Over the past year, business losses due to illegal actions by the State Environmental Service have amounted to $200,000,000. The co-founder of S&P Investment Risk Management Agency, PhD, MBA, risk management business advisor, and attorney Natalia Osadcha explains how the scheme of stopping ships in ports operates.
We have repeatedly discussed the difficulties of business “interactions” with the Environmental Inspection in previous publications. Using one of our cases as an example, we detailed step by step how environmental officials skillfully and subtly manipulate terminology with a single goal – to prevent a vessel from leaving a Ukrainian port. A full year has passed since the publication of our first article. Unfortunately, no positive changes have occurred during this time. Once again, we must revisit the issue, analyze, forecast, and investigate where the real problem lies. The irony is that, a year later, a client has approached us again with a painfully familiar problem – a vessel being detained in port.
Our client is the owner of a grain cargo. The ship was detained in port because a stamp reading “Radiological Control: Import/Export Prohibited” mysteriously appeared on the bill of lading. It is important to note that under current legislation, this type of cargo is not subject to environmental control, and radiological control is conducted only if the cargo exhibits radiation emissions. Our client’s cargo successfully passed through the automated control system in the port. Nevertheless, without any valid grounds, the State Environmental Inspection stamped the bill of lading with “Radiological Control: Import/Export Prohibited,” indicating that the cargo was radioactive and that the vessel carrying such cargo could not leave the port.
Just like a year ago, it was only after the cargo owner officially contacted the State Environmental Inspection that the situation started to become clearer. It turned out that the Environmental Inspection had no claims against the cargo itself. Instead, the prohibition stamp was placed on the bill of lading based on allegations that the vessel had violated environmental protection laws. According to the regulatory authority, the ship was polluting the country’s internal waters. Despite the cargo being in perfect order, the vessel remained detained in the port, causing massive financial losses for both the cargo owner and the shipowner.
If environmental officials had acted within the framework of existing legislation, they would have issued an administrative violation report and calculated the environmental damage caused by the vessel. However, they had no legal right to detain the ship in the port.
In reality, the shipowner was never presented with a water sampling report, a protocol of water composition and characteristic measurements, or any official documentation confirming the vessel’s violation. There was no record of an offense committed by the ship, no administrative violation protocol, no fine, and no calculation of damages. The only thing issued was the stamp “Radiological Control: Import/Export Prohibited” on the bill of lading, resulting in a one-week delay and total losses exceeding $150,000.
In response to official inquiries about the reason for the ship’s detention, environmental officials shamelessly admitted that the Environmental Inspection simply had no other mechanism to detain a vessel, so they resorted to using a stamp intended for radiological control of goods.
The illegal actions of officials have catastrophic consequences. According to information published by the Better Regulation Delivery Office (BRDO) on Facebook, the estimated business losses due to the unlawful use of the “Radiological Control: Import/Export Prohibited” stamp by the State Environmental Service amount to approximately $200,000,000 per year. This figure does not even include the daily losses from vessel and cargo downtime, which range from $15,000 to $30,000 per day.
The situation was expected to improve with the introduction of Ukraine’s new Law No. 2530-VIII, adopted on 06.09.2018, “On Amendments to the Customs Code of Ukraine” and certain other laws regarding the implementation of the “single window” mechanism and the optimization of control procedures for goods crossing Ukraine’s customs border. Unfortunately, the law only made minor adjustments to how environmental officials operate, without changing the final outcome—ships continue to be unjustifiably detained in ports. The only difference is that instead of stamping “Radiological Control: Import/Export Prohibited,” environmental officials now issue direct bans on vessels leaving the port. However, they are only legally permitted to do so in one specific case—if the cargo exhibits radiation emissions (exceeding permissible radiation levels), as determined by Customs authorities.
Regarding our case, we made every effort to secure the release of the vessel. The issue of holding government officials accountable for the unlawful detention of the ship and cargo, as well as recovering damages from them, remains unresolved. Until a precedent is established and businesses take a firm stance, the system will continue to operate as it has, with only minor adjustments. Ultimately, the choice remains in the hands of businesses—just as it always has.
