Export Q & A: U.S. Agricultural Exports to Russia

U.S. Agricultural Exports to Russia

Q:  My Company exports frozen cheesecake bites which are thawed and served in foodservice. We usually ignore leads from Russia because we were told there was a ban on U.S. foods. The latest importer to approach us said “there is no problem” and “don’t worry about it”. My question is whether we should pursue this or not as he seems sincere even if there is a ban or not.

A:  Thanks for the question, as there has been some confusion on this matter lately and it is a good time to re-examine what is going on. There may be a little lost in the translation, but he may be right, let’s take a look. This issue goes way back. In March 2014, the United States joined 30 other countries in imposing sanctions on Russia for violating the territorial integrity of Ukraine. Russia responded by imposing its own countersanctions on many agricultural imports. Since 2014, Russian agricultural production has increased 30%. It is referred to as “import substitution”.  

The list was rather limited to begin with and has undergone multiple revisions. In addition to that there a lot of exceptions to each of the products depending on specific needs they have so even banned products do clear customs.  Banned U.S. foods intended for their national sports teams would be an example. U.S. food has been going to Russia all these years, but only in moderation.

U.S. Agricultural Exports to Russia

In calendar year (CY) 2013, the United States shipped $1.3 billion of agricultural and related food products (including fish and forestry products), and of this amount approximately 55% became restricted.” Russia was ranked 30th as a destination for U.S. agricultural and related products. In CY 2014 U.S. exports of agricultural and related food products have dropped 28% to $971.7 million. Between 2014 and 2020 U.S. exports have dropped 84% to $216.8 million which gives Russia a dismal ranking of 57th, slightly more than the Netherlands Antilles.  

The May 2021 agricultural export data was just released and shows oddly enough that U.S. exports have grown 27% year to date (YTD) to $104 million. Consumer food exports account for about half that amount and are up 41%. High growth consumer food exports include fruit and vegetable juices, soft drinks, beer and wine, chocolate and confectionery and condiments and sauces. 

And of course, the U.S. is not going it alone as its allies in applying Russian sanctions have also been included. The now EU-27 + U.K. are also a major supplier into the market so Russia will have to source from other competitors. FAS Moscow reported that the EU-27 supplied nearly 40% of the Russia agricultural market in 2014 followed by Brazil with 9%.  Many imported products are now supplied by countries that are not subject to Russia’s counter sanctions (Belarus, Turkey, China, Ecuador, South Africa, Chile, and Argentina). However, products that are lower cost, better value or that are not already available locally are still potentially an opportunity for American suppliers. 

FAS Moscow reports that while overall imports of consumer-oriented products have fallen by more than 30% because of Russian countersanctions, Russia continues to rely on foreign supplies of fresh and dried fruit, nuts, vegetables, beef, cheese, wine, spirits, and food additives. In recent years, the volatility of the Russian ruble has been one of the major factors affecting the competitiveness of imported food products. The Russian ruble lost over half of its value against the U.S. dollar, from 35 rubles per USD in 2014 to 73 rubles per USD in 2020.

Changes in Countries Targeted by Russia

Over the course of seven years a number of changes to the list of countries having their food items banned have occurred.  On November 21, 2020, President Putin signed decree No. 730 extending Russia’s ban on the import of agricultural products from the countries that applied economic sanctions against Russia, including the U.S., until the end of 2021. The Government issued decree No. 2054 of December 9, 2020, implementing the decree of the President without any changes to the list of covered products. There was only a technical change to the list of covered countries, with the U.K. added to the list to reflect the Brexit reality.

Prior to that there was an extension of countries in Europe that were also not members of the EU. The complete list is now as follows: “LIST of agricultural products, raw materials and food, originating from the United States of America, European Union countries, Canada, Australia, the Kingdom of Norway, Ukraine, the Republic of Albania, Montenegro, the Republic of Iceland, the Principality of Liechtenstein and the United Kingdom of Great Britain and Northern Ireland, which are prohibited for import into the Russian Federation through December 31, 2021”

Overview of Banned Products   

Russia used the Harmonized System (HS), the global product classification system, in order to list the banned products more specifically, which is helpful in separating out the products which were not in fact banned. If your HS code is not on the list, or if it is but there is an exception for which you qualify, the product is not being banned from the market.

You will need your HS code and use a tariff database such as Customs Info to examine the specific line items in Russia. They are using the EU version of the HS but since the first six digits are all the same you can get very close or exactly to the specific code in the tariff. There are a number of asterisk extensions for exceptions to the ban, some reaching length of 8-10 digits since there are so many exceptions. You can review the exceptions to banned products and get more background on it by accessing the FAS Moscow report “Russia Continues to Fine Tune its Food Ban to Import Substitution Needs” or Report Number: RS2021-0010, dated April 13th 2021. The website is www.fas.usda.gov and then into the “GAIN” database under the “Data & Analysis” link.

The first line item is from Chapter 01 of the HS which is for live animals. It says “0103 (except for 0103 10 000 0)” is banned. It is for “Live swine” but there is an exception for pure-bred breeding animals.

From Chapter 02 which are meats of animals. “0201 – Meat of cattle, fresh and chilled; 0202*****” – this asterisk for example means it needs an import permit from the ministry. “Meat of cattle, frozen”; 0203; Pork fresh, chilled or frozen; 0206 (except for 0206 10 100 0, 0206 22 000 1, 0206 29 100 0, 0206 30 000 1, 0206 30 000 3, 0206 41 000 1, 0206 49 000 1, 0206 80 100 0, 0206 90 100 0*******); Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or frozen (except for products for the production of pharmaceutical products*******)”

“0207*****Meat and food byproducts of poultry, indicated in the HS item 0105, fresh, chilled or frozen; 0209; Pig fat, free of lean meat, and poultry fat, not rendered or otherwise extracted, fresh, chilled, frozen, salted, in brine, dried or smoked; from 0210**; Meat salted, pickled, dried from 0210** Meat salted, pickled, dried or smoked”

This is from Chapter 03 of the HS which is for seafood that is not prepared or preserved. “From 0301 (except for 0301 11 000 0, 0301 19 000 0)** – Live fish (except for fry of Atlantic salmon (Salmo salar) and fry of trout, fry of flounder-turbot, fry of sea perch, live decorative fish); 0302, 0303, 0304, 0305, from 0306**, from 0307** (except from 0307 60 900 0**), 0308: Fish and crustaceous, mollusks and other aquatic invertebrates (except for young oysters and mussels (spat), spat of white shrimp, breeding grapevine snails*********** and breeding or smoked; brown garden snails***********”

Chapter 04 is for dairy products: “From 0401**, from 0402**, from 0403**, from 0404**, from 0405**, 0406 – Milk and dairy products (except for specialized lactose-free milk and specialized lactose-free dairy products for therapeutic dietary nutrition and preventive dietary nutrition, 90 percent demineralized whey powder************)”

HS Chapter 06 is omitted. Chapter 07 is for vegetables and this one is a bit messy. It looks like all the products are banned and at the same time all of them also have exceptions. It looks like an asterisk convention. “Vegetables, edible roots and tuber crops (except for seed potatoes, seed onion, hybrid sweetcorn seed, seed peas, chickpea seeds********, *********, lentil seeds********, *********) 0701: (except for 0701 10 000 0 ********, *********), 0702 00 000, 0703, (except for 0703 10, 110 0 ********, *********), 0704, 0705, 0706, 0707 00, 0708, 0709, 0710*****, 0711, 0712*****; (except for 0712 90 110 0 ********, *********), 0713 (except for 0713 10 1000; ********, *********, from 0713 20 000 0**, from 0713 40 000 0**), 0714”

Chapter 08 of the HS is for fresh and dried fruits and nuts. In this case Russia has taken the opposite approach and lists every single product as banned with NO Exceptions: “0801, 0802, 0803, 0804, 0805, 0806, 0807, 0808, 0809, 0810, 0811, 0813” – you would expect to see no exports however there are about $500,000 in the last five years so somebody has permission to import fruits and tree nuts, it could be the Embassy or perhaps someone more “well connected” in the system.

HS Chapters 09 through 14 is omitted. Chapter 15 is for fats and oils or animals and vegetables. There are only a few products with even fewer exceptions. “1501: Pig fat (including lard) and poultry fat, other than that of heading 0209 or 1503; 1502 Fats of bovine animals, sheep or goats, other than those of heading 1503; 1503 00; Lard stearin, lard oil, oleo stearin, oleo-oil and tallow oil, not emulsified or mixed or otherwise prepared”

Chapter 16 is for prepared/preserved meats, and they have banned the import of sausages and like products of all meats, beef, pork, chicken, and other poultry. “1601 00: Sausages and similar products from meat, meat byproducts or blood; prepared meat products prepared therefrom” There are absolutely no ballpark franks going to Moscow, so they are missing out.

Then HS chapters 17 and 18 are omitted. Since they are for sugar and chocolate confectionery that explains the 2021 YTD growth you see in the categories. 

Then they combine HS Chapters 19 and 21, or parts of each. They say “Food or prepared products (except for biologically active additives, specialized food products for nutrition of sportsmen****, vitamin and mineral additives, flavorings, protein concentrates (of animal and plant origin) and their mixes; food fibers, food additives from 1901 90 110 0**, from 1901 90 910 0**, from 1901 90 990 0** – Food or prepared products prepared according to the technologies for cheese production and containing 1.5 % mass fraction or more dairy fat; from 2106 90 920 0**, from 2106 90 980 4**, from 2106 90 980 5**, from 2106 90 980 9**” 190190 includes malt extracts and dairy blends and 210690 is for miscellaneous food products not elsewhere specified, in this case syrups, animal/vegetable fat mixtures and cheese fondue – go figure.

Chapter 20 of the HS is omitted which is for preparations of vegetables, fruit, nuts, or other parts of plants, and 22 which is for beverages of all kinds including soft drinks, beer, wine, distilled spirits. 23 is also not included which is for animal feed. The final HS Chapter on the banned food list is not technically an agricultural product – it is salt from HS 25.

Is there a Russian Ban on “Frozen Cheesecake Bites?

Through all this analysis we saw no mention of a Russian ban on your HS code which is 1905.90 for “Bread, pastry, cakes, biscuits and other bakers’ wares” There were just a few powders from 1901 that they selected. This means your frozen cheesecake bites are not banned in Russia, so the potential buyer was correct, even if a little vague. There is no problem and there is nothing to worry about.  U.S. exports hit a record high $1.5 million in frozen pastries in 2019 and dropped like most products used in foodservice in 2019 but are still active through May at $186,000. Good luck with it!