International Trade News. May - August 2017

WTO NEWS

RUSSIAN FEDERATION LAUNCHED A NEW WTO DISPUTE TARGETING WIDE RANGE OF UKRAINIAN MEASURES RELATING TO TRADE IN GOODS AND SERVICES

On 19 May 2017, the Russian Federation requested consultations with Ukraine with regard to the wide range of measures relating to trade in goods and services, as well as transit. According to the document[1] submitted to the WTO Secretariat, Russia aims to challenge a set of measures introduced by the Ukrainian government since 2014. The indicated list of measures includes certain agricultural (meat, fish, dairy, confectionary, alcoholic beverages, cigarettes, etc.) and industrial goods import ban, adopted in response to the similar ban imposed on Ukrainian goods by the Russian authorities, measures related to importation of and approval procedures for printed materials, restrictions on distribution and demonstration of motion pictures, movies, TV programmes and TV series produced in the Russian Federation, tax treatment of motor vehicles from the Russian Federation, restrictions and prohibitions on capital movements and transfers, as well as participation in the privatization processes for certain Russian enterprises, banking and financial institutions, service suppliers restrictions, in particular those related to accreditation of certain Russian mass media journalists and representatives, and other personal special economic restrictive measures.

The upcoming dispute is of a vital importance not only for the future of Ukraine – Russia trade relations, but for the whole WTO dispute settlement mechanism as well. First, it will add to a heavy workload[2] the WTO Dispute Settlement Body currently experiencing. Second, the dispute might shed some light on the interpretation of certain WTO provisions which were never before the WTO panels or the Appellate Body in past (namely, GATT 1994 security exception, which might potentially be invoked by Ukraine, although GATT panels on several occasions dealt with GATT 1947 Article XXI).

For reference:Upon initiating these consultations, the Russian Federation tied the score of Ukraine – Russia WTO complaints, which is now 2:2. Another Russian complaint concerns Ukrainian anti-dumping measures on ammonium nitrate (DS 493). Ukrainian complaints refer to certain measures affecting the importation of railway equipment and parts thereof (DS 499) and transit of goods through the territory of the Russian Federation (DS 512).

UKRAINE RESERVED THE RIGHT TO MODIFY ITS SCHEDULE OF CONCESSIONS DURING THE NEXT THREE YEARS

The WTO Secretariat has circulated the relevant communication[3] in the end of April 2017. The right was reserved in accordance with Article XXVIII:5 of the GATT 1994, and the indicated three-year period commences on 1 January 2018. According to Ukraine, despite the positive effects of the WTO accession, economic and social situation in the country drastically changed since 2014, mainly due to the annexation of Crimea and armed conflict in the Eastern Ukraine, which resulted in production decrease in certain industries, national currency devaluation and other unfavourable economic consequences.[4]

For reference: Since its accession in 2008, Ukraine has already requested its WTO bound tariffs modifications twice. In 2012, Ukraine intended to increase its tariffs with respect to 371 tariff lines but decided not to proceed with its intention following the criticism of the WTO membership. Ukraine also reserved its right to modify for the period of 2015 – 2017, but has not taken and further steps. Moreover, in 2014, the Verkhovna Rada of Ukraine adopted the law imposing additional 5 per cent and 10 per cent import duties on all goods except sensitive products. This measure was introduced to improve Ukraine’s balance of payments situation and remained in force until 1 January 2016.[5]

WTO MEMBERS REVIEW EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA (DCFTA)

As a part of an effort to increase the understanding of EU-Ukraine DCFTA relation to the WTO rules and potential impacts thereof, the WTO Members, during the meeting on 29 June 2017, inter alia, reviewed the aforementioned free trade agreement (FTA).

The DCFTA has been provisionally applied since January 2016 and fully enters into force on 1 September 2017. Several WTO Members welcomed Ukraine’s efforts to undertake a wide range of reforms and modernize its trade rules and regulations. Members had an opportunity to question the parties to the DCFTA on the various parts and provisions of it. Most of the questions came from the delegation of the Russian Federation and referred to technical barriers to trade provisions, safeguard mechanisms, regulatory issues and legislation harmonization.[6]

Ukraine noted that the DCFTA is “the most powerful instrument to support its economy and provide substantial liberalization in trade and investment.”[7]

TRADE LIBERALIZATION AND ELIMINATION OF TRADE BARRIERS

 

CANADA–UKRAINE FTA ENTERS INTO FORCE

Canada-Ukraine Free Trade Agreement (CUFTA) entered into force on 1 August 2017. For Ukrainian exporters the deal envisages tariff-free trade with respect to 98 per cent of the Canadian product markets. At the same time, the parties agreed to implement the agreement asymmetrically, meaning that Ukraine will have to eliminate its respective duties over the transitional period. According to the Ministry of Trade and Economic Development of Ukraine, the CUFTA is expected to result in increase of foreign direct investments into Ukraine, estimated at USD 36 million over the next three years.[8]

EU–UKRAINE ASSOCIATION AGREEMENT FULLY ENETRS INTO FORCE ON 1 SEPTEMBER 2017

On 11 July 2017, right before the annual EU-Ukraine Summit, the Council of the European Union adopted a decision to conclude the Association Agreement with Ukraine. The decision was made upon the completion of the ratification process in the Netherlands in the end of May 2017, which brought a long political process following Dutch voters rejecting the deal in a referendum to an end. The Council decision will allow full implementation of the Association Agreement, including the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA) as of 1 September 2017. The provisional application of the DCFTA for over a year has resulted in 10 per cent trade increase between the partners, and full implementation is expected to bring in even more gains through the cooperation in the areas of taxation, public finance management, science and technology.[9]

THE EU GRANTS ADDITIONAL TRADE PREFERENCES TO UKRAINE

On 17 July 2017, the Council of the European Union supported the proposal tabled by the European Commission in September 2016 and adopted a decision to grant additional trade preferences to Ukrainian exporters. The proposed measures are aimed at (1) granting additional annual duty-free import quotas on certain agricultural products (natural honey – 2,500 tonnes, processed tomatoes – 3,000 tonnes, grape juice - 500 tonnes, oats – 4,000 tonnes, wheat – 65,000 tonnes, maize – 625,000 tonnes, barley – 325,000 tonnes, and groats and pellets of certain cereals – 7,800 tonnes) and (2) complete removal of tariffs on certain industrial goods (fertilizers, dyes, pigments and other colouring matters, footwear, copper, aluminum, as well as television and sound recording equipment).[10]

According to the Trade Representative of Ukraine, “the decision will improve the access for Ukrainian exporters to the European market.”[11] Ukrainian producers will be able to benefit from the adopted preferences starting October 2017.

VERKHOVNA RADA RATIFIES UKRAINE – CROATIA ECONOMIC COOPERATION AGREEMENT

On 17 May 2017, the Ukrainian Parliament ratified the Agreement on economic cooperation between the Governments of Ukraine and Croatia. The Trade Representative of Ukraine, while presenting the Agreement in the Parliament, noted the importance of the agreement and emphasized that the Ukrainian export of goods and services to Croatia increased almost twice over the previous year and amounted to USD 40.8 million.[12]

The main purpose of the Agreement is to develop and strengthen economic cooperation between the states. To that end, the deal will contribute to more effective work of the Joint Commission on Economic Cooperation, improve legal procedures and mechanism for economic cooperation, and help better identify and resolve trade and development issues.

TRADE DEFENCE MEASURES

EUROPEAN COMMISSION INITIATES AN EXPIRY REVIEW OF THE ANTI-DUMPING MEASURES ON UKRAINAN IRON AND STEEL SEAMLESS PIPES

On 4 July 2017, the European Commission published a Notice of initiation of an expiry review of the anti-dumping measures applicable to imports of certain seamless pipes and tubes of iron or steel originating in Russia and Ukraine.[13] According to it, the Commission is to review definitive anti-dumping measures imposed on Ukrainian and Russian seamless pipes back in 2012, which were to expire on 5 July 2017.

Previously adopted Council Implementing Regulations imposed the following anti-dumping duty rates for Ukrainian producers: OJSC Dnepropetrovsk Tube Works – 12.3 per cent; LLC Interpipe Niko Tube and OJSC Interpipe Nizhnedneprovsky Tube Rolling Plant – 13.8 per cent; CJSC Nikopol Steel Pipe Plant Yutist – 25.7 per cent; all other exporters – 25.7 per cent.

The request has been lodged by the Defence Committee of the Seamless Steel Tubes Industry of the European Union in March 2017. The investigation shall be concluded within 15 months from the date of the publication of the Notice, i.e. until the beginning of October 2018. Pursuant to Article 11.2 of the EU Basic Anti-dumping regulation, the existing measures will remain in force pending the conclusion of the review.[14]

EUROPEAN COMMISSION INITIATES AN ANTI-DUMPING INVESTIGATION CONCERNING IMPORTS OF FERRO-SILICON ORIGINATING IN EGYPT AND UKRAINE

On 2 August 2017, the European Commission published Notice[15] of initiation of an anti-dumping proceeding concerning imports of ferro-silicon originating in Egypt and Ukraine. The investigation was initiated on the basis of the complaint by “Euroalliages”, acting on behalf of four Union producers, namely Ferropem, Ferroatlántica SL, OFZ and Huta Laziska SA, which together represent more than 90 per cent of the total Union production of Ferro-Silicon. The product subject to this investigation is ferro-silicon, a ferro-alloy containing by weight 20 per cent or more but not more than 96 per cent of silicon and 4 per cent or more of iron, and classified under the CN Codes 7202 21 00, 7202 29 10 and 7202 29 90. The allegation of dumping from Ukraine is based on a comparison of the normal value established on the information provided by a sector-specific publication on domestic prices with the export price (at ex-works level) of the product under investigation when sold for export to the Union. The investigation will cover the period from 1 July 2016 to 30 June 2017.

EURASIAN ECONOMIC COMMISSION IS ABOUT TO APPLY DEFINITIVE ANTI-DUMPING DUTIES ON UKRAINIAN HOT-ROLLED STEEL ANGLES

On 4 July 2017, the Eurasian Economic Commission Department for Internal Market Defence issued its final report on the results of the anti-dumping investigation with respect to hot-rolled steel angles originating from Ukraine. According to the Report[16], the department established the existence of dumping, material injury to the economy of the Eurasian Economic Union (EAEU), and causal relationship between the two and recommended the application of the definitive anti-dumping measures on hot-rolled steel angles originating from Ukraine and classified under the FEACN of the EAEU codes 7216 21 000 0, 7216 40 100 0, 7216 50 100 0, 7216 50 990 0 and 7228 70 100 0. The Department recommended the following anti-dumping duty rates to be applied: for Private Joint Stock Company “Enakievskiy Metallurgy Works” and Private Joint Stock Company “Azov Metallurgy Works” – 37.89 per cent; all other producers – 37.89 per cent. Now, in accordance with the Protocol on the Application of Safeguard, Anti-Dumping and Countervailing Measures to Third Countries (Annex 8 of the EAEU Treaty[17]), the EAEU Commission has to adopt the final decision.

For reference: Provisional anti-dumping duties on Ukrainian hot-rolled steel angles for the period of 4 months effective from 11 June 2017 were implemented through EAEU Commission Decision No. 53[18] of 11 May 2017 and applied pending the completion of the investigation. Moreover, pursuant to the Notice of the Eurasian Economic Commission Department for Internal Market Defence of 4 August 2017[19], the period for conducting the investigation has been extended until 10 October 2017.

UKRAINE RENEWS THE APPLICATION OF ANTI-DUMPING MESURES WITH RESPECT TO CERTAIN NIGROGEN FERTILIZERS ORIGINATING IN THE RUSSIAN FEDERATION

After reviewing the current situation on the supply of nitrogen fertilizers to the Ukrainian agricultural producers, as well as information concerning the suspension of anti-dumping measures with respect to certain nitrogen fertilizers originating in the Russian Federation, The Interdepartmental Commission on International Trade decided that further suspension of the measures is unjustifiable and renewed their application. According to the Commission’s notice[20], it confirmed the existence of dumping, injury caused to the Ukrainian producers and the causal relationship between the two, and set the rate of the definitive anti-dumping duty at 31.84 per cent.

The decision was adopted on 18 May 2017 and entered into force on 22 May 2017.

UKRAINE IMPOSES ANTI-DUMPING DUTIES ON RUSSIAN CHOCOLATE

On 20 May 2017, the Interdepartmental Commission on International Trade published the Notice[21] on application of anti-dumping measures with respect to imports into Ukraine of certain chocolate and cacao-containing products originating in the Russian Federation. According to it, the Commission conducted an investigation for the period of 2015 and established the existence of dumped imports of certain chocolate and cacao-containing products (classified under the UKTZED Codes 1806 31 00 00, 1806 90 11 00, 1806 90 19 00 and 1806 90 50 00) over that period, which caused material injury to the national producers. In particular, such imports resulted in decrease of national production (by 7.63 per cent), decrease of domestic sales (by 20.85 per cent), decrease of domestic sales profitability (by 26.42 per cent), as well as other negative consequences.

The Commission decided to apply the definitive ant-dumping duty at a rate of 31.33 per cent for the period of 5 years. The Decision entered into force 30 days after its publication, i.e. on 20 June 2017.

UKRAINE INITIATED SAFEGUARD INVESTIGATION ON SULFURIC ACID AND OLEUM

The appropriate Notice[22] was published on 10 August 2017. The investigation was launched on the basis of complaint by SE “Skhidnyi girnycho-zbahachyvalnyi combinat”, PJSC “Sumyhimprom”, “RPE “Zarya” LLC, and “Pershe Himichne Obyednannya” LLC. The product under investigation is sulfuric acid and oleum (classified under UKTZED Code 2807 00 00 00) regardless of country of export. According to the complaint, the volume of import of the product under investigation in 2015 and 2016 compared to 2014has increased by 80 per cent and 200 per cent respectively. At the same time, economic efficiency indicators of the domestic producers have decreased over the same period. Moreover, sales prices of the imported goods were less than theprices andcost of production of the domestic companies.

Interested parties have 30 days from the date of publication to register in the investigation and 45 days from the publication date to submit their comments.

OTHER TRADE NEWS

UKRAINE CREATES COUNCIL ON INTERNATIONAL TRADE

The Cabinet of Ministers of Ukraine on 4 July 2017 adopted a decision to create Council on International Trade (the “CIT”). The CIT is expected to serve as a single platform for coordinating international trade development in Ukraine. It is designed as an advisory body with a function of linking the government and business sector in the following dimensions of cooperation: simplification of trade procedures, export promotion, international trade strategies and policies development and implementation, and improvement of tariff regulation and trade defence instruments. The First Vice-Minister – Minister of Economic Development and Trade of Ukraine will become the head of the CIT, and the Deputy Minister of Economic Development and Trade of Ukraine – the Trade Representative of Ukraine will serve as his deputy.[23]

UKRAINE EXTENDS EXPORT DUTY ON SCRAP OF FERROUS METALS

The Verkhovna Rada of Ukraine adopted Law No. 2142-19 “On amendments to Section II “Final and transitional provisions” of the Law of Ukraine “On amendments to certain laws of Ukraine with respect to decrease of ferrous metals scrap deficit in the domestic market”[24] and extended the application of the export duty of 30 euros per ton on scrap of ferrous metals for additional year. According to the previous version of the law, the application of the duty was to expire in September 2017, but will now remain in force until 15 September 2018.


[1]https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=236627&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True

[2]http://www.reuters.com/article/us-wto-disputes-idUSKBN18Z2K1

[3]https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=235858,235843,235826,235862,235850,235856,235842,235838,235847,235855&CurrentCatalogueIdIndex=6&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True

[4]http://interfax.com.ua/news/economic/419379.html

[5]http://interfax.com.ua/news/economic/419379.html

[6]https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=237511,236779,235686,227587,227009,226225,125600&CurrentCatalogueIdIndex=1&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True

[7]https://www.wto.org/english/news_e/news17_e/rta_03jul17_e.htm

[8]http://me.gov.ua/News/Detail?lang=uk-UA&id=44310b82-4d20-4f7c-aea7-ba6b67589d40&title=NabulaChinnostiUgodaProVilnuTorgivliuZKanadoiu

[9]http://www.consilium.europa.eu/en/press/press-releases/2017/07/11-ukraine-association-agreement/

[10]http://www.consilium.europa.eu/en/press/press-releases/2017/06/28-ukraine-trade-preferences/

[11]http://www.kmu.gov.ua/control/publish/article?art_id=250147718

[12]http://me.gov.ua/News/Detail?lang=uk-UA&id=9632efc6-68ab-4663-8d49-bd089b106eec&title=VerkhovnaRadaUkrainiRatifikuvalaUgoduProEkonomichneSpivrobitnitstvoMizhUriadomUkrainiTaUriadomKhorvatii

[13]http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155692.init-expR.en.C214-2017.pdf

[14]http://trade.ec.europa.eu/doclib/docs/2016/june/tradoc_154702.en.L176-2016.pdf

[15]http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.C_.2017.251.01.0005.01.ENG&toc=OJ:C:2017:251:TOC

[16]http://eec.eaeunion.org/ru/act/trade/podm/investigations/PublicDocuments/AD22_report_final.pdf

[17]https://docs.eaeunion.org/docs/ru-ru/0013611/itia_05062014_doc.pdf

[18]https://docs.eaeunion.org/docs/ru-ru/01113873/clcd_12052017_53_doc.pdf

[19]http://www.eurasiancommission.org/ru/act/trade/podm/investigations/PublicDocuments/AD22_notice_ext.pdf

[20]https://ukurier.gov.ua/uk/articles/mizhvidomcha-komisiya-z-mizhnarodnoyi-200520173/

[21]https://ukurier.gov.ua/uk/articles/mizhvidomcha-komisiya-z-mizhnarodnoyi-torgivli1905/

[22]https://ukurier.gov.ua/uk/articles/mizhvidomcha-komisiya-z-mizhnarodnoyi-torgivli10_0/

[23]http://www.eurointegration.com.ua/news/2017/07/4/7068047/

[24]http://zakon2.rada.gov.ua/laws/show/2142-19/paran5#n5