International Trade News. February – April 2016
Ukraine joined the WTO Government Procurement Agreement
On 7 April 2016 the Law of Ukraine “On Ukraine’s accession to the WTO Agreement on Government Procurement”|1| came into force. The Law was passed by the Parliament of Ukraine on 16 March 2016 and signed by the President on 4 April 2016.|2|
Ratification of the Government Procurement Agreement (the “GPA”) by Ukraine provides the Ukrainian companies with an opportunity to enter the global market of international procurement with turnover of USD 1,700,000,000.|3|
Just to remind: the WTO GPA is a plurilateral agreement with a limited number of participants amounting to forty-five WTO members, including twenty-eight EU countries, Canada, Hong Kong, Israel, Japan, Korea, Switzerland, and USA. In 2015, Moldova, Montenegro and New Zealand also acceded to the GPA; and Albania, Australia, China, Georgia, Jordan, Kyrgyzstan, Tajikistan, Oman are in the process of accession. Ukraine initiated the negotiation process on the GPA accession in 2011.
The Protocol Amending the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) has Entered into Force for Ukraine
On 16 March 2016 Ukraine deposited its instrument of acceptance of the Protocol to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the “TRIPS”). The Protocol will enter into force once two-thirds of the WTO membership has formally accepted it.|4|
The Protocol amending the TRIPS Agreement, adopted in 2005, aims to streamline the access to affordable medicines for poorer WTO members. The Protocol allows exporting countries to grant compulsory licenses (ones that are granted without the patent holder’s consent) to their generic suppliers to manufacture and export medicines to countries that cannot manufacture the needed medicines themselves. These licenses were originally limited to predominantly supplying the domestic market.
Establishment of the Panel in the WTO Dispute on Ammonium Nitrate Initiated by the Russian Federation against Ukraine
Ukraine received the request of the Russian Federation on the establishment of the Panel in the WTO case Ukraine — Anti-Dumping Measures on Ammonium Nitrate (DS 493).|5|
Just to remind: On 7 May 2015 this dispute was initiated in the WTO by the Russian Federation on the grounds that in July 2014 Ukraine extended for 5 years and increased rates of the anti–dumping duties (by 20.51 per cent and 36.03 per cent) imposed on imports of ammonium nitrate originating from Russia. The rates of anti-dumping duties in the present reviews were established using the gas adjustment applied to the production cost, which corresponds to the previous EU practice (the Russian Federation initiated the respective WTO dispute against the EU in December 2013).
Ban on Transit of Ukrainian Goods Imposed by the Russian Federation
After introduction of the discriminatory conditions for transit of Ukrainian goods on 1 January 2016, in April 2016 the Russian Federation banned the transit of Ukrainian confectionery. The respective decision was adopted by the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor).
According to the Ministry of Economic Development and Trade, the discriminatory transit conditions imposed by the Russian Federation, increased the costs for transportation of the Ukrainian goods to the Central Asia by 30 per cent on average. Consequently, in the first quarter of 2016, the export of Ukrainian goods to the Caucasus and Central Asia countries decreased by 48 per cent on the average and to certain other countries the export levels fell by 70 per cent.
At the meeting of the WTO Council for Trade in Goods held on 15 April 2016 Ukraine made a statement regarding the respective violations of the Russian Federation. In particular, Ukraine made a clear request that Russia shall “immediately lift these unreasonable and restrictive transit restrictions and re-establish non-discriminating, open transit treatment for all WTO Members” in accordance with the respective obligations of the Russian Federation within the WTO. Ukraine’s statement was supported by the delegations of the EU, the Australia, Canada, Japan, Korea, Switzerland, Turkey and USA. However, the Russian delegation did not provide reasoned explanations for the restrictive measures.|6|
REGIONAL LIBERALIZATION OF TRADE
First Meeting of the Ukraine – EU Association Committee Responsible for Trade
On 12-13 April 2016 the first meeting of the Ukraine – EU Association Committee which deals with trade issues was held in Kyiv (the “Committee“). In accordance with the Association Agreement, the Committee shall meet in a specific configuration to address all issues related to Title IV (Trade and Trade-related Matters) of the Association Agreement. In particular, the Committee assesses the results of operation of the free trade area between Ukraine and the EU as well as the status of implementation of the economic part of the Association Agreement.
According to the participants of the meeting, Ukraine has generally showed a progress in the implementation of the EU legislation. In particular, Ukraine received positive assessment for its policy in such areas as technical regulation, competition law and public procurement. The regulation of customs and energy spheres was not assessed in the same positive way.Besides, the schedule for implementation of sanitary and phytosanitary standards as well as commencement of operation of the State Service for Food Safety and Consumer Protection was not adhered to as well.|7|
Government Approved the Strategy for Implementation of Legislation in Sphere of Sanitary and Phytosanitary Measures under the EU Requirements
Upon the initiative of the Ministry of Agrarian Policy and Food of Ukraine, on 24 February 2016 the Government adopted the decree “On Approval of Comprehensive Strategy for Implementation of Chapter IV (Sanitary and Phytosanitary Measures) of Title IV “Trade and Trade-related Matters” of the Association Agreement between Ukraine and the EU”.|8|
Ukraine is expected to submit the Comprehensive Strategy for consideration of the bilateral body between Ukraine and the European Union within three months following the entry into force of the Association Agreement.|9| Thereafter the Cabinet of Ministers of Ukraine shall introduce the respective amendments in the Action Plan on Association Agreement Implementation for the period of 2014-2017.
TRADE DEFENCE MEASURES
EU Established a 5-time Lower Anti-Dumping Duty on Imports of Steel Ropes and Cables Originating from Ukraine
In January 2016 the EU reduced the rate of the anti-dumping duty on imports of steel ropes and cables originating from Ukraine in 5 times.
The review of the anti-dumping duty was initiated by the Ukrainian producer in November 2014. Upon the results of the review, the EU anti-dumping duty of 51.8per cent on imports of steel ropes and cables originating in Ukraine and produced by PJSC “PA “Stalkanat-Silur” was amended and established at the level of 10.5 per cent. The amended anti-dumping duty rate will enter into force on the day following the publication of the respective European Commission regulation in the Official Journal of the European Union.
Anti-dumping duties at the level of 51.8 per cent on steel ropes and cables have been applied in the EU since 1999. Since then, the anti-dumping duties were extended at the same rate every five years upon the relevant reviews. The rate of the anti-dumping duty remains stable as far as the EU legislation does not envisage the amendment thereof following the results of the sunset review.|10|
Just to remind: The anti-dumping duty of 51.8 per cent, applicable since 1999, made export of the Ukrainian products to the EU practically impossible. As a result, the Ukrainian producers had to work in the environment, where the export prices in the EU were determined by the European Commission theoretically (based on export prices of the Ukrainian producers to other countries). Establishment of a significantly lower anti-dumping duty of 10.5 per cent is the first major step of the Ukrainian steel cables producer towards the complete elimination of the anti-dumping duty in the EU in the nearest future.
Ukraine extended a safeguard investigation against import of polyurethane foams
By Decision No. СП-353/2016/4411-05 dated 14 March 2016 the Interdepartmental Commission on International Trade extended the safeguard investigation against import into Ukraine of pliable porous plates, blocks and sheets from polyurethane foams irrespective of the country of origin and export for 330 days.
The safeguard investigation against import into Ukraine of pliable porous plates, blocks and sheets from polyurethane foams classified under the UKTZED code 3921131019 was initiated according to the Decision of the Interdepartmental Commission on International Trade No. SP-332/2015/4442-06 dated 3 July 2015.
Ukraine extended the anti-dumping measures on imports of wood fiberboards originating from the Russian Federation
By the Decision No. АД-531/2016/4411-05 dated 12 February 2016 the Interdepartmental Commission on International Trade extended for 5 years the application of anti-dumping measures on imports into Ukraine of wood fiberboards (DVP) produced by wet technology, solid (with density not less than 0.8 g/cm3), without mechanical treatment or coating, originating from the Russian Federation, classified under the UKTZED code 4411 92 10 00. The decision was based on the results of the review of anti-dumping measures in connection with the expiration thereof. The anti-dumping duty was established in respect of all Russian producers at the rate of 31.58 per centof the customs value.
The anti-dumping duties against import of the above products were applied in accordance with the Decision of the Interdepartmental Commission on International Trade No. АД-135/2006/143-35 dated 14 July 2006. In 2010, the Interdepartmental Commission on International Trade extended the period of application of the above measures for another 5 years.
PHARMACEUTICALS AND MEDICAL DEVICES
The Development of the Licensing Conditions for the Business Activities on Importation of Pharmaceuticals and Medical Devices is in Process
On 25 March 2016 the revised Draft of the Resolution|11| providing for the approval of the Licensing Conditions for the Business Activities on the Production, Wholesale and Retail of Pharmaceuticals as well as the Importation of Pharmaceuticals (other than Active Pharmaceutical Ingredients),|12| was published at the official website of the State Administration of Ukraine on Medicinal Products.
Key changes to the Draft are as follows:
- the application for a license, in addition to previously mentioned documents, must be submitted jointly with the information on the lack of control;
- the applicant for a license shall guarantee the access to the technical means and quality assurance system for an operator who will carry out the production and/or quality control of medicinal products in accordance with a contract;
- only those pharmaceuticals and goods shall be stored at the premises of pharmacies, which such pharmacies are authorized to purchase and sell;
- establishment of pharmacies shall be permitted only in those real estate units, which proprietary rights are subject to the state registration.
Start of the Reform of Medicinal Products and Medical Devices Procurement System and Establishment of the Centralized Procurement Organization
On 4 April 2016 the Ministry of Healthcare of Ukraine submitted for public discussion the Draft Concept of the Reform of Pharmaceuticals and Medical Devices Procurement System, developed in October 2015. The Draft Concept provides for establishment of the centralized procurement organization (the “CPO”).|13| According to the Draft Concept, the powers of the Ministry of Healthcare of Ukraine and other operators in the field of procurement of pharmaceuticals, immunological products and medical devices shall be delegated to the CPO.
The Concept is planned to be implemented in three stages during the period of 2016-2018:
I stage (2016) – the development of the institutional and legislative framework for the reform of public procurement in the sphere of healthcare, including the decision-making on the establishment of the CPO;
II stage (2016 – 2017) – the introduction of the modern mechanism of the CPO operation and approvals of the structure and staff of the CPO; holding an open competition for the position of manager and staff the CPO;
III stage (2018) – the development and approval of the plan for transition of procurement from international organizations to the CPO.
The CPO shall be established by the decision of the Ministry based on the principle of self-financing and shall be subordinated to the Ministry. It is proposed to attract the state funds, donor funds and other sources as the sources of funding of the CPO. It is planned that the CPO shall execute the procurement at the local and international level, as well as the procurement from foreign suppliers, as the case may be. The CPO shall also provide consultative support on the implementation public procurement to the operators in the healthcare sector of Ukraine.
The State Service of Ukraine on Safety of Foodstuffs and Consumer Protection is Launched
The State Service of Ukraine on Safety of Foodstuffs and Consumer Protection (the “Food Safety State Service“) is the single competent authority implementing the state policy in the field of food safety. Volodymyr Lapa has been appointed as the Head of the Food Safety State Service on 24 February 2016.
According to the Regulation of the Cabinet of Ministers of Ukraine No 667 dated 2 September 2015 the Food Safety State Service shall implement the policy in the following spheres:
- Safety and certain requirements to the quality of foodstuffs;
- Veterinary medicine;
- Quarantine and plant protection;
- Identification and registration of animals;
- Sanitary legislation;
- Preventionand minimization of the use of tobacco and its adverse effect on public health;
- Metrological control;
- Market control, within its responsibility, of the seeding industry and seedling production (in the part of certification of seeds and seedling material, protection of plant breeders’ rights);
- State control of compliance with the consumer protection and advertising legislation in this sphere.
On 6 April 2016 the Cabinet of Ministers of Ukraine has adopted the Regulation “On the Issue of the State Service of Ukraine on Safety of Foodstuffs and Consumer Protection”, thereby the Food Safety State Service officially started functioning.|14|
Establishment of the German-Ukrainian Chamber of Commerce and Industry
On 16 March 2016 the Parliament of Ukraine passed the Law of Ukraine “On Ratification of the Agreement between the Government of Ukraine and the Government of the Federal Republic of Germany on the Establishment of the German-Ukrainian Chamber of Commerce and Industry”. |15|
The Agreement was signed between the Cabinet of Ministers of Ukraine and the German Government on 23 October 2015. It is designed to formalize recognition of Ukraine as the valuable economic partner of Germany and to establish the basis for further strengthening of bilateral trade relations between Ukraine and Germany.|16|
According to the ratified agreement, the German-Ukrainian Chamber of Commerce and Industry is an independent legal entity, membership in which may be extended to the Ukrainian, German and other commercial entities and associations. The Chamber will be seated in Kyiv. The Chamber shall be financed through membership fees, grants of the Federal Ministry for Economic Affairs and Energy of the Federal Republic of Germany and other sources.
The Government Approved the Closure of Kerch and Sevastopol Sea Fishing Ports
Due to the impossibility to carry out the service of vessels and passengers, freight, transportation, expedition activities as well as other related economic activities in the sea fishing ports located within the territory of the Autonomous Republic of Crimea and in Sevastopol, the Government approved the closure of Kerch Sevastopol Sea Fishing Ports within the respective waters. The relevant decision was adopted in accordance with the CMU Resolution No. 263 dated 6 April 2016.|17|
The First Stage of Grain Terminal is Opened in the Illichivsk Port
In March 2016, the first grain terminal of Swiss company was opened in Illichivsk port. According to Mr Oleksiy Pavlenko, the grain terminal comprises a unit for single storage of 30 thousand tons of grain, equipped with motor discharge, which allows unloading about 120 cars per day. It is expected that the capacity of the storage unit will constitute 700 thousand tons of grain per year.|18|