The past summer was marked by important regulations of the
National Bank of Ukraine that simplify the exchange of foreign
currency cash, use electronic documents, copies of documents in
electronic form when purchasing and making payments with foreign
currency; and extremely important regulations of the Antimonopoly
Committee of Ukraine which approved new Fining Guidelines. Ukraine
continued its integration efforts and joined the Pan-Euro-Med
diagonal cumulation area. The Government represented a new Draft of
tax reform and submitted an initiative to provide compulsory state
social health insurance. These issues became the subject for
analysis by our experts. Ukraine has begun the process of accession
to the Regional Convention on Pan-Euro-Mediterranean Preferential
rules of Origin. How has accession to this agreement affected the
export of national products? What kind of new opportunity for
cooperation will Ukrainian business receive in commerce?
All countries try to deepen trade liberalization by concluding
free trade agreements (FTAs), usually eliminating all tariff and
non-tariff trade barriers. In order to enjoy the said privileges,
goods should originate in one of the countries that is a party to
the FTA and be directly transported between such parties. Use of
imported raw materials and components in the products may
considerably influence their origin status under the FTA.
To the best of our knowledge, the vast majority of FTAs (i.e.
all FTAs concluded by Ukraine (including the Association Agreement
with the EC) stipulate bilateral cumulation. That is, only imported
raw materials and components, originating in either country that
are parties to the FTA, should be used to define the country of
origin status (broadly speaking).
However, quite often in practice it is more reasonable and/or
convenient to use materials and components from third countries
which are not parties to the relevant FTAs. In order to continue
enjoying privileges set forth by the FTAs in such cases, some
countries are now going to apply diagonal cumulation provided that
(a) application of diagonal cumulation is directly set out by the
relevant FTAs; (b) the said FTAs provide for identical rules of
In order to facilitate diagonal cumulation, the EU promotes
conclusion of the Regional Convention on Pan-Euro-Mediterranean
Preferential Rules of Origin (Convention). If a certain
country adheres to the said Convention, it can join the
Pan-Euro-Med diagonal cumulation area. The major advantage of the
Convention is that the rules of origin contained in the Convention
will then automatically replace the rules contained in the relevant
FTAs entered into by that country. This will avoid amending each
FTA individually in order to incorporate rules on diagonal
cumulation and will ensure that identical rules of preferential
It goes without saying that Ukraine's participation in the
Pan-Euro-Med diagonal cumulation area will stimulate the export of
different products from Ukraine, especially value-added ones like
steel products, machinery and some consumer goods. However, in
order to make a system of diagonal cumulation operational, Ukraine
should (a) join the Convention; and (b) negotiate FTAs with those
countries of the Pan-Euro-Mediterranean area with which it would
like to apply diagonal cumulation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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