Estonian Customs Board thwarts German machinery manufacturer's attempt to evade sanctions

TALLINN - At the end of summer 2022, customs officials at the Luhamaa border inspection post in southeastern Estonia stopped a shipment of machine parts that had arrived from Harsewinkel, Germany, and were headed to Krasnodar in Russia, according to the accompanying documents, Postimees reports.

The Estonian Tax and Customs Board is not disclosing any details of the incident, even with regard to whether it occurred in August or September 2022, due to rules demanding the protection of tax secrets.

The shipment included components belonging to Claas, Europe's largest manufacturer of grain harvesters, the export of which to Russia is forbidden due to Russian President Vladimir Putin's war against Ukraine, the German weekly newspaper Die Zeit and Radio Hochstift wrote in a joint news report. The two news outlets said that in order to evade the sanctions, the components subject to an export ban were installed inside larger parts and the shipment had thus received a new goods code.

Kulli Kurvits, head of customs formalities at the Estonian Tax and Customs Board, said that goods moving to Russia have been under heightened scrutiny by the Tax and Customs Board from the start of the war.

"If there's anything that's even a little bit suspicious, we're checking it," Kurvits said. "However much time it takes -- we cannot afford for Estonia to be labeled a country through which it is possible to transport goods that should not arrive in Russia."

The investigation by Die Zeit and Radio Hochstift reveals that the leadership of Claas, a company that has been operating for over a century, had drawn up a strategy document for internal use at the company on how to evade the sanctions imposed against Russia. Claas was the first major Western manufacturer of agricultural machinery to establish a factory in Krasnodar, Russia, for 160 million euros in 2005. The factory produces the Tucano harvesters, but only if a share of the necessary components are transported to Russia from Claas' factories in Harsewinkel or Paderborn in Germany.

Due to operations at the factory in Krasnodar having been suspended for several months following sanctions against Russia, Claas factories in Germany had been looking for ways how to hide the forbidden components in a way that does not attract any attention or raise suspicions on the EU's eastern border, Die Zeit reports.

The Estonian Tax and Customs Board discovered that the goods sent by Claas violate the sanctions imposed against Russia and sent the components subject to an export ban back to Germany.

Even though Estonia intercepted the components for Claas harvesters and sent them back to Germany at the end of summer 2022, the parts nonetheless arrived in Krasnodar at the end of October, according to Die Zeit and Radio Hochstift. The Russian market is profitable for Claas; according to the German sources, Claas' factory in Krasnodar produces up to 2,500 harvesters and tractors per year and generates an annual profit of some 46 million euros.

It is unknown how the forbidden harvester components were ultimately transported from Germany to Russia. The head of customs formalities at the Estonian Tax and Customs Board, Kulli Kurvits, did not comment on this but noted that there are stronger and weaker links on the border of the European Union. She did not rule out that the information presented at the border may have been manipulated in some other country and that different documents with a new goods code may have been presented.

"Unfortunately, the bad guys are smart, too," she said.

Claas has close relations with Russia, according to Die Zeit and Radio Hochstift. Ralf Bendisch, the company's director general in Russia, was also Germany's honorary consul in Krasnodar. The German consulate in Krasnodar has the same address as the Claas harvester factory, according to Die Zeit.

While Claas has rejected accusations of violating the sanctions against Russia, the company has halted deliveries to Russia, according to the latest information, but nonetheless wants to retain the factory in Krasnodar.