No nation was ever ruined by trade

Benjamin Franklin

Nowadays free trade agreements (the "FTAs") are among pillars of the international trade. It is well known that free-trade areas and customs unions facilitate free movement of goods, boost attraction of investments, exchange of technologies and are the "cornerstones" of trade liberalization.

That is why since the early 1990s regional free trade agreements have become a very widespread phenomenon. Some of the most prominent examples include the European Communities, NAFTA (North America), MERCOSUR (South America), ASEAN (Southeast Asia) and many others. As of 31 July 2010, some 474 regional trade agreements have been notified to the World Trade Organization (and its predecessor GATT), among them the FTAs constitute about 90%, while customs unions - 10%. At that date, 283 agreements were still in force1 and this number is likely to substantially increase in the nearest future2. As all WTO members are parties to at least one or more regional trade agreements (the "RTA") (except for Mongolia, which is not a party to any RTA)3, it may be concluded that a significant portion of global trade is made under RTAs.

As Ukraine has been actively participating in almost all regional initiatives on formation of new free trade areas, in this article our aim is to provide a brief overview of the Ukraine's FTAs as well as of the FTAs being currently negotiated.

Ukraine's FTAs in force

Most of the Ukraine's FTAs currently effective are concluded with the post-Soviet countries. Particularly on 15 April 1994 Ukraine and other post-Soviet countries signed the Agreement on Creation of a Free Trade Area between the Commonwealth of Independent States (the "CIS FTA")4 subsequently amended by the Protocol on Amendments and Supplements to the CIS FTA on 2 April 19995.

According to Article 1 of the CIS FTA one of its core objectives is "a gradual cancellation of customs duties, taxes and charges, which have equivalent effect and quantitative restrictions in mutual trade". In addition, the parties undertake not to apply new quantitative or tariff restrictions to import and export6.

Besides, Article 3.3 of the CIS FTA sets forth that the bilateral FTAs would be concluded among the CIS Members. Thus, in addition to the CIS FTA, Ukraine also signed the bilateral FTAs with the following CIS countries:



Date of entry into force



18 December 1996



2 September 1996



11 November 2006



4 June 1996



19 October 1998



19 January 1998



27 May 1996

16 May 2008


Russian Federation

21 February 1994



11 July 2002



4 November 1995



1 January 1996


In addition, Ukraine has concluded the FTA with Macedonia, which entered into force on 5 July 2001.

This list could have been longer and included such countries as Latvia, Lithuania and Estonia, but the FTAs concluded between Ukraine and the said states lost their force on 1 May 2004 after its accession to the European Union.

Trade preferences under the FTAs

The FTAs are worth of attention of the companies as they stipulate additional preferences, simplify the relevant procedures as well as provide additional guarantees of rights, to name a few:

  1. not to impose customs duties, taxes and charges having equivalent effect on import or export of goods originated from the customs territory of one of the parties and destined for the customs territory of another party;
  2. not to impose, directly or indirectly, local taxes or charges on goods at the rate that exceeds the level of relevant taxes and charges imposed on like domestic goods or those produced in third countries;
  3. not to introduce any special restrictions on or requirements to export or import of goods, that in similar cases are not used in respect of like domestic goods or those produced in third countries;
  4. to ensure free transit of goods;
  5. to refrain from actions that may lead to prevention, restriction or distortion of competition on the market etc.

Notably, the main preference agreed upon under the FTAs is non-application of customs duties, taxes and charges with equivalent effect to import and export of goods originating from the customs territories of the parties thereto. However, in practice the FTAs offer only duty-free access, but do not exempt from VAT and excise tax levied on the general basis.

Applying preferences

Noteworthy, the said preferences are not applied automaticly. There are a number of conditions to be met to enjoy the preferences under the FTAs with CIS countries and Macedonia:

  1. Documentary evidence of origin. In order to confirm origin of the imported goods from the CIS countries, the CT-1 certificate of origin is to be submitted to customs authorities. The said certificate shall be issued in accordance with the Rules on Establishing the Country of Origin of Goods8 and only if the goods comply with substantial transformation criteria normally annexed to the relevant bilateral FTAs. According to the FTA with Macedonia EUR-1 certificate is to be issued to confirm the country of origin. EUR-1 certificate is valid for only 4 months comparing to 12 months as in case with СТ-1. Furthermore, in addition to seal of the chamber of commerce and exporter, EUR-1 is to be also approved by the seal of customs authorities of exporting country that is not required for СТ-1 certificate.
  2. Compliance with the "direct purchase" rule. The said rule means that a purchase shall be made directly between residents of countries ratified the respective FTA. For instance, if the Ukrainian and Russian resident companies conclude a supply contract, the "direct purchase" rule is met. However, if the Polish and Russian companies enter into a supply contract, the "direct purchase" rule is not met even though the said supply contract stipulates delivery of the goods to Ukraine.
  3. Compliance with the "direct transport" rule9. According to this condition the goods shall not leave the boundaries of countries signed the CIS FTA, unless shipment is impossible due to geographical reasons i.e. the rule requires that imports arrive directly from the CIS states and are not transported outside the CIS region. For example, if the goods from Armenia are delivered to Ukraine through the territory of Turkey, the rule is not met. However, if such goods are delivered through the territories of Georgia and Russia, the third condition shall be complied with. Even though Ukraine and Macedonia have no adjacent frontiers this rule is still applicable in trade relations between them. In order to meet the said condition, the transported goods shall always be under customs control.

Exemptions from the FTAs

Almost all FTAs provide for "general" and "specific" exemptions from the duty-free entry.

Generally, the said duty-free entry is limited to protect human health and life, environment, animals and plants; protect industrial and intellectual property; to regulate trade in weapons, military equipment, ammunition, etc.

As far as "specific" exemptions are concerned, they are normally stipulated in the form of bilateral protocols to the respective FTA and exclude from the preferential regime of the particular goods.

It is worth noting that the FTAs between Ukraine and a number of countries such as Armenia, Azerbaijan, Kyrgyzstan, Tajikistan and Turkmenistan do not stipulate any "specific" exemptions i.e. as of today there are no additional documents concluded between the parties providing any exemptions to free trade regime.

As far as other countries are concerned, the "specific" exemptions previously agreed upon in the respective protocols to the FTAs with Russian Federation, Uzbekistan, Georgia and Belarus have been subsequently cancelled by the following protocols providing "stage-by-stage" elimination of the said exemptions.

Nevertheless, the Government of Ukraine has established a practice to unilaterally exempt certain goods from the FTAs regime by its resolutions i.e. as of today some goods are temporally exempted from the free trade regime by the Government of Ukraine with Belarus, Moldova, Macedonia, Georgia and Russian Federation. For example, the Government of Ukraine by its Resolution No. 38 of 28 January 2009 has postponed the cancellation of exemption on white sugar from the free trade regime with Russian Federation from 1 January 2009 to 1 January 2013.

Pending FTAs

First of all, the FTA with the European Free Trade Association ("EFTA") shall be mentioned. On 24 June 2010 the EFTA and Ukraine after five rounds of negotiations managed to sign the EFTA-Ukraine FTA (the "EFTA Agreement"). The EFTA Agreement is the so-called "new generation" FTA covering lots of essential commercial issues, including trade in goods and services, protection of intellectual property rights and investments, conducting government procurement, etc. Ukraine also signed bilateral arrangements on agricultural products with Switzerland, Norway and Iceland. Currently the EFTA Agreement is still pending ratification by the parliaments of Ukraine and the EFTA states (Iceland, Norway, Liechtenstein and Switzerland).

Moreover, according to the information posted on the web-site of the Ministry of Economic Development and Trade of Ukraine consultations and negotiations are currently being held as to liberalization of trade and conclusion of respective agreements with the European Union, Singapore and Turkey. Besides, the Ministry has recently initiated negotiations on FTAs with Canada, Serbia, Syria, Israel, Morocco, Mexico, Algeria, Persian Gulf countries as well as some other Asian and African countries.

Moreover, due to rather outdated provisions of the CIS FTA, as of today negotiations on establishment of the extended free trade area within the CIS are held. The CIS working group responsible for drafting the new agreement is expected to finalize the latter shortly. The CIS free trade area rules will provide for almost complete elimination of all import duties and quantitative restrictions, "freezing" export duties at the present level, enlisting all current exemptions from free trade and exact terms for their phase-out, detailed technical regulations and phytosanitary rules applicable to goods, etc. The new agreement is expected to fully conform to WTO rules and give significant impetus to economic development of the CIS free trade area.


Ukraine is an active player in regional integration formations aimed at facilitation of trade. As of today Ukraine was especially successful in establishing free trade relations with the post-Soviet countries because otherwise economies of the CIS countries would experience serious difficulties.,The negotiations on deepening and widening the CIS FTA being currently held and expected to be completed by the end of spring-beginning of summer 2011 hopefully will establish more comprehensive and modern free trade area of the CIS countries. In addition, Ukraine conducts an active work on expanding its trade by eliminating almost all obstacles and barriers far beyond the CIS region. One of the recent prominent examples is, of course, the EFTA Agreement being the first step of integration of the Ukrainian economy into the EU single market.

As such agreements may directly affect commercial interests of Ukrainian national producers, it is advisable to actively participate in the negotiation process in respect of the pending FTAs to ensure that the latter do not have any adverse effect on them both on the domestic and international markets.

Besides, while structuring trade transactions, both Ukrainian and foreign companies shall consider additional preferences and guarantees provided by the FTAs. However, to enjoy the said preferences and guarantees, the companies shall verify all possible "hidden reefs" of each particular transaction (e.g. compliance with sufficient processing criteria, exemptions from duty-free entry). Otherwise, instead of preferences, they may face additional stumbling blocks in the form of unexpected complications e.g. customs clearance delays and penalties...



2. "Regional agreements: the 'pepper' in the multilateral 'curry', Speech of Pascal Lamy delivered at the Confederation of Indian Industries, Bangalore, available at


4. The CIS FTA entered into force on 30 December 1994 after ratification thereof by three of its Parties

5. Ukraine ratified the CIS FTA and the Protocol thereto on 6 October 1999. The latter entered into force for Ukraine on 15 December 1999

6. Under the CIS FTA a term "quantitative restrictions" means any measures, application of which may cause material obstacle or restriction for import/export of goods originating from one of the Member States, including quota allocation, licensing, control over prices or other terms of delivery, other special requirements to exports and imports, which directly or indirectly limit rights of importers and exporters as compared to rights of sellers or buyers of similar goods

7. Ukraine and Moldova actually signed two FTAs i.e. in August 1995 the parties signed the first FTA entered into force on 27 May 1996, the second FTA, amending provisions of the previous one, was signed on 13 November 2003. The Ukrainian Parliament resolved on 19 May 2005 to ratify the Free Trade Agreement with Moldova, postponing its entry into force until Ukraine's accession to WTO. Hence, the FTA with Moldova entered into force on 16 May 2008

8. Approved by the Decision of the Council of Heads of Governments of the CIS of 30 November 2000, as amended

9. According to FTA with Macedonia a term "direct transportation" is used

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