ITC Upholds Prohibitive Tariff on Ukrainian Nitrogen

May 22, 2013 04:17 AM

The United States International Trade Commission has decided that tariffs over 150% on Ukrainian ammonium nitrate (AN) will stay in place. The measure is an attempt to secure profitable returns for American nitrogen producers, and a left-handed means of slowing the flow of AN into the United States.

Ukrainian nitrogen producers argue that because U.S. natural gas costs only 25% of what it does in Ukraine, American producers already have an advantage over imported product. However, experts are unsure about how much Ukraine is actually paying for natural gas and say that production capacity is high enough in that nation to make it up in volume. Ukraine has also been known to undersell AN, pricing the fertilizer as needed for export.

Ammonium nitrate is a component in UAN solutions, but is also very explosive making it a controversial product here in the United States. As an example, Pakistan's Fatima Group, which produces AN in Pakistan, was denied $1 billion in funding in the state of Indiana as the Department of Justice had reason to believe Fatima was selling AN to insurgent militants near the Afghan border. The AN there has been widely used in the construction of improvised explosive devices against U.S. troops and coalition forces.

The Department of Justice reports Fatima is making good progress toward a new AN formula that would be far less explosive. Despite an order from Governor Pence to fold the project altogether, DOJ will take part in tests of Fatima's new formula in June, and Fatima may one day be able to restart the Posey County, Indiana project.

Meanwhile, farm production in the Ukraine has increased by 55% since the tariff was imposed over a decade ago and plans are in place to build at least one more nitrogen production facility in the next few years. Ukraine may find itself in line after China for exports of nitrogen to the U.S. as China's summer tariff window is about to open, reducing duty on Chinese fertilizer to just 2%.

Political disputes in Ukraine have eased and that country has improved its access to natural gas supplies, allowing production to flourish both at the nitrogen plants and on the farm. But the 150% tariff imposed by the United States may force Ukraine to look to other markets including South America and India as leading fertilizer export destinations.


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