13.09.2024 Agro Business of Occupiers

Chinese corporation COFCO takes over the agricultural market of Ukraine

Россия. COFCO начала поставки зерна из Приморья в Китай — Elevatorist.com

Ukraine’s agricultural sector has been suffering from the realities of war for almost 3 years. Hundreds of thousands of kilometers of fields have been mined, tons of crops have been destroyed, and many more have been exported to Russia under pressure from the aggressor. At the same time, the Chinese agro-giant COFCO and its Ukrainian subsidiary COFCO Agri Resources Ukraine continue to gradually expand their influence over the country’s industry.

They already control a number of facilities, including:

  • elevators – Belgravia, Unigrain-Basic, Novooleksiyivka elevator, Karakubske Grain Processing Plant
  • Sattelite oil extraction plant;
  • Danube Shipping and Stevedoring Company (DSSC) grain export terminal;
  • “Industrial Complex.

For reference, «Sattelite» is located in the industrial zone of occupied Mariupol. There are assumptions that its activities are still going on, despite the dominance of racists in the city.

In addition, the analysis of the corporation’s activities revealed a number of manipulations carried out by the company. For example, the “twisting” scheme. Briefly about the mechanism: there is an importer, a company that imports goods into the country that are not related to the agricultural sector. The importer officially pays for the imported goods, as well as the VAT of 20% of the value available at customs.

The importer then sells the goods for cash and receives twice the original cost. He no longer pays income tax, as the sale was made unofficially. He also has to pay additional VAT on the difference between the selling price and the customs declaration. It turns out that now it is necessary to show where the goods that have already been officially sold have gone.

The importer finds a fraudulent company that fictitiously buys the goods from him at cost, and then “twists” the VAT tax credit, taking it for himself.

At the same time, a grain trader, another company, buys grain from farmers on the domestic market for cash, who cannot provide a VAT credit. As a result, the grain trader ends up with grain that is not officially on its balance sheet, and no tax credit. Again, to resolve this issue, the controlled shell company buys the grain. The grain trader exports half of the real grain and half of the fictitious grain.

Subsequently, funds are withdrawn and legalized.

In addition, with the help of certificates of bankruptcy of their counterparties (actually fictitious), exporters close currency control in Ukrainian banks and then successfully receive a VAT refund. But how do grain exporting companies get a tax credit if they buy grain either for cash or as single tax payers who are not VAT payers and therefore cannot issue a tax invoice?

Now these twists and turns are working in favor of grain exporters: imported bananas are transformed into exported grain, with the corresponding movement of tax invoices along the entire chain of counterparties.

The modest ones simply break even with the state, while the greedy ones draw a fat plus in their favor (the same VAT refund). At the same time, there are more greedy ones now. So which group should COFCO be assigned to?

In fact, the Chinese COFCO deceives the state twice: in the sale of the “left” – the third product, and in operations with grain crops. The Chinese company sells grain to China with a minimal markup. As a result, our grain is dumped in Europe. Hence the blocking of the border, the reduction of international aid to Ukraine, and the “killing” of agricultural potential.

The Economist estimates that Ukraine has already lost more than $3 billion due to similar schemes for exporting “black grain.” And how much more is being lost every day. Imagine how many Mavics or pickup trucks could have been purchased for all this money.

Representatives of the Prosecutor General’s Office and the BES have repeatedly drawn attention to this issue, pointing out that only recently more than 40 containers of agricultural products purchased for cash were prevented from being exported from Ukraine. This means UAH 32 million in unpaid taxes.

Moreover, on our initiative, based on materials on COFCO’s activities in Ukraine, the

  • TU BES in Kyiv region was registered in the URPTI No. 72024110400000003 under Part 1 of Art. 211 of the Criminal Code,
  • Dnipropetrovs’k District Prosecutor’s Office – №42023040000000579 under Part 1 of Article 212 of the Criminal Code, Part 1 of Article 209 of the Criminal Code,
  • the Prosecutor General’s Office – № 42024000000000357 under Part 1 of Article 110-2 of the CCU, etc.

However, this does not prevent COFCO from continuing to conduct business and even obtaining the status of “an enterprise critical for the functioning of the economy and ensuring the livelihoods of the population during a special period.” This is confirmed by the Order of the Ministry of Agrarian Policy and Food of Ukraine No. 577 dated 27.02.2024, which states that the company meets the list of criteria. In particular, it states that

the amount of foreign currency receipts, other than loans and borrowings, for the tax year under review exceeds the equivalent of EUR 32 million, determined at the weighted average official exchange rate of the NBU for the same period
no arrears in the payment of a single contribution to the obligatory state social insurance;
the average salary of insured employees at the enterprise for the last calendar quarter is not less than the average salary in the region for the fourth quarter of 2021 (according to the State Statistics Service).

Thus, given the legislation of Ukraine, COFCO employees can be reserved from mobilization.

So has the Ministry of Agrarian Policy studied the organization’s activities in detail? We are interested to hear the prerequisites and grounds for such a decision, so we are already preparing relevant complaints and inquiries. We hope that the Ministry and the new Minister Vitaliy Koval will reconsider the decision and adopt a new one that will cancel the previous one. After all, you must admit that we do not believe in the actions of former Minister Solsky, who was accused of seizing state land and corruption schemes.

Response COFCO

Response COFCO Agri Resources Ukraine to our investigations was categorical. First, the lawyers of Kofko Agri Resources Ukraine LLC filed a lawsuit with the Economic Court of Kharkiv Oblast against the NGO Non-Stop and the head of the NGO, Kyrylo Yakovets, separately. They demanded “to refute false information by publishing a video, the content of which would be agreed with the Plaintiff”.

Simultaneously with the lawsuit, several complaints were filed with the Qualification and Disciplinary Commission of Advocates against the activities of lawyer Yakovets, apparently to increase pressure on our activities. However, in both cases, COFCO representatives failed. The complaints were dismissed and the proceedings closed. By the way, the Eastern Economic Court of Appeal upheld the opinion of the first instance and left the decision unchanged.

At the same time, we learned from our own sources that approximately 20% of the contractors had ceased cooperation with the company. This was a triple setback for COFCO Agri Resources Ukraine.

But even this did not stop COFCO from continui “COFCO Agri Resources Ukraine” filed a lawsuit with the Kyiv City Commercial Court. Interestingly, along with NGO Non-Stop, the defendant in the case is Gugl LLC, which the plaintiff asks to publish a refutation of our investigations.

In addition, COFCO demands to recover UAH 2 million in non-pecuniary damage from us. I wonder how the amount of damage to business reputation was determined?

Of course, the Commercial Court of Kyiv returned COFCO’s claim, stating: “Also, the stated claims are not the main and derivative claims within the meaning of the provisions of the Commercial Procedural Code of Ukraine, since the placement of several articles on different websites, the author of which, according to the plaintiff, is defendant 1, who disseminated false information, but this does not prove the interconnectedness of the grounds for the occurrence or the evidence submitted by the claim to refute certain blocks of information set out in separate articles.

Having reviewed the materials of the claim, the court notes that the plaintiff in the claim did not indicate and did not substantiate the connection of the claims, and consideration of the stated claims in this version of the claim excludes the possibility of applying the provisions of Article 173 of the Commercial Procedural Code of Ukraine regarding the consolidation of claims in one claim.”

Well, we are waiting for another appeal from Kofko. On our own behalf, we would advise you to hire qualified lawyers and finally stop the judicial terror of the NGO “Non-Stop” and Kyrylo Yakovets. If the information we have provided was a conspiracy, it is unlikely that law enforcement would have launched a detailed investigation into your activities.

We continue to work out the details of the agro-giant’s activities. And we urge Ukrainian farmers and agricultural business representatives not to cooperate with those who finance aggression, evade taxes and terrorize others for “unwanted information”.

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Let us know about it. We will help protect the violated rights!

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