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25 September 2015

International Trade News. June – August 2015

I. WTO NEWS

Ukraine suspended the WTO dispute with Australia

On 28 May 2015, Ukraine requested the WTO Dispute Settlement Body (the DSB) to suspend the proceedings of the Panel in the dispute against Australia on Certain Measures concerning Trademarks and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (DS 434). On 2 June 2015, the Panel informed the DSB of its decision to suspend its work upon Ukraine’s request. Accordingly, Ukraine pulled out of the dispute with Australia over the Tobacco Plain Packaging Act, initiated in 2012.

WTO DSB Panel took the decision regarding safeguard duties on imports of passenger cars to Ukraine

On 26 June 2015, the WTO DSB Panel circulated a report on the dispute between Ukraine and Japan over safeguard duties on certain passenger cars, imported to Ukraine (DS 468). According to the Panel’s decision, the safeguard duties shall be revoked as far as Ukraine failed to comply with a number of substantial and procedural issues during the conduct of an investigation. In particular, the imposition of safeguard duties was found inconsistent with Article XIX:1(a) of the GATT as well as with the relevant provisions of the WTO Agreement on Safeguards. Following the Panel’s report, the Interdepartmental Commission on International Trade took a decision "On Removal of Safeguard Measures on Imports of Passenger Cars to Ukraine, regardless of Country of Origin and Export". According to the decision cited above, the safeguard duties will be revoked at 30 September 2015.

Just to remind:On 14 April 2013, Ukraine imposed the safeguard duties on import of passenger cars with the following rates: 6.46% (for passenger cars with an engine volume of 1000 cm3 – 1500 cm3) and 12.95% (for passenger cars with an engine volume of 1500 cm3 – 2200 cm3). The rates of safeguard duties were liberalized by one-third every year and reached the level of 2.15% and 4.32% at the time when the decision of the WTO Panel was rendered.

Ukraine agreed the imposition of import surcharge with the WTO members

Ukraine concluded the consultations with the WTO members regarding the imposition of import surcharge.The indicated consultations were held within the WTO Committee on Balance-of-Payments Restrictions. A relevant Report was adopted on 19 June 2015.

During the consultations, all WTO members, exlcuding the Russian Federation, considered the Ukraine’s measure to be imposed for balance-of-payments reasons and to be fully in line with the WTO rules. Nevertheless, the WTO members suggested that Ukraine remove the import surcharge by the end of December 2015 or sooner, if possible. 

WTO General Council adopted the decision on Kazakhstan’s terms of entry to the Organization

On 27 July 2015, the WTO members formally adopted Kazakhstan’s WTO terms of entry at the General Council meeting. Later on the same day, the President of Kazakhstan, Mr. Nursultan Nazarbayev, and the WTO Director-General, Mr. Roberto Azevêdo, signed the Protocol of Accession of Kazakhstan to the WTO. The Protocol shall be ratified by the Parliament of Kazakhstan on 31 October 2015 and after that, the country will officially become the 162-th WTO member.

Just to remind: The negotiations on accession of Kazakhstan to the WTO lasted for 19 years (starting from 1996) before Kazakhstan’s terms of entry were adopted. Ukraine also participated in the negotiations and achieved the significant results in trade facilitation with Kazakhstan. Particularly, the Ministry of Economic Development and Trade of Ukraine agreed on the removal of limitations on import of meat and dairy products of eight Ukrainian producers and exporters. Currently, the negotiations on the removal of import limitations for seven more enterprises are held. Moreover, Kazakhstan declared that it would not increase the rates of duties for Ukrainian goods, as the Russian Federation plans to do due to the commencement of the EU-Ukraine free trade area on 1 January 2016.

Kyrgyzstan notified of its intention to revise its tariff obligations within the WTO

At the beginning of July 2015, Kyrgyzstan notified the WTO of the intention to review its obligations on customs tariff rates for the three-year period as per 1 January 2015. This decision was taken due to the accession of Kyrgyzstan to the Eurasian Economic Union (the EEU).The Treaty on the Accession of the Kyrgyz Republic to the EEU entered into force on 12 August 2015.

Subsequently, Kyrgyzstan will hold the negotiations on adjustment of import duty rates with its major trade partners and states with which the respective obligations were initially negotiated (Australia, the EU Member States and the USA). Currently, the average rate of import duty of the Kyrgyz Republic is 7.4% (according to the obligations undertaken by the state during its accession to the WTO). At the same time, the rate of the Common Customs Tariff of the EEU comprises 9.4% and shall be reduced to 7.7% to conform with the obligations of the Russian Federation within the WTO.

II. REGIONAL LIBERALIZATION OF TRADE

Ukraine and Canada rounded off talks on free trade agreement

On 14 July 2015, Ukraine and Canada concluded negotiations on the establishment of the Canada-Ukraine Free Trade Agreement (the CUFTA). In the following steps, the parties shall observe some formalities including translation of the document into three languages (English, French and Ukrainian), signature and ratification of the agreement.

The CUFTA shall open up 98% of the Canadian market for the Ukrainian goods. In particular, the import duties will be eliminated with regard to all agricultural goods excluding 108 tariff lines and all industrial products except for passenger cars. The groups of products not benefiting from the duty-free access are subject to tariff reductions over the transition period of seven years. Besides that, the agricultural goods falling within the mentioned above 108 tariff lines can be exported in the frames of a duty-free tariff quota. 

Ukraine, in its turn, shall revoke customs tariffs on 80% of Canadian goods with subsequent tariff elimination of the remaining portion of the products on a three-stages basis – over the periods of three, five and seven years. In addition, some Canadian products will also benefit from the duty-free tariff quotas and some of them are phased out of the CUFTA.

Just to remind: Canada and Ukraine launched the free trade agreement negotiations in 2009. In 2012, the negotiations were suspended upon the initiative of Canada, since Ukraine had notified of its intention to revise the WTO commitments. At the beginning of 2015, the negotiations became active again.

Ukraine became a beneficiary of the US General System of Preferences

On 29 July 2015, the Trade Preferences Extension Act came into force in the USA. This Act extends the General System of Preferences (the GSP) till 31 December 2017.

The updated GSP program covers 121 beneficiaries, including Ukraine. Owing to participation in the GSP, Ukrainian producers will benefit from a duty-free access on 3500 items representing 33% of all tariff lines. In particular, the list of products eligible for duty-free export to the US market includes some agricultural products, chemicals, minerals, jewelry, etc.

It should be emphasized that the GSP envisages a retroactive refund of duties paid by importers for goods imported from 1 August 2013 to 29 July 2015 (the period when the GSP was suspended). However, both currently imported goods and goods eligible for retroactive refund of duties shall meet certain requirements.

The detailed information on export requirements in the frames of the GSP can be found here.

Trade cooperation between Ukraine and Iran might intensify significantly due to the sanctions elimination agreements

On 14 July 2015, the Islamic Republic of Iran and the Member States of International Atomic Energy Agency (IAEA) signed a "roadmap" under the title of the "Joint Comprehensive Plan of Action" (the Plan). On 20 July 2015, the Plan was endorsed by the Resolution of the UN Security Council No. 2231 (2015).

The Plan envisages a gradual lifting of a variety of international sanctions, including foreign economic sanctions, and their ultimate repeal in consideration for Iran’s nuclear disarmament. In this connection, a significant revival of trade turnover between Ukraine and Iran is expected.

In June 2015, Ukrainian and Iranian delegations conducted the first meetings regarding the possible areas of cooperation. Besides that, on 25-29 July 2015, the delegation of major Ukrainian business representatives visited Iran. As it was revealed, the representatives of Iranian businesses hold the particular interest in the importation of Ukrainian cereals, crude sunflower oil as well as in the land plots lease for cultivation of these products with their further placement on internal market or re-export to third countries. Iranians are also interested in the engineering goods (including carriage, ship and aircraft building, industrial equipment). Specifically, the Iranian companies face up to launch the exportation of equipment and technology for their own railway undertakings, steelworks and machinery plants.

III. TRADE DEFENCE MEASURES

Ukraine initiated an anti-dumping investigation against import into Ukraine of certain nitrogen fertilizers originating from the Russian Federation

According to the Decision of the Interdepartmental Commission on International Trade "On Initiation and Conduct of the Anti-Dumping Investigation Against Import into Ukraine of Certain Nitrogen Fertilizers Originating from the Russian Federation" No. AD-331/2015/4442-06 dated 23 June 2015, Ukraine initiated an anti-dumping investigation against import of urea and ammonium nitrate in hydrous and ammonia solutions originating from the Russian Federation, classified under the UKTZED codes 310210 and 3102800000.

The investigation was initiated at the request of the PJSC "Azot", the PJSC "Concern Stirol", the PJSC "Severodonetske Obyednannya Azot".

Ukraine adopted a decision on application of definitive anti-dumping measures against import of general-purpose-type incandescent electric lamps originating from Kyrgyzstan

According to the Decision of the Interdepartmental Commission on International Trade "On Application of Definitive Anti-Dumping Measures Against Import into Ukraine of Electric General Service Incandescent Lamps Originating from the Kyrgyz Republic" No. AD-330/2015/4442-06 dated 23 June 2015, the definitive anti-dumping measures against import into Ukraine of incandescent electric lamps with wattage not more than 200W and voltage more than 100V classified under the UKTZED code 8539229010 shall be applied by levying of 25.73% anti-dumping duty during the period of 5 years.

Ukraine initiated a safeguard investigation against import of pliable porous plates, blocks and sheets from polyurethane foams

According to the Decision of the Interdepartmental Commission on International Trade "On Initiation and Conduct of the Safeguard Investigation against Import into Ukraine of Pliable Porous Plates, Blocks and Sheets from Polyurethane Foams Irrespectively of the Country of Origin and Export" No. SP-332/2015/4442-06 dated 3 July 2015, the safeguard investigation against import into Ukraine of the respective products classified under the UKTZED code 3921131019 was initiated.

The investigation was initiated at the request of the LLC "INTERFOAM", the LLC "INTERFOAM-DNIPRO", the LLC "INTERFOAM-ZAKHID" and the LLC "INTERFOAM-M".

Eurasian Economic Commission initiated a sunset review of anti-dumping measures against certain types of steel pipes originating from Ukraine

According to the Notification of the Department for Internal Market Defence of the Eurasian Economic Commission "On Initiation of the Sunset Review of Anti-Dumping Measures Against Certain Types of Steel Pipes Originating from Ukraine" adopted by the Order of the Director of the Department for Internal Market Defence No. 9 dated 6 July 2015, the sunset review of anti-dumping measures against import of casing pipes, tubing pipes as well as oil line pipes, gas line pipes and hot-deformed conventional pipes with diameter up to 820 mm classified under the TN VED codes 7304, 7305 and 7306 was initiated following the expiry of the previous anti-dumping measures.

Just to remind: According to the Decision of the Commission of Customs Union "On Measures for Protection of the Economic Interests of Producers of Certain Types of Steel Pipes in the Customs Union" No. 702 dated 22 June 2011, the previous anti-dumping measures were imposed at the following rates:

a)    casing pipes – 18.9%;

b)    tubing pipes – 19.9%;

c)    oil line pipes, gas line pipes and hot – deformed conventional pipes with a diameter up to 820 mm – from 19.4% to 37.8%.

Canada initiated a sunset review of anti-dumping measures against import of hot-rolled carbon and alloy steel sheet and strip from several countries including Ukraine

On 13 July 2015, the Canada Border Services Agency initiated a sunset review of anti-dumping measures against import of hot-rolled carbon and alloy steel sheet and strip from Brazil, China, Taiwan (Chinese Taipei), India and Ukraine. The products are classified under the following HS codes 7208, 7211, 7225 and 7226. The sunset review is anticipated to be concluded by 28 October 2015.

Just to remind: According to the determination of the Canada Customs and Revenue Service dated 18 July 2001, confirmed by the Decision of the Canadian International Trade Tribunal, the anti-dumping duty for Ukraine was imposed at the rate of 62.9% of the normal value or 169% of the export price. Application of the measure was extended following the results of sunset reviews in 2006 and 2011.

Pakistan initiated an anti-dumping investigation against import of cold-rolled flat products from China and Ukraine

On 16 July 2015, the Islamic Republic of Pakistan initiated the anti-dumping investigation against import of cold-rolled flat products originating from People’s Republic of China and Ukraine classified under the following codes of the Customs Tariff of Pakistan: 72091690, 72091790, 72091890, 72091610, 72091710, 72091810, 72092690, 72092790, 72092890, 72092610, 72092710 and 72092810.

IV. PHARMACEUTICALS

The Ministry of Health of Ukraine suggests that certain kinds of pharmaceuticals shall be exempted from import surcharge

On 3 August 2015, the Ministry of Health of Ukraine published on its website the Draft Regulation of the Cabinet of Ministers of Ukraine (the CMU) "On Adoption of the List of Medicinal Products which Shall not be Charged with the Import Surcharge" (the Draft Regulation).

The Draft Regulation offers to exempt from import surcharge the following groups of medicinal products:

  • medicinal products which are authorized for production and use in Ukraine and are listed in the State Registrar of Medicinal Products;
  • medicinal products imported for clinical trials.

Providing that the medicinal products purchased through international organizations for state budget are already exempted from import surcharge, all registered medicinal products will be exempted from the import surcharge in case this Draft Regulation comes into force.

Requirements of technical regulations on medicinal products became mandatory

On 1 July 2015, the requirements of technical regulations on medical product sapproved by the CMU Regulations No. 753, No. 754, No. 755 dated 2 October 2013 became mandatory (the Technical Regulations). These Technical Regulations contain the rules on conformity assessment procedure and are elaborated on the basis of the EU Directives No. 93/42/EEC dated 14 June 1993, No. 98/79/ЕС dated 27 November 1998and No. 90/385/ЕЕС dated 20 June 1990. Until 1 July 2015, the Technical Regulations had been applied on а voluntary basis.

However, the scope of the Technical Regulations does not cover the following categories of medical products: the products (1) registered in the State Registrar of Medical Equipment and Healthcare Products and (2) authorized for use on the territory of Ukraine without conformity assessment procedures and labelling during the established transition period. The said period lasts: for the products, which certificate of state registration expires after 1 July 2016 or has no expiry date – until 1 July 2016; for the medical products, which certificate expires before 1 July 2016 – until the expiry date.

It should be noted that the associations of medical products importers emphasize on the existence of a number of problems, which arose due to the provisions of Ukrainian legislation. The main (though not the only) problem is the length of the transition period.

The procedure of declaration of wholesale prices for the medicinal products and healthcare products is simplified

On 7 July 2015, the CMU Regulation establishing the new order for declaring of wholesale prices for medicinal and medical products "On Making Amendments to Certain Regulations of the Cabinet of Ministers of Ukraine" No. 449 of 22 April 2015 came into force (the Regulation).

This Regulation abolishes the reference pricing (price-fixing on the basis of comparison between the prices for supply into Ukraine with the prices for equivalent drugs in other countries). Thus, the State Inspection of Ukraine for the Price Control will be not involved in the declaring process, and the only state body verifying the submitted documents and taking decisions regarding declaration is the Ministry of Health of Ukraine. Besides that, due to the reference pricing termination, the list of document required for declaration is reduced. In particular, it is not necessary to submit now the explanatory note on the necessity of price changes as well as the report on the prices in the referential countries and Ukraine.

The Regulation also reduced the term for decision-making regarding the declaration from 22 to 10 working days after the documents are submitted.

Important novelty is a determination of the limit on resale markup in the amount of 25% for pharmaceuticals and medical products registered in the National List of Basic Medicinal Products, Medical Products and Socially Oriented Medicinal Products Purchased by the Drugstores.

V. OTHER NEWS

The Russian Federation included Ukraine in food embargo list on special terms

The Government of the Russian Federation extended the food embargo to certain countries including Ukraine (according to the Regulation of the RF Government "On Making Amendments to the Regulations of the Government of the Russian Federation dated 7 August 2014 No.778 and 31 July 2015 No. 774" No. 842 dated 13 August 2015). Up to this point, the food embargo had been applied with regard to the agricultural goods, raw materials and food products from the USA, Canada, the EU Member States, Australia and the Kingdom of Norway.

Ukraine is subject to special conditions: the embargo shall come into force from the date of application of import duties on certain goods originating from Ukraine according to the Regulation of the RF Government No. 959 dated 19 September 2014. According to this Regulation, the import duties will be enacted by the Russian Federation in case Ukraine applies the economic part of the EU-Ukraine Association Agreement. Nevertheless, the food embargo will come into force not later than 1 January 2016. Besides Ukraine, embargo was also imposed against Albany, Montenegro, Island and Lichtenstein.

State Fiscal Service of Ukraine launched the process of Ukraine’s accession to the WCO CTS Program

On 4 August 2015, the State Fiscal Service of Ukraine (the SFS) launched the process of Ukraine’s accession to the World Customs Organization (the WCO) Program on collection, storage and exchange of information on cargoes – the WCO CTS (the World Customs Organization Cargo Targeting System). According to the information of the SFS press-service, the Head of the SFS, Mr. Roman Nasirov, signed an agreement with the WCO on accession to the program.

Due to the participation in the program, Ukraine will be able to receive a preliminary detailed information on cargos delivered to the Ukrainian ports in containers, efficiently manage the risks and simplify a number of formalities. Implementation of the WCO CTS will be financed by the USA within the frames of export control and border safety program. Hereinafter, the system will be maintained free of charge.

The Law of Ukraine "On Licensing of the Types of Commercial Activity" entered into force

On 28 June 2015, the Law of Ukraine "On Licensing of the Types of Commercial Activity" No. 222‑VIII dated 2 March 2015 (the Law) entered into force. Thus, according to para. 3 of Article 21 of this Law, the Law of Ukraine "On Licensing of Certain Types of Commercial Activity" No. 1775‑III dated 1 June 2000 became invalid.

The new Law abolishes licensing of twenty-six types of commercial activity, in particular, the operations with the metal scrap, the customs brokerage activity, the construction of buildings of I-III categories of difficulty, licensing of trade in agrochemicals, veterinary drugs, liquid fuel and biogas, etc. Besides that, the Law envisages certain amendments in respect of some other legal acts of Ukraine.

The Cabinet of Ministers of Ukraine extended the moratorium on inspections of business entities until the end of 2016

On 24 June 2015, the Cabinet of Ministers of Ukraine adopted a decision to extend the moratorium on inspections of the commercial entities activity with the revenue below UAH 20 mln before the end of 2016. The prohibition on inspections of business entities was imposed by the Law of Ukraine "On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Regarding the Tax Reform" dated 28 December 2014 No. 71-VIII (the Law).

According to the Law, the inspection of the commercial activity of a company may be carried out exclusively upon the authorization of the Cabinet of Ministers of Ukraine, a court decision, in accordance with the requirements of the Criminal Procedure Code of Ukraine or upon company’s own initiative. In case the authorization is granted, solely the State Fiscal Service and State Finance Inspection of Ukraine are empowered to conduct an inspection.

Moratorium does not cover (1) the inspections of commercial entities, which import, produce or sale excisable goods; (2) the inspections for certain aspects of compliance with the license and tax legislation (as of 1 January 2015); (3) the inspections of activities of second and third groups of taxpayers; and (4) the inspections of retail sales of goods by means of mobile chain, except from certain categories of taxpayers defined in the Para 27 of Subchapter 10 of Chapter ХХof the Tax code of Ukraine (as of 1 July 2015).

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