Ukrzaliznytsia ignores market position on scrap metal tenders for ProZorro

In the period from the end of April to the beginning of May 2019, Ukrzaliznytsya put up for sale the next large consignments of ferrous scrap through the ProZorro system. At the same time, the terms of the tenders did not change for the better compared to previous auctions: metallurgists are offered to buy scrap on terms that do not imply UZ's responsibility for the physical provision of scrap, its safety and the buyer's access to the purchased raw materials, as well as obligations for its shipment.

As of early May, the shipment of scrap under March contracts to a number of auction winners has not yet begun. The winner of one of the tenders made a 100% advance payment in the amount of hundreds of millions of hryvnias for scrap metal, but a month and a half has passed, and the shipment of paid scrap metal has not begun.

Moreover, now there is an "innovation" in terms of mixing types of scrap. This is misleading to buyers, as different types of scrap involve different processing methods and therefore different consumers. The sale of lots, consisting of mixed types of scrap, is reminiscent of the Soviet trading principle - “on-load” sales.

The main problematic issue is the terms of delivery of scrap metal

Metallurgists offer to buy scrap on FCA terms instead of EXW offered by Ukrzaliznytsia. EXW conditions mean that ownership from seller to buyer passes to the goods on the territory of UZ. At the same time, Ukrzaliznytsia does not bear any obligations on the timing of the provision of scrap and its safety. The documents at the auction do not contain data on the actual location of scrap, and UZ alone regulates access to its sites where scrap is stored. She also manages the equipment that can be loaded into wagons or vehicles, and determines the cost of loading at its discretion.

According to the conditions offered by Ukrzaliznytsia, the buyer must, instead of one contract for the purchase of scrap, conclude separately three contracts - purchase, loading and organization of transportation. In the bidding documents, the drafts of the last two contracts are absent, which provides UZ with a field for speculation. And the number of contracts for loading and organizing transportation is proportional to the number of UZ branches taking part in the shipment. In other words, UZ offers the buyer to independently negotiate with each of its sites on the conditions for loading and dispatching already purchased scrap.

Metallurgists, on the other hand, offer to buy scrap on FCA terms, i.e. scrap loaded into a carriage and located at the railway station. This method of delivery relieves the buyer of the risks of violation by the seller of the conditions for the safety of the goods and the terms of shipment. The FCA price includes the seller's expenses for loading and delivery to the station. The industry has been operating under these conditions for 10 years, they