIBULON is a vertically integrated Ukrainian company and a leader in the domestic agrarian market. It is one of the largest agricultural commodity producers, investors, and exporters. On December 5, 2021, the company will celebrate its 30th anniversary. Established in 1991, when Ukraine declared independence, NIBULON, together with the country, continues to improve and to become stronger.Other domestic companies in various sectors follow the company’s example to revive Ukrainian inland waterways, shipbuilding and navigation, as well as to create its own modern fleet. At present the company gradually increases the volumes of cargoes transported by river. We hope passenger transportation will be revived. The development of Ukraine’s water transportation has a considerable multiplication effect, promoting the development of other economic sectors, creating new workplaces, and ensuring budget revenues. The appropriate legislative field should promote this development. On the contrary, our current laws aim to destroy not only Ukrainian shipbuilders and seamen, but also threaten people, the environment, and national sovereignty. We spoke with Mykhailo Rizak, NIBULON’s Deputy General Director for Interaction with Public Authorities, about the contradictions in the legislation and how to protect businesses from their effects.- Mr Rizak, please tell us about the global experience in using water transport arteries and how Ukraine uses them. – Inland waterways are important national resources in every country. They are sources of fresh water and one of the natural bases for economic development, improving people’s lives and activities as well as developing industry and agriculture. In addition, waterways are efficient transport arteries. Cargo transportation by water is the cheapest mode of transport in developed countries. This is the most environmentally friendly mode of transport to deliver cargoes, thereby enabling the country to save funds that would otherwise be required for road repairs. The river transport has been efficiently developed in EU for ten years, thereby reducing greenhouse gas emissions into the atmosphere. Thus, the Mannheim Convention (1868) cancelled all the taxes and dues on the Rhine, thereby stimulating the development of navigation in Europe.There are several negative factors preventing rivers from being developed, namely River pollution, as legislative standards permit vessels to discharge sewage water into the river;Navigable river depths are not maintained, so that the length of navigable river waterways is reduced by 100 km annually.The above-mentioned information explains why Ukraine is ranked only in 125th place out of 180 countries, according to the World Bank researches. Ukraine is a water-scarce country on the map of Europe. Unfortunately, our rivers are polluted and not suitable for drinking. River transport, as the most capital-intensive mode of transport, generates generates only marginal river cargo flow in Ukraine because, contrary to other countries, it is not the cheapest mode of transport. The world has realized that it is beneficial to use river cargo flows in conjunction with short haulage to deliver cargoes by railway and road transport to rivers. We do not do this, and Ukraine suffers from damaged roads. Unfortunately, vessels are only being built by cargo owners to diversify their risks in the transport sector. – What is the potential of Ukrainian rivers as transport arteries in our country and the entire world (as part of the E40 waterway)? Has anything been done in this direction? – Ukrainian rivers have the potential to transport about 60 million tons of cargoes annually. It would be possible to transport about 30 million tons by 2025, if the river transportation was the cheapest in comparison with alternative modes of road transport. It is possible to achieve this by implementing the item “f” of the Article 15 of the Directive 2003/96/EU (provided by the Appendix XXVIII of the Association Agreement between Ukraine and EU) to provide compensation/cancellation of fuel excise duties paid on inland water transport and to control the purposes of fuel consumption. The Tax Code of Ukraine does not consider this position on the given issue, despite it is being supported by the Council of Entrepreneurs under the Cabinet of Ministers of Ukraine, the Ukrainian Union of Industrialists and Entrepreneurs, the European Business Association, the Chamber of Industry and Commerce, and other business communities.Ignoring the EU’s experience in cancelling excise duties will result in river cargo flows remaining only residual. Thus, the transportation volumes will be increased to 15 million tons, mostly because of the Ukrzaliznytsia’s decline and the fact that outdated vessels operated on the Russian Federation market and are now used to destroy shipbuilding in Ukraine. One of NIBULON’s priorities is to revive transportation by the E40 international waterway and to organize transportation along the Baltic Sea-Gdansk-Dnipro-Black Sea route, as the potential cargo volume between Ukraine and Belarus comprises 10 million tons. It is possible to transport grain and grain products, oilseeds and oilseed residues, multipurpose containers, building materials (sand, clay, gravel, etc.), vegetables and fruit, as well as juices by water transport from Ukraine to Belarus. In its turn, Belarusian oil processing products, potassium, nitrogen, and other mineral fertilizers, tires, wood-processing products, agricultural machinery, tractors, cars and trucks are in great demand in Ukraine. Both the absence of the required river depths in the territories of Poland and Belarus and political considerations have prevented the implementation this project, as the EU implemented three packages of personal sanctions against Belarus for the falsification of presidential elections and repression against protesters at the end of last year. – Is inland waterway navigation important for the country? Do countries allow foreign-going vessels to transport cargoes on their own rivers? – Neither the U.S. nor NATO and EU countries allow foreign-going vessels to navigate freely by their waterways, as it is a matter of their defense and national security. The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Inland Water Transport” and completely ignored the European integration course of Ukraine specified in the Constitution of Ukraine as part of the implementation of the Law of Ukraine No. 1629-IV “On the National Program of Adaptation of Ukrainian Legislation to the European Union Legislation” concerning the implementation of the Regulations 3577/92/EU and 3921/91/EU, as well as the implementation of the current international agreements for inland water navigation, according to which only vessels under the flag of Ukraine are permitted to navigate by inland waterways, unless otherwise provided by international agreements. Please note that the Article 136 of the Association Agreement between Ukraine and EU provides an access to inland transport markets only in future international agreements based on the reciprocity principle. The law on inland water transport aims to protect national interests, secure people and the environment, to develop strategic economic sectors – shipbuilding and navigation in every developed country. Unfortunately, this law is corrupted in Ukraine and threatens national security. Free access to inland waterway navigation, provided by the Law 1054-ІХ, is a strike against national security, as there is a cascade of locks on the Dnipro, with a total area of 7 thousand km2 and with a volume of 44 km3 of water, which represents more than 90% of the total number of all large reservoirs in Ukraine. It is unacceptable to allow foreign-going outdated vessels to freely navigate Ukrainian inland waterways. This is a matter of Ukraine’s security (Article 53).In addition, the law’s current edition contradicts international principles to allow navigation on inland waterways and international agreements for navigation (inland waterway navigation) and inland waterways with:Germany (a permit for inland waterway navigation provided by the Part 1 of the Article 5);Belarus (a permit provided by the Part 3 of the Article 3);Croatia (a permit provided by the Paragraph 2 of the Part 8 of the Article 3);the Convention regarding the regime of navigation on the Danube (a national permit for inland waterway navigation provided by the Article 25).The legal regulation of the inland waterway navigation is a matter of economic security and the creation of workplaces. Please note the U.S. experience in adopting the Jones Law which prohibits foreign countries from navigating on inland waterways and establishes requirements to build fleet at the U.S. shipyards. Everybody knows that Great Britain also became a powerful marine state by adopting the Oliver Cromvell’s Navigation Act (1651) which made it compulsory to transport and deliver English products by English vessels. The Navigation Act contributed to the development of English shipbuilding and navigation and was aimed at destroying Holland’s monopoly. Please note that once an experimental permit for foreign-going vessels to navigate by inland waterways was implemented in Ukraine, the Russian Federation immediately copied and implemented the Jones Law on its territory in June 2021…- The domestic river transportation legal field. What is NIBULON’s attitude towards the provisions of the Law “On Inland Water Transport”?- The Law of Ukraine 1054-ІХ “On Inland Water Transport” allows vessels to discharge sewage water directly into the river, when navigating on inland waterways. This will negatively impact Ukrainian rivers, especially the Dnipro which provides a source of fresh water for almost half the population of Ukraine.The Article 9 of the Law of Ukraine 1054-ІХ cancels port duties for vessels with the deadweight of 4.5 m, i.e. vessels that are constantly operated on the Volga and the Don (in particular Volgo-Don projects comprising more than 250 vessels built by the 507, 1565, 1566 projects and other vessels). The Russian Federation will soon prohibit the operation of these vessels unless they were built by the Russian shipyards. In addition, port duties are cancelled for international trips by the Item 2 of the Part 2 of the Article 9 of this document, thereby causing billions of losses for the Ukrainian Sea Ports Authority, 80% of dividends of which fund the state budget of Ukraine.The Item 2 of the Part 2 of the Article 9 of the Law of Ukraine 1054-ІХ specifies an approach that distorts competitiveness, contradicts the Item 105 of the Decree of the Cabinet of Ministers of Ukraine 1413-р and contradicts the principle of predictability of the state regulatory policy. This will destroy the shipbuilding sector, as there will be no need to build a new fleet for Ukrainian rivers if outdated vessels, operated on the Russian Federation’s waterways, navigate Ukrainian inland waterways. This is the first time the “contraband” of fuel by foreign-going fleet without paying taxes and duties is legalized, whereas the fleet under the flag of Ukraine pays fuel excise duties and is discriminated. According to the Golos Ukrainy edition, the vessels were supplied with up to 500 thousand tons of oil and lubricants, including fuel, 15 years ago, and today the fueling level in Ukrainian ports does not exceed 40-50 thousand tons. This decrease was caused by a fuel excise duty introduced by the Tax Code of Ukraine in 2011, whilst ignoring the EU experience in cancelling fuel excise duties for vessels navigating on inland waterways. The fiscal policy distorted competitiveness and destroyed the entire economic sector – fueling of seagoing vessels. DELFI vessels navigate first kilometers beyond a 12-mile zone of Ukraine, which is proved by the vessel location data, and destroyed thousands of workplaces in Ukraine. The law also provides a long-term scheme of uncontrolled sand mining on the Dnipro and on all inland waterways (Article 15 and Item 4 of the Final and Transitional Provisions). A company that conducts dredging is permitted to store soil in any place without coordinating with environmental institutions and communities. We highlight that Kyiv is located near the Chernobyl zone, and the sand mined from the river bottom to be used for construction without environmental expertise is another strike against the health of Kyiv citizens as well as all Ukrainians. The Law does everything to prevent Ukrainian vessels from operating on Ukrainian rivers, resulting in the crews being composed of foreigners, rather than from Ukrainians who must work abroad (Article 53).The Article 30 of this document legalized the state qualification committee to administer exams for seamen, which is now trying to be liquidated because of corruption scandals. Nevertheless, its influence on the inland water transport is increased. This law is a strike against Ukrainian shipbuilding and will probably be the final nail in the coffin of the Ukrainian shipbuilding (Item 2 of Part 2 of Article 9, Article 53). – Is there any hope to stop these terrible consequences caused by the Law on Inland Water Transport? What should be done by the country? What are the company’s actions?- Ukraine must respond to these threats and implement the policy of the European and Euro-Atlantic course of Ukraine provided by the Constitution of Ukraine. The President of Ukraine has already confirmed the implementation of these courses by the Decrees of the President No. 348/2021 “On the Communication Strategy on Ukraine’s Euro-Atlantic Integration for the Period until 2025” and No.448/2021 “On the Decision of the National Security and Defense Council of Ukraine of July 30, 2021 “On the Strategy of Foreign Policy of Ukraine”.By the Decree of the President of Ukraine, Volodymyr Zelenskyi, Ukroboronprom SC created аn interagency working group to develop a Shipbuilding Development Strategy until 2030 (the shipbuilding strategy) and a package of bills to implement this Strategy. This group consists of specialists from Ukrsudprom, NIBULON, and other shipbuilding yards. The shipbuilding strategy and a package of bills of Ukraine, developed and adopted by the working group, were sent to the National Security and Defense Council of Ukraine and the Verkhovna Rada of Ukraine with the following standard propositions: 1) to encourage a domestic demand for shipbuilding by implementing Item “f” of the Article 15 of the Directive 2003/96 to completely compensate fuel excise duties paid by vessels navigating on inland waterways;2) to create new workplaces by placing orders in Ukraine and to fund the budget with other revenues (VAT, Unified Social Tax, Individual Income Tax, etc.) by implementing the Regulations (EU) 3921/91 and 3577/92 as well as Jones Law (the U.S.) to allow domestic vessels to navigate on inland waterways and only under the flag of Ukraine;3) to temporarily cancel taxes and customs for goods that are not produced in Ukraine to reduce prime cost and to create competitive propositions on the shipbuilding market by creating a material base for import substitution;4) to implement Item 105 of the Decree of the Cabinet of Ministers of Ukraine No.1413 of 04.12.2019 to cancel port dues for inland navigation vessels with a maximum draught of not more than 4 m in Ukrainian sea ports (i.e. vessels designed for Ukrainian rivers).It depends on the President of Ukraine to stop the unreasonable provisions of the Law 1054-ІХ and to liquidate the corrupt schemes. The President of Ukraine has all the levers to implement the Shipbuilding Strategy in the shortest possible time, including by considering as urgent the bills provided by this Strategy.