Belarus K imports at issue
At least eight members of Congress have written the Obama Administration seeking an investigation of potash imports from Belarus, citing sanctions that were put in place in 2007 against the state-owned company Belneftekhim Concern. According to the opponents, the Belarus government in February 2014 removed potash producer Belaruskali from the Belneftekhim Concern and a Belarus press article at the time said the move was “intended to evade economic sanctions once imposed by the U.S.”
The Fertilizer Institute has received a number of inquiries from its members on the issue and has prepared a memorandum advising them to “act with caution,” in proceeding with any Belarus –related transaction. TFI urges them to conduct an appropriate level of due diligence review, and as needed, consult their own counsel to assure themselves of compliance with the regulations.
TFI duly notes that the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC), which is responsible for administering and enforcing U.S. sanctions, places the burden on U.S. companies themselves for conducting due diligence on these transactions. TFI said that OFAC itself has refrained from expressly and publicly indicating if it considers Belaruskali or trading company Belarusian Potash Co. (BPC) as subject to the sanctions.
Under OFAC rules, TFI said if Belaruskali or trading firm BPC are still 50 percent or more owned by Belneftekhim, then they would still be under the sanctions.
TFI noted BPC has indicated it is not subject to the sanctions.
At least one import cargo has reportedly found its way to NOLA, with two more expected this month. In total, about 150,000 mt are expected, with three trading firms reportedly bringing in the product– Trammo, Koch and Gavilon. The NOLA potash market was sitting at about $370/st when the news of Belarus imports were confirmed. With the Belarus news, along with other imports, prices have recently fallen to the $358-$365/st FOB range.
According to TFI, violating the sanctions could mean a fine up to the greater of $250,000 or twice the value of the transaction per violation in most administrative cases, and temporary or permanent denial of export privileges. Criminal violations involving willful failure to comply with the regulations may result in up to $1 million in fines and/or up to 20 years in prison per violation. However, TFI noted that in many cases, OFAC reaches negotiated settlements, and has the authority to reduce fines and penalties resulting from voluntary self-disclosures of violations and other mitigating factors. TFI said actual penalties in the past have ranged from warning letters to multi-million fines.