1 PRESENTATION OF NIBULON’S RESEARCHES REGARDING THE CONSEQUENCES OF THE DRAFT LAWS NO. 2475A, 2476A, 2713, AND 2712 2 DUES, TAXES AND FEES BASED ON A CALL BY A VESSEL THROUGH THE WATERWAY FROM TRUTAIEV SANDBANK TO KREMENCHUK Barge plus tug flying the Ukrainian flag Volgo-Don vessel flying the Ukrainian flag Foreign-going Volgo-Don vessel flying (a pusher tug plus 2 barges) (coastal shipping), (coastal shipping), 3 500 tons of cargo foreign flag, 3 500 tons of cargo 5 600 tons of cargo In accordance with In accordance In accordance In accordance with the draft In accordance with the draft In accordance with the the current with the current with the current law No. 2475a law No. 2475a draft law No. 2475a legislation legislation legislation Canal dues $ 0,00 $ 0,00 $ 0,00 $ 0,00 $ 1 851,36 $ 0,00 Tonnage dues $ 83,55 $ 0,00 $ 62,86 $ 0,00 $ 1 595,00 $ 0,00 Administration dues $ 41,77 $ 0,00 $ 31,43 $ 0,00 $ 314,37 $ 261,00 Light dues $ 87,35 $ 0,00 $ 65,71 $ 0,00 $ 548,00 $ 0,00 Sanitary dues $ 41,77 $ 0,00 $ 31,43 $ 0,00 $ 314,37 $ 0,00 Anchorage dues $ 0,00 $ 0,00 $ 0,00 $ 0,00 $ 0,00 $ 0,00 Locking services* $ 435,50 $ 0,00 $ 456,00 $ 0,00 $ 1 365,00 $ 0,00 Pilotage $ 0,00 $ 0,00 $ 0,00 $ 0,00 $ 6 602,00 $ 6 602,00 VTMS (vessel traffic $ 121,52 $ 121,52 $ 91,20 $ 91,20 $ 128,60 $ 257,00 management system) River due $ 0,00 $ 694,66 $ 0,00 $ 434,16 $ 0,00 $ 1 302,49 Total $ 811,47 $ 816,18 $ 738,63 $ 525,36 $ 12 718,70 $ 8 475,86 Excise tax* $ 2 300,00 $ 2 300,00 $ 2 300,00 $ 2 300,00 $ 0,00 $ 0,00 Total per 1 ton $ 0,5556 $ 0,5565 $ 0,8682 $ 0,8072 $ 3,63 $ 2,4217 *at the Ukrainian National Bank exchange rate as of October 26, 2016 In case of adoption of the draft law No. 2475a, vessels flying foreign flags and performing cargo trips by inland waterways, paying the river due, will be exempted from canal, tonnage, light, sanitary, and anchorage dues. The vessels will be exempted from compulsory pilotage if the captains have valid certificate enabling one to sail along the inland waterways of Ukraine without pilotage. Given the above mentioned, vessels flying foreign flags will be able to use inland waterways of Ukraine on an equal footing with the vessels flying the Ukrainian flag. However, foreign vessels will be able to bunker behind the 12-mile zone and will not pay fuel excise tax. As a result, they will have an advantage over the vessels flying the Ukrainian flag, and the state budget will receive less funds. If the average fuel consumption comprises 36 tons per cargo trip and the total freight traffic is 10 million tons, the state will not receive about EUR 9 600 000 per year or EUR 0.96 per ton of cargo transported by rivers. Thereby there will be no source to form revenues of the budget to revive and maintain the inland waterways. Thus, introduction of the draft law No. 2475а will lead to: 1) shortfall in excise tax by the state (EUR 9 600 00); 2) unequal competitive conditions for vessels flying the Ukrainian flag, as vessels flying foreign flags will be able to bunker behind the 12-mile zone and spare up to USD 50 per ton of the fuel cost or USD 0.5 per ton during cargo transportation. This is a significant advantage for foreign shipowners over the domestic ones. 3 CALCULATION OF COSTS FOR COASTAL TRIP BY THE ROUTE TRUTAIEV SANDBANK – KREMENCHUK Barge plus tug flying the Ukrainian flag (a pusher tug plus 2 barges), 5 600 tons of cargo In accordance with the current legislation River due of UAH 0.005 Canal dues, UAH 0,00 0,00 Tonnage dues, UAH 2 138,04 0,00 Administration dues, UAH 1 068,89 0,00 Light dues, UAH 2 235,29 0,00 Sanitary dues, UAH 1 068,89 0,00 Anchorage dues, UAH 0,00 0,00 Locking services*, UAH 11 144,45 0,00 Pilotage, UAH 0,00 0,00 VTMS, UAH 3 109,70 3 109,70 River due, UAH 0,00 17 780,00 Excise tax*, UAH 58 857,00 58 857,00 Total, UAH 79 622,26 79 746,00 Total per 1 ton, UAH 14,22 14,24 Cumulative increase in dues and fees in comparison 0,00 123,74 with the current legislation, UAH Cumulative increase in dues and fees in comparison 0,00 0,02 with the current legislation per 1 ton, UAH Upon implementation of the river due of UAH 0.005 and taking into account potential freight traffic on the inland waterways of 10 million tons, the total annual revenue from the river due will comprise UAH 31.75 million. This demonstrates inefficiency of the river due adoption to form the budget of the river waterways authorities. 4 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV (as of April 1, 2016, before increase in tariffs for railway services) UAH 197.34 per ton UAH 249.82 per ton UAH 342.72 per ton 5 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV (since May 1, 2016, after increase in tariffs for railway services) The Ministry of UAH 226.94 per ton Infrastructure of Ukraine plans to increase tariffs by 15 %. It is unacceptable. The Ministry of UAH 249.82 per ton Infrastructure of Ukraine should develop tariff policy to concentrate transport UAH 342.72 per ton logistics of Ukraine on transportation by waterways. 6 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV (according to the draft law No. 2475a on inland water transport) Given the abolishment of certain payments and taking into account the river due. UAH 226.94 per ton Reduction of the prime cost for river transportation by UAH 3.24 through fees and dues is explained by the fact that they comprised a small share of the total prime cost. Excise tax UAH 246.40 per ton forms the major share of the prime cost. Excise taxes: Ukraine – EUR 113 per ton; The USA – USD 76.71 per ton; UAH 342.72 per ton Europe – there is no excise tax. We suggest reducing the excise tax in Ukraine at least by 50 %. 7 COMPARISON OF VESSEL CALL AT SEA PORTS Motor vessel, 25 thousand tons Motor vessel, 60 thousand tons Europe Europe Mykolaiv Rotterdam Hamburg Ghent Antwerp Mykolaiv Rotterdam Hamburg Ghent Antwerp Length of canals, miles 44 10 70 18 43 Length of canals, miles 44 10 70 18 43 Dues Dues Tonnage dues (in/out), Tonnage dues (in/out), including: $ 17 321,85 10 407,58 13 474,43 $ 38 667,39 22 144,87 28 650,98 including: € € € € $ 43 702,66 - - $ 97 556,99 - - Canal dues (in/out), including: Canal dues (in/out), including: 1. canal passing due $ 37 469,25 - - 1. canal passing due $ 83 642,22 - - $ 6 233,41 - - $ 13 914,77 - - 2. entrance canal dues € 19 392,47 € 8 708,00 2. entrance canal dues € 41 214,84 € 18 629,00 Light dues $ 2 825,55 - - Light dues $ 6 307,45 - - Berth dues $ 2 149,88 € 5 242,50 € 3 980,00 Berth dues $ 4 799,14 € 12 582,00 € 9 552,00 Anchorage dues $ 264,13 -- $ 589,61 Anchorage dues -- $ 1 351,35 Administration dues € 171,30 € 171,30 Administration dues $ 3 016,60 € 171,30 € 171,30 Sanitary dues $ 1 489,92 € 415,00 - € 168,38 € 218,38 Sanitary dues $ 3 325,94 € 615,00 - € 273,68 € 323,68 Payments for services Payments for services $ 10 171,98 8 310,00 7 107,54 9 672,92 $ 37 394,93 16 418,00 10 156,14 13 715,80 Pilotage, including: € € € Pilotage, including: € € € 1. canal passing $ 8 815,72 € 9 930,00 € 7 328,00 € 4 832,34 € 4 832,34 1. canal passing $ 25 602,75 € 10 870,00 € 14 852,00 € 6 894,12 € 6 894,12 $ 1 356,26 982,00 2 275,20 4 840,58 $ 11 792,18 1 566,00 3 262,02 6 821,68 2. pilotage (in) / entrance canal € € € 2. pilotage (in) / entrance canal € € € VTMS $ 1 651,10 € 664,33 - - - VTMS $ 5 528,61 € 1 076,74 - - - Mooring / unmooring $ 2 160,00 - - € 1 000,59 € 793,00 Mooring / unmooring $ 3 600,00 - - € 1 280,83 € 1 400,00 Tugs $ 10 909,08 € 5 860,00 € 10 120,00 € 19 264,86 € 6 192,48 Tugs $ 48 232,22 € 14 130,00 € 14 410,00 € 31 237,14 € 12 749,76 Harbour Master fee $ 368,40 € 30,00 - - - Harbour Master fee $ 368,40 € 30,00 - - - Agency service $ 4 056,20 € 4 830,00 € 4 844,00 € 5 350,00 € 5 350,00 Agency service $ 5 130,00 € 7 090,00 € 7 899,00 € 7 354,00 € 7 354,00 Bunker adjustment - --€ 212,00 € 212,00 Bunker adjustment - --€ 308,00 € 308,00 Other $ 293,17 € 1 368,00 € 2 325,00 € 1 104,00 € 500,00 Other $ 407,98 € 2 514,00 € 3 078,00 € 1 594,00 € 500,00 Total $ 98 715,27 € 42 489,80 € 34 307,00 € 50 028,75 € 40 564,51 Total $ 254 925,26 € 77 540,58 € 60 434,00 € 87 101,96 € 74 725,52 Total per 1 ton $ 3,95 € 1,70 € 1,37 € 2,00 € 1,62 Total per 1 ton $ 4,25 € 1,29 € 1,01 € 1,45 € 1,25 Given the information, canal dues at Mykolaiv are unreasonably high.