Counterfeit and fake at the construction site: wrongly accused

Counterfeit and fake at the construction site: wrongly accused
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In late May, the Public Chamber of the Russian Federation brought together law enforcement and public officials, as well as supervisory authorities and businessmen so as to discuss the current situation in the area of the circulation in poor-quality and counterfeit building materials.

The roundtable discussion with officials from the Construction Ministry, Prosecutor's Office, Ministry of Internal Affairs, Federal Agency on Technical Regulating and Metrology, Russian Quality System, Federal Service for Accreditation as well as manufacturers of building materials was convened on the initiative of Russia’s Association of Builders. The event was moderated by Vladislav Grib, Chairman of the Commission for Public Control and Interaction with Public Councils at the Public Chamber. According to him, the volume of counterfeit products tends to grow due to the current economic crisis.

The meeting was opened by Chairman of the Commission on Housing, Construction, and Roads of the Public Chamber, Igor Shpektor. Calling on the present representatives of the media and Public Chamber to carry out a competent analysis of the situation, he has cited the example of a case where public officials ask illiterate questions, being confectioners by their main occupation. Igor Efremov, Director General of Lipetsk tube-rolling plant Svobodny Sokol, has noted that it is even worse when confectioners have senior positions at ministries.

President of Russia’s Association of Builders, Nikolai Koshman, took the floor. In his words, it remains unclear why the production of building materials is under the authority of the Industry and Trade Ministry, rather than the relevant ministry. This affects the effectiveness of the decisions made because officials often have to explain “how aerated concrete differs from foamed glass”. Nikolai has also pointed out that the recent accidents in the Russian cities of Kemerovo, Kazan, Saratov, Omsk, and Grozny were largely due to the use of poor-quality building materials. While their appearance on construction sites is in line with the policy pursued by the executive authorities and the Federal Antimonopoly Service aimed at reducing the cost of building materials.

Nikolai Koshman has also cited the example of a destructive activity of VEB (Bank for Development and Foreign Economic Affairs) that has “driven 13,000 enterprises to bankruptcy, six of which are strategic”. So, a domestic manufacturer of foamed glass managed to launch a production line of insulation for LNG plants. Until the last moment, products for these facilities — with seven new plants due to be built by 2024 —  had been supplied solely by U.S. manufacturers. As a result of continuous examination in the USA, a positive conclusion was issued regarding the use of domestic products, noting its superior quality compared to American analogs as well as its low price. After no more than two weeks after the permissive documentation was received, VEB blocked accounts of the company. The manufacturer had to repeatedly defend its rights before the court.

Then, with his attention focused on the situation with regard to cement production, Nikolai Koshman has said that in 2017, the share of low-quality products for this type of goods amounted to 20%. The leader here is the Siberian Federal District of Russia, with over 150,000 tons of counterfeit products sold. Cement is diluted with ash and radioactive slag, it is certifying bodies that are a weak point in quality control. The share of forged or inadequate certificates has reached 18%. The President of the Association has called for the introduction of companies’ notification with the establishment of a public register and a blacklist of certifying bodies. Thus, there are 4,000 accredited companies in Germany, with 208 of them being notified.

The notification was also endorsed by Alexander Stepanov, Deputy Director of the Department of Urban Development at the Construction Ministry. The official has noted a strong influence that is being exerted on the Ministry on the part of the partner countries, primarily, Kazakhstan, in the work on technical regulations of the Eurasian Economic Union titled: “On the Safety of Buildings and Structures, Construction Materials and Products”. However, there are significant imbalances in the internal regulation as well: apart from the division of powers with the Industry and Trade Ministry, issues of construction supervision are also beyond the Ministry’s authority.

A representative of entrepreneurs, Igor Efremov, has said that the main problem in product quality control is the lack of state standards for most items in the range of building material. There is a situation where each manufacturer can make its own set of rules and technical regulations through small laboratories and institutes, get a certificate and sell low-quality materials. According to Director of Lipetsk tube-rolling plant Svobodny Sokol, until the state has standardized the main types of building materials, efforts of supervisory bodies will be in vain.

Pre-owned pipes: dug out of the ground, subjected to sandblasting, fastening spraying — and put on the market again.

Vladimir Ivanov, Deputy Head of the TsMTU at the Federal Agency on Technical Regulating and Metrology (Rosstandart), has aligned himself with the position of businesses, noting the need to introduce standards for all reinforced concrete products. Referring to the other side of the question, the official has noted the fact that often it is not just end buyers but also sellers that fall victim to counterfeit and fake products. So, recently, in a large retail company was selling cement, the strength of which did not exceed 50% of the declared. According to Vladimir Ivanov, it is necessary to oblige sales points to keep incoming control of the delivered building materials.

Natalia Kozhina, a member of the Expert Council under the State Commission for Counteracting Illicit Trafficking in Industrial Products of NO Soyuztsement, has pointed out that retailers benefit from selling low-quality products because being cheaper they provide the sellers with greater profits. Last year, honest producers lost 40 billion rubles as a result of the actions of frauds, leaving the state budget without extra 9 billion rubles in tax revenues. In addition to strengthening control, there should be a liability for selling counterfeit products, up to a criminal one, Natalia notes — at present, the fine in terms of a ton of cement amounts just to 250 rubles.

According to First Deputy Head of the Committee for Technical Regulation, Standardization and Conformity Assessment at Russian Union of Industrialists and Entrepreneurs (RUIE), Andrei Lotsmanov, last year, 10 million tons of fake cement was in circulation. The expert has indicated that following the introduction in 2017 of the state standard for cement, the share of low-quality products decreased. The shared problem of the industry is the halfway measures in its regulation policy: the legislative framework corresponds to European standards, while the control does not. In the EU, there are surprise inspections, whereas in our country the companies are notified of them. The breeding ground for the increase in low-quality products is also the existing scheme of tax holidays — quite large companies falling under the expanded SME criteria are freed from inspections.

Regulatory authorities are required to inform the business the day before the unscheduled inspection. Often, that is enough time to hide the criminal activity, said First Vice President of AO “KhK Sibtsem” Gennady Rasskazov. Last year, the enterprise has made 28 control purchases of cement, revealing about 90 violations. At the same time, appeals to the regulatory authorities are often unsuccessful due to the “lack of sufficient data”, delaying the collection of information and the claim procedure for filing. And most importantly, according to the manufacturer, there is no mechanism for revoking a black certificate — after paying a fine, the unscrupulous company has the right to keep on operating.

As explained by Zakhar Golovnev, Deputy Head of the Department for Combating Offenses in Agriculture, Material Production and Non-Production Sphere at the “P” Division of the Main Directorate for Economic Safety and Counteracting Corruption, in Russia’s Interior Ministry, unlike counterfeit, selling fake products is not prosecuted under existing legislation, which in practice leads to the fact that law enforcement officers do not have the right to take interim measures or to destroy poor-quality goods.

The fact that there is no defined status of packers bringing the cement into circulation also creates a gap in the law — according to the Head of the Department of Chemical Technology of Cementing Materials of the Russian Chemical and Technological University n.a. D.I. Mendeleyev, Ph.D. in Technical Sciences, Sergei Sivkov. The pot is stirred by the Federal Antimonopoly Service requiring that the accredited organizations do not refuse to issue certificates to firms, which products often meet the necessary criteria only on technicalities. Regulatory authorities also like to pick faults in the marking, appearance and other details, ignoring the main thing — the quality of goods.

Petr Larin