Annual Review: International Trade
In 2012 a number of foreign trade issues were making headlines in Ukraine. One of the most important and anticipated changes was entering into force of the new Customs Code of Ukraine. Furthermore, Ukraine continued its efforts in regional trade liberalization including ratification of the new CIS Free Trade Agreement, the Free Trade Agreement with Montenegro. Last but not the least, one of the most controversial changes was the Ukrainian Government’s move for tariff renegotiation within the WTO, which raised strong concerns among Ukraine’s trade partners.
NEW CUSTOMS CODE OF UKRAINE
On 13 March 2012 the Parliament of Ukraine adopted the new Customs Code of Ukraine No. 4495-VI (the “Customs Code”) with proposals submitted by the President of Ukraine. The Customs Code entered into force on 1 June 2012. The Customs Code contains a number of positive changes in order to ease the activity of business entities. Within the second half of 2012, the Ministry of Finance of Ukraine adopted a number of by-laws for implementing the provisions of the Customs Code.
The Customs Code provides for:
• that the maximum time for clearing goods shall not exceed 4 business hours;
• the right of business entities to clear goods in any customs authorities irrespective of the place of their registration;
• the principle of “single window” during customs control of goods involving other state authorities;
• specific benefits for business entities possessing the status of the authorized economic operator;
• some crucial provisions related to custom value determination, to name but a few: new Customs Code provides for the exhaustive list of documents which customs authorities may require to confirm the declared customs value; the customs authorities are entitled to refuse to clear the goods at the declared by the declarant customs value only if there are reasonable grounds that the said value is inaccurate or false etc.
FREE TRADE AGREEMENTS
In 2012 three free trade agreements (the “FTA”) involving Ukraine (New CIS FTA, FTA with Montenegro, FTA with EFTA) entered into force.
New CIS FTA
On 30 July 2012 the Parliament of Ukraine adopted the Law of Ukraine “On Ratification of Free Trade Agreement with Commonwealth of Independent States” No.5193-VI.
On 20 September 2012 new CIS FTA came into effect in three states, which have ratified it: Belarus, Russia and Ukraine. For Armenia, Moldova and Kazakhstan, which have ratified the Agreement later, it came into force in the end of 2012.
Contrary to the previous version of the CIS FTA of 1994, the new CIS FTA is adapted to the WTO rules as well as stipulates the exact dispute settlement mechanism to be employed by the contracting parties in case of the violation of the CIS FTA provisions. At the same time, the new CIS FTA still have lots of exemptions from the FTA regime applicable to different products, to name but a few: to oil, gas, sugar, spirits, sunflower seed, ferroalloys, cattle, etc.
FTA with Montenegro
On 16 November 2012 the Law of Ukraine “On Ratification of the Free Trade Agreement between the Government of Ukraine and the Government of Montenegro” No.5445-VI came into force. The FTA with Montenegro entered into force on 1 January 2013. The FTA with Montenegro stipulates that the Parties shall eliminate all customs duties on imports of products originating from Montenegro and Ukraine, except for some goods, such as for Ukraine – pork, parts of chickens, sugar from sugar cane or sugar beet and chemically pure sucrose, in solid form etc.
FTA with EFTA states
The Free Trade Agreement between the EFTA states (Iceland, Liechtenstein, Norway, Switzerland) and Ukraine entered into force on 1 June 2012. 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.
UKRAINIAN INITIATIVE TO RAISE TARIFFS IN WTO
On 14 September 2012, Ukraine sent a document marked “secret” to members of the World Trade Organisation stating that it intends to raise the limit on the tariffs on 371 goods. Ukrainian initiative is based under Article XXVIII of the GATT. Since creation of the WTO in 1995, Article XXVIII has been used mostly for small or technical adjustments to countries’ tariffs, and almost always for fewer than 10 tariffs at a time.
Nearly 60 countries raised concerns over Ukraine’s request to renegotiate its tariff schedule at several meetings of the WTO General Council and the WTO Committee for Trade in Goods during October – December 2012. In particular, on 26 November 2012 at the WTO Council for Trade in Goods meeting 23 delegations (including Brazil, Canada, the European Union, Japan, Korea, Switzerland, Turkey, USA, China) issued a joint statement urging Ukraine to withdraw its request to renegotiate its tariff commitments on a large number of products.
On 12 December 2012 three months term for submission of requests for renegotiation of tariff commitments with Ukraine expired. Such requests were submitted by more than 15 WTO member-states, including USA, the EU, Argentina, Brazil, Egypt, India, Canada, China, Norway, Japan. Taking into consideration the volume of Ukraine’s application, the negotiations can be very lengthy and difficult.