Republic of Belarus and the Russian Federation: Sanctions and Tariffs

Matt Rodda Excerpts

Wednesday 8th March 2023 Westminster Hall

[Siobhain McDonagh]

I thank the right hon. Gentleman and congratulate him on all the work he does on not only Russia but China. We often work together. This debate is not about the grand scope of the sanctions, but about the nuts, bolts and garage doors of how they are working on the ground for British businesses and Belarusian businesses.

The Belarusian company appears to be stealing the British company’s customer base by avoiding the sanctions, absorbing the additional tariff and undercutting the British company by supplying at a lower rate. Most people would call that dumping, and it has led to a loss of roughly £10 million in revenue for this British company based in my constituency.

As has been said many times in the Commons, Russia and Belarus are trying to get round sanctions on an industrial scale, and this seems to be a case in point. I have detailed evidence of how the Belarusian company is evading sanctions, and I would like to state it for Hansard so that it is in the public domain. I also note that, although the Office of Financial Sanctions Implementation at His Majesty’s Revenue and Customs is responsible for enforcing specific cases, the Foreign, Commonwealth and Development Office is responsible for drawing up the sanctions and tariffs legislation.

As I tried to explain to the Minister informally last night, the way the company is avoiding sanctions is unbelievable: it is starting some of its goods in Russia. There is a list of sanctioned products codes for Russia and one for Belarus, and in some instances, the two lists do not match. As a result, a product could be sanctioned in Belarus but not sanctioned if it comes from Russia. That is exactly what is happening. The tariffs apply to all iron and steel commodity codes starting 72 and 73 in Belarus, but they apply to only specific iron and steel products that begin with commodity codes 72 and 73 in Russia. That means that some of the goods that the Belarusian company supplies are sanctioned if they are imported from Belarus but not if they are imported from Russia.

The Belarusian company supposedly managed to move an entire factory’s worth to Russia so that it can still import the goods sanctioned from Belarus into the UK tariff free, all the while undercutting a British business. I have been able to get hold of an email from the Belarusian company to one of those customers to prove that. It stated:

“We would like to clarify the situation with regard to the current import of sectional doors and operators to the UK.”

The company says:

“Since the UK Government has introduced economic trade and transport sanctions on Belarus,”

it has

“imported garage doors from our Russian factory”.

It states that

“shipments fully comply with import restrictions by the Government of the United Kingdom in the last months.”

There we have it. Because of the way our sanctions list has been drawn up, Belarusian companies are avoiding sanctions. They are manufacturing and shipping products that were originally from Belarus, and are now supposedly from Russia, to avoid the sanctions. I am glad that the Foreign Office Minister is present today, and I hope that the sanctions list is updated, because it is costing a business in my constituency millions of pounds.

In other cases, this Belarusian company is assigning its products a new, intentionally incorrect but unsanctioned commodity code, enabling it to import to the UK sanction-free. I got hold of an email from this company to one of its customers to prove that. The measures are quite technical, so I hope hon. Members will forgive me if I go through them in a little detail. The company stated:

“We are looking for a way to supply you with roll tubes which are currently banned from entering the EU due to their commodity code 7308905900, and it seems like we have found an option. We can bundle the roll tubes with other items. This will have a different name and a commodity code which can be imported to the EU and the UK.”

The company can change the commodity code to one that is allowed to enter the UK from Belarus, and it can evade sanctions altogether. The most egregious part is that the Belarusian company is now approaching the former customers of the British business in my constituency and offering to supply them directly, profiting and expanding its business because of the war in Ukraine. It is just unbelievable. If that is happening in one company, surely it is happening in a number of businesses right across the UK.

It is important that President Zelensky comes to Parliament to speak, that our Opposition and Government leaders visit Kyiv and that we all get together to stress how strong our sanctions and tariffs need to be. However, it makes a difference only if the detail is correct. The sanctions are effective only if the product lists are drawn up effectively and we are able to target Belarusian and Russian businesses. Tariffs are effective only if they are high enough to make goods originating from a country uncompetitive. In the recent co-ordinated package of sanctions by the US, EU and UK, only the US increased tariffs on metals by up to 200%.

As we know, Putin and his cronies will be seeking every single loophole, omission and error to try to circumvent the sanctions. It is quite clear that Russia and Belarus are actively trying to get round sanctions and absorb tariffs on an industrial scale. Currently, companies are claiming that their goods originate in Russia to avoid sanctions. That is absurd. I hope that the Minister can provide more information about that and explain how we will close the loopholes that Russia and Belarus are using.

We can have the toughest regime on paper, but if Russia and Belarus are finding ways round it in practice and costing UK businesses, we have not done the right thing. I ask the Minister to address the detail and the consequences for British business. If he is in a position to do so, I would welcome it if he gave a few minutes after the debate to the businesses that are here today.

[Matt Rodda (Reading East) (Lab)]

rose—

[Yvonne Fovargue (in the Chair)]

Order. If the hon. Member wishes to speak, did he obtain the permission of the Member in charge and the Minister prior to the debate?

--- Later in debate ---

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairship, Ms Fovargue. I thank the Minister and my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for allowing me to speak briefly. I thank my hon. Friend for her excellent work on this matter. Who would have thought that such a humble thing as a garage door could have been the subject of such appalling abuse of the system? I ask the Minister to look into that.

I want to set out my support for this action and point out the considerable support for Ukraine in my constituency of Reading East. Many local people, including those in our significant local Ukrainian community, who I actively support, are concerned about sanctions. Sanctions need to be part of a wider package of action against the Putin regime in Russia; that should include the UK continuing to work with NATO, continued UK Government support for the Ukrainian Government through military and other means, and a package of measures for the future, such as a plan for the longer term and action against war criminals.