COUNTERFEIT CHEMICALS: Ukraine's Euro-integration hopes threatened by growing fake pesticides trade
By Jim Davis, Business Ukraine magazine
Kyiv, Ukraine, Monday, March 31, 2008

Ukraine's agricultural star would appear to be rising again. Agricultural
Policy Minister Yuriy Melnyk estimates a 40 million tonne grain crop in
2008, World Trade Organisation (WTO) membership should further facilitate
exports, and serious discussions of a European Union-Ukraine free trade
agreement are set to begin as soon as WTO accession becomes reality.

However, a burgeoning trade in illegal and dangerous agrochemicals that have their origin in China and use Ukraine as a conduit for European distribution could stop forward progress in its tracks.

POISONING THE BREADBASKET

Ukraine's rich lands, its industrious farmers and its proximity to the rich
European market should make it a natural supplier of fruit and vegetables as
well as grains and vegetable oil to EU countries.

However, Ukraine's reputation as both a user of and a conduit for illegal
and dangerous counterfeit agrochemicals may deny the country the benefits
of the international agreements it has fought so hard to gain over the past
fifteen years.

The choices for Ukraine appear quite simple and the results of failure to
act could be catastrophic and long-lasting. Either Ukraine must improve its
customs law enforcement, improve its policing of agrochemical use and
interdict fake agrochemical exports into EU states through its borders - or
face the distinct possibly of the EU's doors closing on the country faster
than they are currently opening.

A March 20 round table, organised by the European Business Association
(EBA), the European Crop Protection Association (ECPA) and EUCPIS, the
European Crop Protection Information Service, discussed details of the trade
in counterfeit and illegal plant protection products.

Evidence presented during the round table identified the People's Republic
of China as the principle source of most of the counterfeit products, with
Ukraine serving as a major repackaging and distribution centre for much of
eastern and western Europe.

BAD FOR BUSINESS, DANGEROUS FOR HEALTH

Round table chair and chair of the EBA Agrochemical Committee Marek Luczak, who is also Syngenta Ukraine's CEO, summed up the problem: "Ukraine has a tremendous opportunity to sell both farm produce and food products into the European Union but this can be ruined by the actions of a small number of unscrupulous importers and local producers who in many cases simply defraud farmers.

In reality the savings made in buying these cheap copies simply do not add
up as these farmers are putting their own health and that of their workers
at risk as well as running the risk of destroying their crops."

Rocky Rowe, trade advisor to the ECPA, says: "There has been a marked
increase in the trade of illegal and counterfeit agricultural chemicals over
the past few years that is unfortunately directly linked to the growth and
expansion of the chemicals industry in China. Nobody objects to legitimate
competition from China but what is currently being illegally exported is in
many cases very dangerous indeed."

During the round table, ECPA officials and others pointed out that it takes
10 years to synthesize, field test, register and launch into production a
new plant protection product based on a unique proprietary active
ingredient. The development of one such product alone costs around EUR
150 million.

CREATING CONSUMER CONCERNS

Round table participants from the agrochemical industry, government and the
farming community all agreed that while the potential negative impact for
Ukraine's exports into the vast European market is a major current concern,
the use of fake agrichemicals is also a problem for Ukraine's farmers and
consumers.

Moreover, Luczak comments: "This is a truly global problem. For Ukraine to
gain the advantages of WTO accession and to be able to negotiate a
free-trade agreement with the European Union, the country must put its own
agrochemical house in order. The EU wants to buy from Ukraine, but for this
to work, Ukraine must accept that it is in competition with the rest of the
world, which also wants to sell to the EU.

"Every Ukrainian producer who wants to sell to Europe must comply with EU
standards. European consumers are the best informed and most sophisticated
consumers in the world and we have to be able to provide the kind of
products they desire."

The EU has developed a union-wide reporting system that not only detects
illegal agrochemicals but also has a system that has the capacity to not
only spot an illegal substance on agricultural produce such as fresh
vegetables in a supermarket but also to trace the suspect chemical back to
the source.

CATCHING THE CROP SPRAY COUNTERFEITERS

Rowe points to a recent instance in which a grower in the Almeria region of
Spain used an illegal agrochemical during the production of bell peppers.
Soon, reports of the suspicious substance streamed in from 12 or 13 EU
countries to which the tainted peppers had been marketed and shipped.

The result was that all of the peppers were pulled from supermarket shelves
immediately and the remainder of the grower's crop was destroyed in the
field. Without serious harm to consumers, the use of illegal crop protection
had been detected and dealt with in a very expeditious manner through
implementation of EU procedures.

Discussions subsequent to the round table with members of staff of several
crop protection chemical companies tended to confirm the strong and
disturbing claims made during the ECPA and EBA presentations at the event.

UKRAINE: BOTTOM OF THE FORMER SOVIET LEAGUE TABLE

Dominic Watson, DuPont's Country Manager for Crop Protection in eastern
Europe, has spent the last five years travelling through the entire area for
which he has responsibility. He deals with a wide range of crop protection
counterfeiting problems.

Asked to evaluate the levels of counterfeiting problems in those parts of
the former Soviet Union for which he has responsibility, Watson explains:
"Russia has good control over what it lets in and provides more protection
for its domestic consumers. Belarus exercises complete control over what
enters it borders.

"Although the way they exercise control is different in Kazakhstan,
Uzbekistan, and Kyrgyzstan, they too keep things under control. However,
Ukraine is the worst both in terms of control of its borders and in control
of agrochemicals and their components after they enter the country."

While raising serious questions about Ukraine's ability to control farm
chemicals, Watson pointed out that in recent years many of Ukraine's
successful farmers are now becoming much more professional in they way
they deal with the acquisition and use of crop protection chemicals.

Watson pointed to DuPont's successful implementation of an anti-illegal
product program using a proprietary IZON three-dimensional holographic
label on containers of crop protection. In a previous presentation in
Russia, Tom McHale, manager of the anti-illegal product program, claimed,
that "every attempt to illegally duplicate them is sure to fail."

Watson adds that the holograms are a guarantee of quality for the buyer who
wants to assure that he is getting the real product for which he is paying.

However, he also pointed out that the person who is attempting to buy the
cheapest possible product does not pay any attention to the lack of a
hologram, since such buyers are motivated by price and generally don't worry
about quality.

When asked how importation of illegal crop protection chemicals into Ukraine
could be avoided, Watson is clear: "Stop imports of chemicals from China."

ILLICT CHEMICALS: THE CHINESE CONNECTION

To back up his contention, Watson points to a large shipment of crop
protection chemicals from China in connection with which an investigation is
still ongoing. "This shipment came into the country marked as 'cement.'
Anyone who conducted even a cursory investigation would have soon
discovered that this was not cement at all.

However, it passed right through Ukrainian customs with apparently no
questions being asked. I will let you make any assumption you want about
the circumstances, but the reality is that what was marked in shipping
documents as simple construction cement was actually 550 tonnes of
illegal and dangerous counterfeit copies of registered crop protection
chemicals."

Watson displays the results of an investigation into the matter that proved
the alleged cement was actually counterfeit versions of the products of
major agrochemical producers: Monsanto [334.4 tonnes]; Syngenta [74 tonnes];
Bayer [17 tonnes]; BASF 1.620 tonnes; Crompton 21 tonnes with four other
batches of agrochemicals from other manufacturers, bringing the total of
this one illegal shipment to 549.9 tonnes of illegal and potentially highly
dangerous crop protection chemicals.

According to Watson, the evidence suggests that some of the illegal
chemicals in this particular shipment have already been distributed to
Poland, Hungary and other countries throughout eastern Europe.

The ECPA has already written to President Yushchenko about the consignment
and is currently writing to Prime Minister Tymoshenko to advise her of the
subject. "These chemicals can be extremely dangerous," Rowe says.

"They need to be treated as toxic waste and disposed of by internationally
approved processes. The ECPA is offering technical expertise and independent
verification of the seized consignment so that discussions can be opened on
the ultimate disposal of these chemicals."

IDENTIFYING ROGUE SHIPMENTS

Watson and others pointed to analyses of previously seized agrochemicals in
comparison with the genuine products. The impurity profiles of original
products are always fully tested and demonstrated as safe to use and
complying with UN Food and Agriculture Organisation (FAO) specifications.

However, the impurity profiles of counterfeit products invariably show large
numbers of unknown impurities that are outside FAO specifications, may be
toxic and affect human health and the environment. These impurities may be
more apparent on fruit and vegetables, but also damage the quality of export
grain and consequently, of food sold to consumers.

"We are talking about danger to the farmer's crops, danger to his workers
and ultimately danger to consumers. The consumer is becoming a powerful
force when it come to food quality and security of the source.

That is why the ECPA and other cooperating organisations are determined to
continue the fight to stop these dangerous crop protection chemicals across
all of Europe. And to put the matter in perspective, from recent figures
published by the by the European Commission's Taxation and Customs Union
Directorate-General, over 86% of all counterfeits seized while entering the
EU come from China," Rowe adds.
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