Ukraine: International Trade News. October - December 2016

WTO NEWS

WTO DISPUTE REGARDING RESTRICTIONS APPLIED TO UKRAINIAN TRANSIT OF GOODS THROUGH THE TERRITORY OF THE RUSSIAN FEDERATION

On 14 September 2016, Ukraine submitted a request for consultations with the Russian Federation in respect of restrictions on the transit of Ukrainian goods through the territory of the Russian Federation (DS512 "Russian Federation - Measures Concerning Traffic in Transit"). On 10 November 2016, consultations were held between Ukraine and the Russian Federation in the WTO on the issue, the progress and the results of which are kept confidential1.

The restrictions on transit of goods were introduced by the Russian Federation on 1 January 2016, after commencement of application of the EU - Ukraine Association Agreement.

WTO DISPUTE ON IMPORT RESTRICTIONS APPLIED TO UKRAINIAN RAILWAYS GOODS

On 10 November 2016, Ukraine submitted request for the establishment of a panel in the dispute on import restrictions applied to Ukrainian railway goods: railcars and rolling stock, turnouts, other equipment and components (DS499 "Russian Federation - Measures affecting the importation of railway equipment and parts thereof"). On 16 December, WTO Dispute Settlement Body agreed to establish the panel2. Japan, US, EU, China, Indonesia and Singapore have later joined the dispute as third parties thereto.

Ukraine initiated the dispute in October 2015, by submitting a request for consultations with the Russian Federation ("Request"). However, during the consultations Ukraine and the Russian Federation have not come to a mutually acceptable solution, therefore restrictions were not lifted.

According to the Request, in 2014 the Russian Federation introduced a number of unsubstantiated restrictions, which have actually rendered the import of Ukrainian railway goods to the Russian Federation impossible. In particular, the Russian Federation suspended the certificates of conformity issued previously, limited the issuance of new certificates, and does not recognize the certificates of conformity issued by other countries of the Eurasian Economic Union.

TRADE LIBERALIZATION AND REMOVAL OF TRADE BARRIERS

TERMINATION OF THE BAN ON TIMBER EXPORTSIS PLANNED

On 7 December 2016, the Draft Law №5495 "On Amendments to Some Laws of Ukraine Concerning the Conservation of Ukrainian Forests and Prevention of Illegal Export of Unprocessed Timber" was registered in the Verkhovna Rada. The Law provides, among other things, for restrictions on domestic consumption of raw timber (code 4403 UKTZED) reducing it to the amount of 20 million cubic meters per year for the duration of the moratorium on the timber export3.

On 24 November, the President of European Commission Jean-Claude Juncker said at the briefing upon the results of the EU-Ukraine summit, that the President of Ukraine Petro Poroshenko expressed his intention to lift the ban on the export of raw timber.

On 9 April 2015, the Ukrainian Parliament adopted the law, which prohibited the export of timber and lumber in their raw form for 10 years.The ban on the export of timber (except pine) entered into force on 1 November 2015 and the ban of export of pine wood species became effective on 1 January 2017.

REMOVING ADMINISTRATIVE BARRIERS FOR THE EXPORT OFSERVICES

The Ukrainian Parliament adopted the law on elimination of administrative barriers to the export of services (Draft Law №4496)4.

According to the Law, exporters of services (excluding transport services) will be able to execute the foreign contract by adopting the public offer or by electronic messaging or by other means, in particular by issuing the invoice, inter alia, in electronic form. In addition, the law prohibits the banks to require the translation of the documents into the Ukrainian language, if they were already made in English.

The Law also introduced amendments to the Law  "On Rules of Foreign Currency Payments". In particular, the first section of Article 1, which previously provided for control over return of foreign exchange earnings from the export of intellectual property works (services), shall be removed. Thus, control over return of foreign exchange earnings will be carried out solely for the export of products, works and transport services.

SANITARY AND PHYTOSANITARY MEASURES

MOLDOVA, ROMANIA AND BELARUS PROHIBIT MEAT IMPORTS FROM UKRAINE

Due to the outbreak of African swine fever in some regions of Ukraine in October-November, the imports of meat products from the Ukrainian territory to a number of countries was limited. The Cabinet of Ministers of Moldova was the first to take such decision. The ban is applied to meat, drugs, foods, and animal by-products from animals susceptible to African swine fever5. On 11 October, Romania joined the list of countries by introducing a complete ban on imports of pork from the Odessaregion.6 On 30 November, Belarus banned the import of pork and feed from Rivne and Cherkasy regions for the same reasons. All three countries noted that restrictions are temporary and are based solely on security considerations7.

UKRAINE PROHIBITS THE IMPORT OF POULTRY FROM GERMANY, AUSTRIA, HUNGARY AND BULGARIA

The State Service of Ukraine for the Issues of Food Safety and Consumer Protection (Derzhspozhyvchsluzhba) introduced restrictions on imports of poultry from certain regions of Germany, Bulgaria, Hungary and Austria. Such measures were taken in response to the outbreak of avian influenza and Newcastle disease in the territory of these countries8.

TRADE DEFENCE MEASURES

THE RULES OF APPLICATION OF SAFEGUARD DUTIES AGAINST IMPORT OF CARS FROM THE EUROPEAN UNIONHAVE BEEN ADOPTED

On 28 December 2016, the Cabinet of Ministers of Ukraine agreed on the rules of application of safeguard measures concerning the import of cars, classified under UKTZED code 8703, originating from the European Union into Ukraine. Such measure may be applied pursuant to Art.44 of the Association Agreement between Ukraine and the European Union. The draft Resolution was proposed by the Ministry of Economic Development and Trade of Ukraine.

Safeguard duty against imports of passenger cars from the European Union can be introduced if all of the following conditions are met:

  • if the volume of imports of passenger cars from the European Union to Ukraine during the year reaches 45000 units, and the percentage of such import in total import to the domestic car market exceeds 20 per cent (requirements for the second yearof application of the EU – Ukraine Association Agreement);
  • if the amount ofcars imported from the EU exceeds the trigger volume of all new registrations of passenger cars over the last year;
  • if such import is causing serious injury to the domestic industry.

The decision of the Cabinet of Ministers of Ukraine is aimed at support of the domestic automotive industry during the gradual reduction of import duties on cars from the EU.9

ANTIDUMPING DUTIES ON FERTILIZERS FROM THE RUSSIAN FEDERATION

On 27 December 2016, the Interdepartmental Commission on International Trade ("the Commission") by its decision No. AD-363/2016 / 4411-05 imposed definitive anti-dumping measures in the form of anti-dumping duty against imports of certain nitrogen fertilizers (urea and urea - ammonium nitrate solution), classified under UKTZED codes 3102 10 80 and 3102 00 00, originating from the Russian Federation, into Ukraine. The rates of anti-dumping duties are set at the following level:

  • for PJSC "NovomoskovskJoint StockCompany "Azot" - 18.78 per cent;
  • for PJSC "Nevinnomizsky Azot" - 18.78 per cent;
  • for PrJSC "KuibyshevAzot" - 4.19 per cent;
  • other producers in the Russian Federation - 31,84 per cent.

Antidumping duties shall be applied for a period of 5 years. The notification on application of duties was published on 30 December 2016 in "Uryadovyi Courier" newspaper ("The Government Courier"). Anti-dumping measures shall apply after 60 days from the date of publication of the notification.

In its statement of 27 December 2016, the Commission announced that the government is planning to present to the Parliament the Draft Law on diversification of fertilizers supply by reducing the import duty rates for the most popular types of fertilizers. According to the Commission, the Ministry of Agrarian Policy and Food of Ukraine plans to address to the Commission with the request for suspension the applied measures.

As of today, according to the Commission, the Russian Federation accounts for about 90 per cent of the total volume of imports of fertilizers, being the main supplier of this product to Ukraine. As stated by the Commission in its communication, the import of fertilizers at dumped prices makes Ukrainian farmers precariously dependent on their future deliveries. Probable unforeseen suspension of the supply of fertilizers from the Russian Federation could be another trade risk factor for the agriculture and food sectors of Ukraine.10

REVIEW OF SAFEGUARDS ON IMPORT OF DISHES AND TABLEWARE FROM CHINAWAS INITIATED

The Interdepartmental Commission on International Trade ("the Commission") by its Decision № SP-364/2016 / 4411-05 of 27 December 2016 initiated the review of the safeguard measures concerning the import of cookware, tableware and kitchen utensils made of porcelain (UKTZED code 6911 10 00 00)  into Ukraine, irrespectively of the country of origin and export.Review of the measures was initiated at the request of "Druzhkovsky Porcelain Factory".

Safeguard measures in the form of safeguard duties were applied to cookware, tableware and kitchen utensils made of porcelain, irrespectively of country of origin and export in accordance with the Commission's decision No. SP-309/2014 / 4421-06 of 4 April  2014. Duty rate was set at the level of 35.6 per cent with its gradual liberalization to 28.8 per cent11.

AGRICULTURE

UKRAINIAN AGRARIANS PROVIDED WITH EXPANDED LIST OF GOODS FOR EXPORT TO INDONESIA

According to the Council of exporters and investors at the Ministry of Foreign Affairs of Ukraine, the list of agricultural products allowed for export from Ukraine to Indonesia, has been expanded. This step is the result of cooperation between the Embassy of Ukraine in the Republic of Indonesia and the State Service of Ukraine on Issues of Food Safety and Consumer Protection.

In particular, the updated product list includes 14 types of fresh berries, onions, garlic, cherries, potatoes, carrots, etc., in addition to previously approved wheat and apples. Exports of the agricultural products originating in Ukraine to Indonesia shall be subject to the certificate of analysis indicating the limit values of pesticide content, mycotoxins, heavy metals and bacteria for each type of product. Such certificate shall be issued by the body, certified thereto by the Indonesian party, - the Odessa State Border Control and Toxicological Laboratory12.

PHARMACEUTICALS

GOVERNMENT AMENDS THE REGULATION ON THE STATE REGISTER OF MEDICINAL PRODUCTS

On 30 November 2016, the Cabinet of Ministers of Ukraine adopted the Regulation № 874 "On Amendments to the Regulation on the State Register of Medicinal Products". Under this Regulation, certain amendments were made to the Regulation on the State Register of Medicinal Products, according to which, the State Register of Medicinal Products shall also include the data on registration of the corresponding drug in the US, Switzerland, Japan, Australia, Canada, and EU member states, as well as pre-registration, re-registration or cancellation of the medicinal product registration.

Thus, the Cabinet of Ministers of Ukraine brought the Regulation on the State Register of Medicinal Products in accordance with the Law of Ukraine of 31 May 2016 № 1396-VIII "On Amendments to Article 9 of the Law of Ukraine "On Medicinal Products" Regarding Simplification of State Registration of Medicinal Products" 13.

THE GOVERNMENT EXTENDS THE PERIOD FOR ADVANCE PAYMENT UNDER THE MEDICINE PROCUREMENT CONTRACT

On 14 December, the Cabinet of Ministers of Ukraine adopted the Regulation № 996 "On Amending the Regulation of the Cabinet of Ministers of Ukraine № 117 dated 23 April 2014". According to the Regulation, the Government allowed administrators and recipients of budgetary funds to establish the term of advance payment for up to 18 months in case of procurement of medicinal products and / or vaccines for the preventive vaccination of people, and of medical devices and related services based on contracts of procurement signed with specialized organizations, carrying out the purchases. This provision applies to contracts executed during 2017.

Moreover, the Regulation provides that the term of advance payment in case of procurement of medicines, vaccines and medical devices by specialized organizations in 2018 - 2019 shall not exceed 12 months14.

OTHER NEWS

AMENDMENTS MADE TO THE TAX CODE OF UKRAINE REGARDING THE VAT REFUNDPROCEDURE

On 21 December 2016, the Verkhovna Rada of Ukraine adopted the Law 1797-19 "On Amendments to the Tax Code of Ukraine Concerning the Improvement of the Investment Climate in Ukraine" (Law № 1797-19). The Law introduced a number of innovations aimed to simplification of administrative procedures and facilitation business activities in Ukraine.

The Law № 1797-19 provides for the replacement of the two registers of applications for export VAT refund with a single registry. This step is aimed at increasing transparency and equal treatment of applicants during the VAT refund. The registered tax invoice may solely be a ground for VAT refund; the refund will be based on the risk assessment, the criteria for which have not yet been established15.

UKRAINIAN PARLIAMENT CANCELS 5 PER CENT DUTY ON METAL SCRAP IMPORT

On 4 October 2016, the Verkhovna Rada of Ukraine adopted the Law №1645-VIII "On Amendments to the Law of Ukraine "On Customs Tariff of Ukraine" Regarding Reduction of Ferrous Scrap Shortage in the Domestic Market in Order to Ensure Priority Needs of the Defense Industry and the Restoration of Infrastructure".  The Law establishes zero import duty rate on waste and scrap of ferrous metals, ferrous metal ingots for remelting (scrap ingots), UKTZED codes 7204 10, 7204 21, 7204 49, instead of the previous 5 per cent rate. The zero duty rate is applicable from 10 November 201616.

CABINET OF MINISTERS OF UKRAINE INITIATES ADAPTATION OF EUROPEAN RULES OF GOODS TRANSIT

The Cabinet of Ministers of Ukraine informed that during the meeting on 28 December 2016 it supported the proposal to amend the Customs Code of Ukraine and to bring the transit procedures in line with the European standards: the Convention on a Common Transit Procedure and the Convention on the Simplification of Formalities in Trade in Goods.The government's actions are aimed at Ukraine's accession to the said Conventions, which will give Ukraine the opportunity to apply common transit procedures of the European Economic Community and the European Free Trade Association.

The advantages of the new transit regulations are the following:

  • application in Ukraine ofthe customs declarations similar to those used in the EU for common transit procedures;
  • performance of customs formalities in Ukraine using the information and telecommunication systems based on European technologies;
  • validity of the guarantees issued by Ukrainian banks at the territory of all member states of the Convention;
  • application by companies of the singlecustoms declaration and guarantee for transferring the goods from their own warehouses to those of the counterparties;
  • simplification of administrative procedures due to the rapid exchange of information between customs authorities of Ukraine and the European countries;
  • making risk assessment prior to arrival of the commodity in Ukraine.

Introduction of new transit rules is one of the obligations of Ukraine in the sphere of approximation of legislation under the EU – Ukraine Association Agreement17.

Footnotes

1. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds512_e.htm; http://me.gov.ua/News/Detail?lang=uk-UA&id=8881f6d5-fe76-4e91-9761-855e3a160613&title=UkrainaURamkakhSotOskarzhuDiskriminatsiiniiTaNeobruntovaniiKharakterTorgovelnikhZakhodivRosiiskoiFederatsii

2. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds499_e.htm

3. http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60642

4. http://zakon0.rada.gov.ua/laws/show/1724-19

5. http://www.epravda.com.ua/news/2016/09/29/607034/

6. http://www.epravda.com.ua/news/2016/10/11/607802/

7. http://www.epravda.com.ua/news/2016/11/30/612759/

8. http://economics.unian.ua/agro/1653376-ukrajina-zaboronila-vvezennya-ptitsi-zi-sche-dvoh-regioniv-nimechchini.html

9. http://www.me.gov.ua/News/Detail?id=c68051ab-c9d3-4a14-9bd4-ca60e82df01b

10. http://www.me.gov.ua/News/Detail?lang=uk-UA&id=e25cd6de-d945-4cfc-83d6-f919b4852c83&title=ZaiavaMizhvidomchoiKomisiiZMizhnarodnoiTorgivli http://ukurier.gov.ua/uk/articles/mizhvidomcha-komisiya-z-mizhnarodnoyi-torgivli-301/

11. http://ukurier.gov.ua/uk/articles/mizhvidomcha-komisiya-z-mizhnarodnoyi-3012/

12. http://ukrprod.dp.ua/2016/10/05/ukraina-agrarii-poluchili-rasshirennyj-perechen-tovarov-dlya-eksporta-v-indoneziyu.html

13. http://zakon2.rada.gov.ua/laws/show/874-2016-%D0%BF

14. http://zakon0.rada.gov.ua/laws/show/117-2014-%D0%BF

15. http://zakon0.rada.gov.ua/laws/show/1797-viii

16. http://zakon2.rada.gov.ua/laws/show/1645-19

17. http://www.kmu.gov.ua/control/uk/publish/article?art_id=249631625&cat_id=244276429

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