International Trade News (July 2011)

Official meeting of President of Ukraine and President of Cyprus: bilateral agreements signed

On 4 July 2011, in Kyiv the President of Ukraine, Mr. Yanukovych, met the President of Cyprus, Mr. Christofias, in Kyiv. In the history of the bilateral relations tThis is the very first in the history of bilateral relations visit of the President of Cyprus to Ukraineto Ukraine. Both Presidents called for development of the Ukrainian-Cyprus cooperation. Mr. Yanukovych welcomed the establishmenting of the embassy of Cyprus in Ukraine and stressed the importance of bilateral trade and economic relations. Mr. Christofias assured Mr. Yanukovych that Cyprus willwould support Ukrainian pro-European policies during its Presidency of the Council of the EU in the second half of 2012.

In the course of the meeting between the PresidentsPresidents, the following bilateral agreements and memorandum aimed at facilitation of the cooperation between the states were signed:

(i) An Agreement between the Government of the Republic of Cyprus and the Government of Ukraine on Economic, Scientific, Technical and Industrial Cooperation;

(ii) An Agreement between the Government of the Republic of Cyprus and the Government of Ukraine on Cooperation in the Field of DefenceDefense;

(iii) An Agreement between the Government of the Republic of Cyprus and the Government of Ukraine on International Road Transport;

(iv) An Agreement between the Government of the Republic of Cyprus and the Government of Ukraine on the Mutual Protection of Classified Information;

(v) A Memorandum of Understanding between the Ministry of Foreign Affairs of the Republic of Cyprus and the Ministry of Foreign Affairs of Ukraine for Cooperation on European Union related Matters.

Ministry of Economic Development and Trade of Ukraine initiates amendments to legislation aimed to facilitate state registration of foreign investments in Ukraine

On 7 July 2011, the Ministry of Economic Development and Trade of Ukraine published on its official web-site a Draft Law “On Amending Article 13 of the Law of Ukraine “On Foreign Investment Regime” on its official web-site. The Draft Law suggests amending Article 13 of the Law of Ukraine “On Foreign Investment Regime” regarding the term to apply for the state registration of foreign investments (including re-registration in case of change in title to the investment and cancellation of registration in case of investment repatriation).

We would Just to remind you that: presently foreign investments shall be subject to the state registration in Ukraine during 3 business days once the investment is made. The Draft Law extends the term for investment registration to 30 calendar days from the date investment is made. The Draft Law also establishes requirements for registration of transfer of equity rights to the investment between non-residents and procedure for repatriation of foreign investments. Registration of investments transfer or repatriation shall be made also in 30 calendar days from the date of their performance. The abovementioned 30-day term is provided for foreign investors only, while the competent Ukrainian authorities shall register the investment in the course of 3 days after the submission of the respective application by the investor.

Prime-Minister of Ukraine, Mr. Azarov, develops plans to support export and import substitution

The Prime Minister of Ukraine, Mr. Azarov, assigned the Ministry of Economic Development and Trade of Ukraine to present for consideration of the Government a complex plan on support of export and import substitution until 1 September 2011. Mr. Azarov has underlined that Ukraine has a negative balance of foreign trade due to the growing prices for natural gas and oil. Hence, the Prime Minister has emphasized that Ukraine needs to take appropriate actions to correct its trading balance.


 

DSB established Panel in trade dispute between Moldova and Ukraine [1]

On 20 July 2011 at its regular meeting, the Dispute Settlement Body established Panel in trade dispute between Moldova and Ukraine concerning taxes on distilled spirits. According to the WTO Secretariat Ukraine stated that Moldova’s panel request was submitted in the middle of information exchange between parties to the dispute. China, the EU, Colombia and the US reserved their third-party rights.

Just a reminder: several weeks after Ukraine submitted the request for consultations with Moldova concerning environmental charge, in March 2011 Moldova submitted request for consultations with Ukraine concerning application by Ukraine of excise duty on spirits. In February 2011, Moldovan Deputy Minister of Economy, Octavian Calmic, said: “Moldova plans to synchronize the WTO examinations of the collection of the ecological duty from juice and beer producers by Moldova, with the problem of high excise taxes for Moldovan spirits.” [2]

Panel report in dispute China – Raw Materials circulated

On 5 July 2011 the WTO circulated reports of the panel in “China — Measures Related to the Exportation of Various Raw Materials” (D394, D395 and D398, respectively), initiated by the US, the EU and Mexico. Complainants questioned the WTO-compatibility of the four types of export restraints, imposed by China on certain raw materials. Basically, the complainants argued that such measures caused higher prices of the raw materials in world markets and provided Chinese domestic industry with a significant advantage. China made certain commitments on export restraints in its Protocol of Accession. In brief, the Panel made the following findings:

(i) China's export duties are inconsistent with its commitments in the Protocol of Accession;

(ii) China’s export quotas are inconsistent with WTO rules;

(iii) Certain aspects of China's export licensing regime are found to be inconsistent with WTO rules.

It is worth mentioning that China may notify the Dispute Settlement Body of its decision to appeal certain findings of the said report within 60 days after the date of circulation of a panel report.


 

Ukraine-EU talks over the Association agreement [3]

According to the press-service of the President of Ukraine, on 20 October 2011 the President of Ukraine, Mr. Yanukovych, will visit Brussels in order to reach political agreements necessary for the completion of negotiations over the Association Agreement between Ukraine and the European Union. President of Ukraine informed that he hopes for the support of the President of the European Commission, Mr. Barroso, in this endeavor.

Furthermore, Mr. Yanukovych stated that the Ukrainian side submitted a report to the European Commission on the implementation of the first legislative phase of the Action Plan on Visa Liberalization in June. The President of Ukraine hopes that the “European Commission will reach positive conclusions on the fulfillment of the first stage of the document by the Ukrainian side. We also expect that other member-states will take a political decision on passing to the second stage of implementation of the Action Plan by the end of this year."

Ukraine-EU talks over free trade agreement [4]

The next round of talks on creation of a free trade area between Ukraine and the European Union, which is to be held in September of 2011, will be “a serious stage to sum up results”, the head of the Ukrainian delegation, former deputy Minister of Economic Development and Trade of Ukraine, Mr. Piatnytsky, said after talks on the free trade area in Brussels on 12 July 2011.

He said that the parties had agreed to move talks previously scheduled for 26 September to 19 October.

Mr. Piatnytsky stated that Kyiv and Brussels “have already found a common vision” in all major issues that remained unresolved during the negotiations. “We are working to ensure that the remaining issues are resolved as soon as possible,” he confirmed, adding that Ukraine is seriously set to complete all of the work by the end of the year.

Mr. Piatnytsky also noted that before the talks held in Brussels officials from Kyiv, Brussels and executives had met in Spain to discuss geographical indications for food supplies. He acknowledged that the sides had switched “to the practical stage of drafting a technical assistance plan.” In order to draft an action plan on technical assistance, Ukrainian and European experts will be involved in working with the Ukrainian government and business to determine speifi assistance for speifi enterprises, he said.

Besides, according to the information policy department of the Ministry for Foreign Affairs of Ukraine, in mid-July at the meeting of the Minister for Foreign Affairs of Ukraine, Mr. Hryshchenko, with the EU Commissioner for Trade, Mr. De Gucht, in Brussels parties agreed to reach an agreement on all the fundamental provisions of the free trade agreement by the end of September, in particular by the time the Eastern Partnership summit is to be held on 29 September 2011.

Recent developments in relations with Customs Union [5]

On 8 July 2011 the Ukrainian delegation submitted to Russia the proposals concerning future cooperation with the Custom Union within the Common Economic Space (Russia, Belarus, and Kazakhstan) in the 3+1 format.

At the beginning of July, the President of Ukraine, Mr. Yanukovych, held a press-conference, where he elaborated on issues related to the relations between Ukraine and the Customs Union. In particular, he noted: “The 3+1 formula that we proposed is our strategy, and it forms the basis of the national pragmatism of our foreign policy. So now we are persuading our partners that the contractual framework, which we have developed at a bilateral level with Russia, Belarus and Kazakhstan, should be moved at least to the 3+1 formula”.

On 11 July, the Prime Minister of the Russian Federation, Mr. Putin stated that Russian government experts are actively working on the version, proposed by Ukraine. However, to date no official response on the said proposal from Russia was received.


 

Ministry of Economic Development and Trade of made public the draft of Government Resolution on application of licensing and quotas to imports of motor cars from Uzbekistan

On 7 July 2011 the Ministry of Economic Development and Trade made available on its official web-site the Draft Resolution of the Government of Ukraine “On Applying of the Quotas and Licensing Regime to Motor Cars Originating from the Republic of Uzbekistan for 2011-2014”.

The Ministry, having conducted the anti-discriminatory investigation initiated at the request of the Association of the Ukrainian Car Producers “Ukravtoprom”, arrived at conclusions on the existence of discriminatory and/or unfriendly actions of Uzbekistan related to motor cars imported from Ukraine. Particularly, Uzbek laws establish excise tax on motor cars imported from Ukraine that exceeds approximately 14 times the same tax paid for the Russian cars and 2,4 times the tax paid for the Uzbek cars. As a result of the said investigation, on 30 June 2011 the Interdepartmental Commission on International Trade adopted a decision establishing the fact of the discrimination of the Ukrainian motor cars in Uzbekistan and suggested the Government of Ukraine to apply quotas and licensing to cars imported into Ukraine from Uzbekistan.

The Draft Resolution is aimed at implementation of the Commission’s decision and establishes the following quotas for import into Ukraine of cars, classified under the relevant customs codes under the UCG FEA.

 

Interdepartmental Commission on International Trade launches interim review of antidumping measures applied to imports of turnout switches

On 2 July 2011, the Interdepartmental Commission on International Trade published an official notification on the initiation of interim review of antidumping measures applied to import into Ukraine of turnout switches produced by OJSC “Murom Turnout Plant”, Russian Federation. The interim review was initiated at the request of OJSC “Murom Turnout Plant”.

As public might recall the antidumping measures had been applied to import of turnout switches originating from the Russian Federation by the Commission’s decision dated 5 July 2002 for 5 years and were further extended by the Commission for another 5 years on 29 November 2008.


 

Customs Union applies import restrictions to animal derived products from Ukraine

The Customs Union introduced temporary restrictions on import of animal derived products for 28 Ukrainian companies. The said import restrictions were imposed after the national veterinary authorities of Russia, Belarus and Kazakhstan have inspected the interested Ukrainian companies that failed to prove compliance with veterinary and sanitary requirements. The restrictions shall remain in force for 1 month until the competent veterinary authorities of Ukraine provide the supporting documents on eliminating the discovered defects and guarantees that the products are in full conformity with the veterinary and sanitary requirements established in the Customs Union. At the same time, three Ukrainian companies were exempted from restrictions, but had been also required to provide relevant documents within 1 month.

Ukraine applies import restrictions to certain vegetables

On 7 July 2011 the State Veterinary and Phytosanitary Service of Ukraine announced on temporary ban on imports of certain vegetables from the European Union without an official document on tests on bacteria of Escherichia coli group. Among these products are potatoes, tomatoes, onions, cabbage, carrots, beets, cucumbers, beans etc. The said document shall be issued by the competent authority of the exporting country or the vegetables shall be examined in the state laboratory of veterinary medicine. The decision on applying of import restrictions was approved by the Ministry of Agriculture and Food of Ukraine and the Central State Inspectorate for Plant Quarantine to prevent the imports into Ukraine of dangerous products of plant origin.


 

Customs control of non-food products

The State Customs Service of Ukraine in its letter No. 16/1-16.3/656-ЕП of 4 July 2011 informed of the grounds for conducting by the customs authorities of the state control of non-food products in accordance with Article 37 of the Law of Ukraine “On the State Market Surveillance and Control of Non-Food Products”.

According to the letter, such control is allowed in 3 cases: 1) under sectoral plans of market surveillance; 2) in case the customs authorities receive information on products possessing serious risks from market surveillance authorities, and 3) in case the customs authorities receive information on products non-compliance with requirements established under technical regulations from market surveillance authorities.

Certain equipment exempted from import duty and VAT

On 8 July 2011 the Parliament of Ukraine adopted the Law of Ukraine “On Amendments to Article 19 of the Law “On Uniform Customs Tariff” exempting import of equipment for the construction of airfields, terminal complexes and ground servicing of the airports in the cities hosted “Euro 2012” from import customs duties.

Under the provisions of the said law, until 1 September 2012 the following goods (excluding excisable) are exempted from import duties: (a) those which are not manufactured in Ukraine or produced, but do not comply with the world technical requirements and demands of international civil aviation organizations, and (b) those which are imported into Ukraine under import customs regime to be used for construction and equipping of airports in cities where 2012 European Football Championship finals will take place,.

Moreover, the Parliament of Ukraine has amended Section XX of the Tax Code of Ukraine by exempting operations for importing the said goods into Ukraine from VAT until 1 September 2012.

Ministry of Economic Development and Trade of Ukraine proposes to cancel obligatory registration of manufacturers’ declarations of conformity

The Ministry of Economic Development and Trade of Ukraine elaborated the Draft Law “On Amendments to Certain Laws of Ukraine on Abolishment of the Registration of the Manufacturers’ Declaration of Conformity” (No. 9029, registered on 21 July 2011), aimed at cancellation of a requirement for the obligatory registration of declarations of conformity.

The authors of the Draft Law say that registration of declarations of conformity by manufacturers is not in line with obligations undertaken by Ukraine while acceding to the WTO as well as is not in conformity with European law and leads to unjustifiable losses of time and proceeds by companies. 


 

Certain aspects of currency regulation clarified

Because of electronic declaring development in Ukraine, the National Bank of Ukraine in its letter of 16 July 2010 No. 28-310/22NB-12269 clarified certain aspects of application of the Instruction on Procedure for the Currency Control of the Export, Import Transactions approved by the Regulation of the Board of the National Bank of Ukraine of 24 March 1999 No. 136, regarding the use of cargo customs declaration (CCD) as a basis for banks to discontinue currency control over export (import) transactions in Ukraine.

The National Bank of Ukraine underlined that Regulation No. 136 does not determine in what format (paper or electronic) CCD data carrier as well as CCD registers must be used to discontinue currency control over EXIM transactions. This allows banks using data from CCD registers in electronic form and, therefore, there is no need to amend Regulation No. 136.

New rules of foreign currency control

The Ministry of Economic Development and Trade of Ukraine published a Draft Law “On Currency Regulation and Currency Control” aimed at protecting “the country's economic security" and "to continue the gradual liberalization of currency legislation”.

The Draft Law allows sending foreign currency abroad through international money transfer systems, but such operations within Ukraine shall be prohibited. Experts consider this provision as discriminative, because it contravenes the legal norm that non-residents and residents should have equal rights.

The Draft Law also requires that all prices for goods, when sold on domestic market, should be fixed only in hryvnia. The use of any equivalent in foreign currency is prohibited.

Although the Draft Law aims to support hryvnia, the Ministry of Economic Development and Trade of Ukraine offered to protect the rights of the banks issuing currency loans and therefore, clearly determined that there is no need to obtain any individual license if general license of the National Bank of Ukraine is available. Let us remind that: previously, courts have invalidated some loans in foreign currency, obtained without the individual license of the National Bank of Ukraine.

The key point of the Draft Law is to expand the powers of the central bank: e.g., if any problems with the balance of payments arise, the National Bank of Ukraine may obligate all residents to sell by 50% of foreign currency proceeds received from non-residents. Such rule may be introduced for the period of 6 months. Experts pay attention that such rule has no analogues in the EU and will be criticized by the International Monetary Fund. They admit the possibility of such decision as emergency measure only and, therefore, urged to prescribe clear criteria for obligatory sale of foreign currency.


 

Government of Ukraine approved agreement with Turkey on international freight railway-ferry service

On 6 July 2011 the Government of Ukraine approved the Agreement between Ukraine and the Republic of Turkey on the Organization of Direct International Freight Railway-Ferry Service signed by the parties on 25 January 2011. The said Agreement defines the procedure of ferry service between ports of both states as well as envisages conducting agreed tariff policy by the parties and further development of joint rules of operation, maintenance, supply and use of railway wagons.


 

Prohibition of advertising of medicines is under consideration

At its meeting on 6 July 2011 the Parliamentary Committee on Health  considered the Draft Law “On Amendments to Certain Legislative Acts in the Field of Health Care (on Strengthening the Control over Turnover of Medicine and Food for Special Dietary Consumption, Functional Food and Dietary Supplements” (No. 7007, registered on 21 July 2010) being currently prepared for the second reading.

This Draft Law envisages total prohibition of advertising of medicines (both prescription and OTC) advertising. At the same time, it is allowallows to provideing information on medicine only in specialized periodicals intended for medical facilities and doctors, as well as in materials distributed at specialized seminars, conferences and symposia on medical issues.

The Parliamentary Committee on Health voted unanimously to recommend to the Parliament of Ukraine to adopt this Draft Law in the second reading in general.

State regulation of prices for medicines may be introduced in Ukraine

On 20 July 2011, the Chairman of the State Service for Medicine, Mr. Soloviov, said at a press conference in Kyiv that Ukraine is planning to introduce state regulation of prices for medicines. However, according to him currently there is no respective draft law on the issue, but the Ministry of Health Care of Ukraine, the State Service for Medicine and a working group at within the Government of Ukraine are currently working on the matter.

Mr. Soloviov also emphasized that prices of medicine are regulated by states in all European countries, apart from Germany, Denmark and Norway. He also added that according to general practice, it takes a short period of time from the stage of discussion to the drawing up of drafting the documents.

List of medical devices, exempted from VAT, has been shortened

The Resolution of the Government of Ukraine “On List of Medical Devices, Operations on Supply of which are Exempted from the Value Added Tax” No. 785 of 9 June 2011 entered into force on 1 August 2011. The said Resolution has shortened the list of medical devices exempted from the VAT and recognized as invalid all previous resolutions on the matter (including the Resolution of the Government of Ukraine No. 1949).

Transactions on sale of medical devices, not included into the said list, should be taxed by VAT in accordance with the standard procedure at the rate of 20%.


 

Simplifying conditions for access to telecommunications market

The President of Ukraine signed the Law of Ukraine “On Amendments to Certain Laws of Ukraine on Facilitation of Access to the Telecommunications Market” No. 3566-VI of 5 July 2011.

The document provides for the cancellation of licensing of certain activities in the telecommunications sector, the establishment of order for registration of business entities planning to operate in the telecommunications industry, etc.

Among others, the said Law cancelled the requirement to obtain permits of the Ukrainian State Centre of Radio Frequencies for sale of electronic and emitting devices imported from abroad. Instead, such imported products, operated in Ukraine, must be accompanied with documents confirming compliance thereof with the standards and must be marked by the control label, confirming the legitimacy of its importation, sale and operation in Ukraine as well as ensuring control of its turnover. Procedure for marking electronic and emitting devices and charge for such labeling will be determined by the Government of Ukraine.

 

Ministry of Economic Development and Trade of Ukraine voiced its position on INCOTERMS

The Ministry of Economic Development and Trade of Ukraine in its letter of 10 June 2011 No. 4201-24/939 explained that business entities may freely enter into commercial contracts, referring to any edition of INCOTERMS.

The Ministry further clarifies that the residents of Ukraine are obliged to use rules of INCOTERMS in the course of all foreign supply (sale-purchase) transactions. At the same time, Ukrainian law does not provide for liability of Ukrainian business entities for non-use of INCOTERMS in the domestic supply (sale-purchase) contracts.


 

Mr. Piatnytsky, Deputy Minister of Economic Development and Trade of Ukraine, changes his position

On 18 July 2011 Mr. Piatnytsky was dismissed from the position of the Deputy Minister of Economic Development and Trade of Ukraine by the Order of the President of Ukraine. The changes in the Ministry are taking place in the framework of the administrative reform launched earlier by the President of Ukraine. In the Ministry Mr. Piatnytsky was responsible for international trade issues and was in charge of the negotiations in the course of Ukraine’s accession to the WTO. On 13 July 2011 Mr. Piatnytsky was appointed as the governmental representative on the European integration matters by the Resolution of the Government of Ukraine. However, presently it is not clear what competence and authorities will be granted to Mr. Piatnytsky at his new position.

Ministry of Economic Development and Trade of Ukraine is open for discussions through its Facebook account

The Minister of Economic Development and Trade of Ukraine and the first Vice-Prime-Minister, Mr. Kliuev, announced in its blog that the Ministry has registered its official Facebook account. The visitors of the account may find at the said account recent news on the activities of the Ministry and will get a chance to discuss the Government’s policies in the sphere of economy and get the comments from the Ministry’s experts.

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[1]http://www.wto.org/english/news_e/news11_e/dsb_20jul11_e.htm
[2] http://ictsd.org/i/news/bridgesweekly/110903/

[3] Interfax news

[4] Based on Interfax Ukraine news

[5] Based on Interfax Ukraine news



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