Ukrainian Agricultural Market
The Resolution withdrawing export quotas for corn became effective
On 5 May 2011 the Resolution No. 463 On Amending the Annex to the Resolution of the Cabinet of Ministers of Ukraine of 4 October 2010 No. 938 was published in the official governmental newspaper “Uryadovyi Kuryer”, thus, it entered into force. Just a reminder - the said resolution withdraws export quotas for corn.
The Parliament of Ukraine adopts the Draft Law on grain export tariffs and subsequently the Cabinet of Ministers of Ukraine withdraws quota regime for barley and wheat
On 19 May 2011 the Parliament of Ukraine has adopted the Draft Law of Ukraine On Introduction of Amendments to the Tax Code of Ukraine and Establishment of Export Tariffs on Certain Types of Grain. Presently the Draft Law is pending for the President’s signature to be officially published and enter into force. Just a reminder - the said law provides for the introduction of export tariffs with following rates:
(i) 9%, but not less than 17 Euro for 1 ton – for wheat, mixture of wheat and rye (meslin) and emmer wheat;
(ii) 14%, but not less than 23 Euro for 1 ton – for barley;
(iii) 12%, but not less than 20 Euro for 1 ton – for corn.
On 25 May 2011, the Cabinet of Ministers of Ukraine has decided to set a quota-free regime for wheat and barley exports. This step followed an earlier decision by the Government to lift export quotas on corn.
TRADE REMEDIES
Anti-discriminatory remedies legislation may be amended
The Draft Law On Amending Certain Laws of Ukraine regarding Protection of National Producers from Discriminatory and/or Unfriendly Actions of Foreign States, Customs Unions or Economic Groups of 26 May 2011 No. 8571 was registered in the Parliament of Ukraine. The Draft Law was submitted by the Government of Ukraine and is expected to facilitate the application of the so called anti-discriminatory remedies by Ukraine as provided by Article 29 of the Law of Ukraine On Foreign Economic Activities.
In particular, the Draft Law provides for the following major amendments:
(i) The right to apply embargo will be included in the authority of the Parliament of Ukraine, the Cabinet of Ministers of Ukraine will have the authority to use licensing regime, and the Interdepartmental Committee on International Trade will be authorized to apply other measures provided by the Ukrainian legislation;
(ii) Indicative prices are excluded from the list of anti-discriminatory measures. Notably, the said anti-discriminatory remedies may not be applied to the WTO Members as according to the Law of Ukraine On Foreign Economic Activities in case Ukraine and the country, customs union or the economic group applying discriminatory measures are members of the same international intergovernmental organization (e.g. the WTO), the dispute over discriminatory measures is settled in accordance with the rules and procedures of such organization.
Just to reiterate the application of anti-discriminatory measures is regulated by the Law of Ukraine On Foreign Economic Activity. The anti-discriminatory remedies (e.g. licensing regime, import duties, embargo etc.) are applied following the anti-discriminatory investigation, which aims at the detection of discriminatory actions i.e. trade barriers for products originated in Ukraine. Basically, the said measures are applied as countermeasures against discrimination of Ukrainian products abroad. Prior to the application of said trade remedies Ukraine conducts negotiations with its foreign partners, where discrimination occurs, aimed at elimination of discrimination. So far Ukraine successfully agreed on the elimination of discrimination in the Republic of Belarus with regard to caramel products (2010), certain household appliances (2008), and anti-discriminatory measures were not applied.
Russia limits exports of forged steel rolls originated in Ukraine
The Government of the Russian Federation adopted the Decision No. 406 of 20 May 2011 providing for application of the anti-dumping duty of 26% of customs value for forged steel rolls for rolling mills originated in Ukraine (classified under the following codes of the Commodity Classification of the Customs Union 8455303100 and 8455303900).
The Customs Union adopts unified approach to trade remedies application
The Commission of the Customs Union (Russia, Belorussia and Kazakhstan) adopted the Decision On Application of the Anti-dumping and Safeguard Measures, Applied in the members of the Customs Union, in the Single Customs territory of the Customs Union Following Their Reviews No. 648 of 19 May 2011. The said Decision sets a list of antidumping and safeguard measures to be applied throughout the territory of the Customs Union, including:
(i) Anti-dumping measures against certain types of steel pipes originated in Ukraine (casing pipes, pump pipes, oil and gas pipes and thermally-deformed pipes for general purposes);
(ii) Anti-dumping measures against engineering hardware originating from Ukraine;
(iii) Anti-dumping measures against polyamide industrial fibers originating in Ukraine (fiberglass);
(iv) Anti-dumping measures against certain products originated in China, Brazil, Republic of Korea and the Republic of South Africa;
(v) Safeguard measures against imports of stainless steel pipes;
(vi) Safeguard measure against imports of cutlery;
(vii) Safeguard measure against imports of fasteners.
Basically, the Decision provides that trade remedies applied in one Member of the Customs Union, e.g. Russian Federation, will be simultaneously applied by other Members of the Customs Union, i.e. the Republic of Belarus, and the Republic of Kazakhstan.
UKRAINE AND WTO
WTO Committee on Safeguards has considered Ukraine’s recent safeguard notifications[1]
On 2 May 2011 the Committee on Safeguards considered 23 notifications of safeguard action led by Indonesia with seven and Ukraine with five. In particular, Ukraine notified safeguard actions on the following products: cooling and refrigerating equipment; ferro-manganese and ferro-silico-manganese; mineral or chemical fertilizers; matches; and certain products of crude oil processing. The notification on crude oil processing products has caused several comments from the WTO Members. For instance, Turkey expressed concern over the delay in submission of the said notification. The large scope of products covered by this notification was questioned by the European Union.
Ukraine gives ‘green light’ to Samoa on its way to the WTO
On 6 May 2011 Ukraine signed bilateral agreement with Samoa concerning market access for goods in Geneva. The said agreement contains bound duty rates for a number of products of export interest to Ukraine. Samoa did not conduct bilateral negotiations in the area of trade in services with Ukraine. On the same day Samoa also signed bilateral agreement with Canada and the market access in goods agreement with the United States of America. Signing bilateral agreements with the interested WTO Members is a part of the WTO accession procedure.
Ukraine requests Dispute Settlement Body to establish a Panel in order to consider its dispute with Moldova
On 12 May 2011 Ukraine requested establishment of a panel to consider its trade dispute with Moldova (Moldova – Measures Affecting the Importation and Internal Sale of Goods (Environmental Charge). Particularly, Ukraine claims that certain provision of Moldova’s Law On Charge for Contamination of Environment seems to be inconsistent with Article III:1 and 2, and III:4 of the GATT 1994. The DSB considered the said request at its meeting on 24 May 2011. Following Moldova’s objection the DSB deferred the establishment of the panel. The next regular DSB meeting where the issue may be considered is to be held on 17 June 2011.
REGIONAL TRADE LIBERALIZATION
Negotiations on signing new CIS FTA failed
On 19 May 2011 members of the Commonwealth of Independent States hold a meeting in Minsk in order to sign amended free trade agreement between CIS Members. In accordance with amendments parties to the CIS FTA will be limited in application of import restrictions and trade disputes will be considered by a special body. Taking into account that the majority of parties to the CIS FTA did not accede to the WTO (Russia, Belarus, Azerbaijan, Kazakhstan, Tadzhikistan, Turkmenistan, and Uzbekistan), the said amendments, especially, the dispute settlement procedure, were deemed to be beneficial for Ukraine.
However, Uzbekistan and Turkmenistan voiced disagreement with proposed amendments and the agreement was not signed. In particular, Uzbekistan demanded to take out of the scope of the suggested dispute settlement procedure disputes over non-tariff barriers in the bilateral trade. Furthermore, Turkmenistan objected to adoption of the amendments without specifying reasons.
Progress in the FTA talks between Ukraine and the EU
In mid-May Ukraine and the EU held interim consultations concerning free trade area. After consultation the head of Ukraine’s negotiation group, Mr. Pyatnytskyy unofficially informed that Ukraine and EU have reached an agreement on all issues[2].
Furthermore, Ukraine seems to agree with the EU on imports of used clothes (second hand clothes) to Ukraine. Ukraine will be able to use such mechanism as entry prices, meaning that Ukraine may impose import tariffs once prices of imported clothes are lower than the stipulated entry price.
EU Commissioner for Enlargement and European Neighborhood Policy Mr. Fule and First Deputy Prime Minister and Minister of Economic Development and Trade of Ukraine Mr. Klyuev discussed preparations for the next round of negotiations on the of a free trade area between Ukraine and the EU during their meeting in Brussels on 31 May 2011. The said round of negotiations will be held on 20-24 June 2011 in Kyiv. The press office of the First Deputy Prime Minister reported that Mr. Fule and Mr. Klyuev had reaffirmed the common desire to complete the negotiations on the association agreement between Ukraine and the EU, including a free trade area, by the end of this year. Earlier on 31 May 2011, Prime Minister of Ukraine Mr. Azarov said that the agreement on the establishment of a FTA between Ukraine and the EU was almost complete, although three issues remained unresolved[3].
Parliament of Ukraine conducted a hearing with respect to cooperation with the EU and Customs Union of Russia, Belarus and Kazakhstan
On 11 May 2011 parliament hearings concerning current state and perspectives of the development of economic relations with the EU (free trade area) and Customs Union were held at the Parliament of Ukraine. Following the said hearings the Parliament of Ukraine has adopted recommendations, where provided that the conclusion of the free trade agreement with the EU is a priority for Ukraine in the nearest future.
CUSTOMS-RELATED NEWS
Verkhovna Rada approves amendments to the Customs Code of Ukraine in the first reading
On 17 May 2011 the Draft Law on Amendments to the Customs Code of Ukraine and Certain Other Legislative Acts of Ukraine was adopted by the Parliament in the first reading. The Draft Law was registered on 12 May 2011 by Mr. Vitaliy Khomutynnik (the Head of the Parliamentary Committee on Finances, Banking Activity, Taxation and Customs Policy) and is a compromise between Draft Law No. 1830, primarily prepared by the State Customs Service of Ukraine and Draft Law No. 1830-1, prepared by the Cabinet of Ministers of Ukraine. If adopted, the Draft Law shall enter into force on 1 January 2012.
The principal changes to the customs legislation, introduced by the Draft Law, include:
- Introduction of imperative time limit of customs clearance, which may not exceed 4 hours from the moment when the customs declaration has been lodged to the customs office and the goods presented for customs control;
- Possibility of subjects of foreign economic activity to conduct customs clearance in any customs office all over Ukraine, i.e. based on end destination of the goods comparing to place of state registration of importer or exporter as provided now;
- Establishment of liability and penalties of customs officers for delay of customs formalities without due cause and reimbursement of expenses of businesses, which suffered losses, caused by such delays (e.g. demurrage, storage costs, etc.);
- Simplification of clearance of goods, brought into the territory of Ukraine by physical persons, who will be entitled to import goods duty-free, if their value does not exceed EUR 2.000 (currently this threshold is EUR 200). If the value of the goods ranges between EUR 2.000-10.000 a flat duty rate in the amount of 10% shall apply (currently flat duty rate is 20%). Such changes shall have positive impact on development of tourism and distant trade;
- Improvement of pre-arrival declaring procedures (i.e. preliminary declaring of goods before their arrival to inland customs office), which shortens time for customs formalities;
- Improvement of customs valuation procedures (e.g. defined exhaustive list of documents, based on which customs value of the imported goods is assessed as well as grounds for rejecting customs value, declared by importer, etc);
- Introduction of authorized economic operator status, which results in simplified customs procedures for its holder, performance of some customs formalities without authorization from customs authorities (however, a company, applying for such status, must meet very strict criteria);
- Introduction of risk management system and post-clearance audit procedure. Such measures are intended to extend rights of the customs authorities, but at the same time to simplify customs clearance. Such checks may be held no more than once per year.
- Decriminalization of smuggling of imported goods (except smuggling of weapons, narcotics, cultural values, etc.). As a general rule, smuggling shall be considered as administrative offence, which shall be punishable by a fine and seizure of illegal items as well as means of transportation;
- Finally, subjects of foreign trade shall not be punished for minor errors or omissions in submitted declarations or documents.
Importers submit to the Government of Ukraine a list of problems encountered at the Ukrainian customs border[4]
In April 2011 importers have submitted to the Administration of the President of Ukraine a list of customs problems, which was subsequently referred to the Government of Ukraine for further detailed consideration. Mainly, problems were related to customs valuation of imported products.
Just to remind on 31 January 2011 during the meeting of the WTO Council for Trade in Goods the EU, the USA and Norway expressed concern about difficulties their companies have encountered in the second half of 2009 and in the beginning of 2010 during customs clearance through Ukraine's customs, especially with respect to customs valuation procedures. Particularly, representatives of the EU and Norway emphasized that Ukrainian customs authorities have been using minimum values instead of declared values in calculating import tariffs, which normally caused significant losses to importers. In response Ukraine’s representative asked concerned WTO Members to submit specific questions on the encountered problems.
In April 2011 importers have submitted to the Administration of the President of Ukraine a list of customs problems, which was subsequently referred to the Government of Ukraine for further detailed consideration. Mainly, problems were related to customs valuation of imported products.
Just to remind on 31 January 2011 during the meeting of the WTO Council for Trade in Goods the EU, the USA and Norway expressed concern about difficulties their companies have encountered in the second half of 2009 and in the beginning of 2010 during customs clearance through Ukraine's customs, especially with respect to customs valuation procedures. Particularly, representatives of the EU and Norway emphasized that Ukrainian customs authorities have been using minimum values instead of declared values in calculating import tariffs, which normally caused significant losses to importers. In response Ukraine’s representative asked concerned WTO Members to submit specific questions on the encountered problems.
TRANSPORTATION
The Parliament of Ukraine adopted new Air Code of Ukraine
On 19 May 2011 the Parliament of Ukraine adopted the Air Code of Ukraine. However, it has not been signed by the President of Ukraine yet. The Air Code of Ukraine being replaced was adopted in 1993 and does not fully meet modern safety and other requirements of aviation industry. The new Code sets out the general legal framework for aviation activity, government regulation of aviation sector and airspace use of Ukraine, aimed at ensuring aviation safety as well as interests and needs of consumers in air transport and aerial works.
The Code, inter alia, stipulates:
- Implementation of requirements of the international organizations related to air navigation safety and protection of passengers;
- Division of aviation into civil (subdivided into general aviation and commercial aviation) and state (e.g. to protect national security);
- The competent state authority in the field of civil aviation shall be State aviation administration, in the field of state aviation – Ministry of Defense of Ukraine. The competent state authorities are obliged to take measures to ensure flight safety, aviation, environmental, economic and information security. The competent state authority in the field of civil aviation may hold scheduled and non-scheduled checks of subjects of aviation activity, decrease/increase abnormally high or low tariffs;
- Liability of subjects of aviation activity for breach of civil aviation rules and regulations;
- Requirements to certification and operation of airports, landing areas, helicopter aerodromes;
- General procedures and requirements to licensing of aviation activity.
INCOTERMS 2010
The President of Ukraine broke the deadlock with application of INCOTERMS 2010 in Ukraine
Until late May 2011 Ukrainian legislation provided that the newer version of the INCOTERMS may be applied not earlier than 10 days after official publication of the respective version of the INCOTERMS in the Ukrainian language in the government newspaper “Uryadovyi Kurier”. The last published version was the INCOTERMS 2000. The said requirement was provided by the Presidential Decree No. 567/94. Moreover the Decree repeated the provisions of the Commercial Code of Ukraine establishing that in contracts (including foreign trade contracts) for the supply of goods the subjects of entrepreneurial activity of all property forms must refer to the INCOTERMS.
The issue of official publication of the respective version of INCOTERMS and its entering in force arose 2011. The International Chamber of Commerce, as an exclusive owner of intellectual property rights to INCOTERMS 2010 denied granting public free access to INCOTERMS 2010 in Ukraine. Therefore, due to established by the Ukrainian legislation special procedure for application of newer version of the INCOTERMS, sometimes Ukrainian traders faced problems with customs clearance of goods supplied under contracts referring to INCOTERMS 2010.
On 26 May 2011 the President abolished the Presidential Decree No. 567/94 by its Decree No. 589/2011, which abolished legislative requirement to prior official publication of the INCOTERMS. The latte fixed the problematic situation with application of the INCOTERMS 2010 in Ukraine.
In addition, the State Customs Service of Ukraine informed local and regional customs in its letter No. 11.1/2-12.2/8256-ЕП of 30 May 2011 that with abolishment of the Presidential Decree No. 567/94, currently there are no restrictions of application of INCOTERMS 2010 in Ukraine.
GAMBLING
On 19 May 2011 the Parliament of Ukraine adopted in the second reading the Draft Law On Amending Certain Laws of Ukraine regarding Improvement of the Legislation on the Prohibition of Gambling Business in Ukraine.
The said Draft was adopted after almost two years since the gambling business and participation in gambling games were banned in Ukraine by the Law of Ukraine on Prohibition of Gambling Business in Ukraine that entered into force on 25 June 2009. Once prohibited in 2009 gambling was not eliminated but moved online offering all the prohibited gambling games in Internet. The Draft Law introduces certain clarifications in the definitions of “gambling business” and “gambling game” aimed at complete ban of all types of gambling, on-line gambling in particular. Thus, “gambling business” shall include not only organization and holding gambling games, but providing an access to such games via computer simulators in interactive facilities or electronic (virtual) casinos irrespective of the server’s location. Moreover “gambling game” is defined as any game with mandatory conditions requiring a player to pay money in order to make stakes and to get a gain (prize) in any forms and the outcome of which depends solely or largely on chance. Moreover, the Draft Law also extends powers of the police allowing it to file a direct lawsuit requesting financial sanctions to be applied to persons violating prohibition of gambling on the territory of Ukraine. Presently the Draft Law is pending for the President’s signature to be officially published and enter into force.
CONSUMER PROTECTION
On 19 May 2011 the Parliament of Ukraine adopted the Draft Law On Liability for Harm Caused by the Defect in Products. Pursuant to the said Draft Law sellers of products do not bear liability for defect in products, and producers will solely bear the liability for defects in products. According to the effective legislation consumers may hold liable either producers or sellers of defected products.
The said Draft Law is to be signed by the President of Ukraine. Once signed, the Draft Law shall become effective in three months upon its official publication.
FRANCHISING
Franchise agreements’ state registration procedure may be revised
On 16 May 2011 the Draft Law On Amending Civil and Commercial Codes of Ukraine (regarding commercial concession agreements) No. 8515 was registered with the Parliament of Ukraine by MP Mr. Tolstenko.
The Draft Law introduces amendments to Article 1118 (2) of the Civil Code of Ukraine and Article 367 (2) of the Commercial Code of Ukraine concerning authorities responsible for state registration of franchise agreements. Under the Draft Law franchise agreement shall be registered by the central body of executive power in the sphere of intellectual property, i.e. the State Service of Intellectual Property of the Ministry of Education, Science, Youth and Sport of Ukraine.
Presently, under the Civil and Commercial Codes the state registration of the franchise agreement shall be carried out by the authorities that held state registration of the franchisor. If the franchisor is registered abroad, the franchise agreement shall be registered by the body that performed state registration of the franchisee. However, as the state registration procedure is not regulated, the responsible authorities refuse to register franchise agreements.
The amendments introduced by the Draft Law are seen as desirable and shall facilitate the franchise agreements’ state registration in Ukraine. The same amendments were suggested earlier by the Draft Law of On Amending Certain Legislative Acts of Ukraine (regarding state registration of commercial concession agreements) No. 2334 that was adopted by the Parliament in the first reading on 15 June 2010 and was further voted down by the MPs in the second reading held in the Parliament on 21 October 2010.
The Draft Law also sets forth minor amendments to Article 1122 of the Civil Code of Ukraine designed to fix some textual mistakes made while drafting the provisions of the said Article on terms and conditions of the franchise agreements to be deemed as invalid.
On 31 May 2011 the Draft Law was distributed among the MPs for their review.
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[2] Source: http://wto.in.ua/index.php?&page=1&get=3&id=2109
[3] Source: Interfax News
[4] Sources: http://www.wto.org/english/news_e/news11_e/good_31jan11_e.htm;
http://wto.in.ua/index.php?lang=ua&&page=1&get=3&id=2122
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