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6 December 2011

International Trade News – November 2011

I. HOT ISSUES

Liability for violations of personal data protection legislation enters into force shortly

Starting from January 1, 2012 the Law of Ukraine “On Amending Certain Legislative Acts of Ukraine Regarding Violations of Legislation on the Personal Data Protection” No. 3454-VI enters into force. The said Law sets forth liability for the violation of legislation on personal data protection, to name but a few: for failure to notify or untimely notification of individuals on their rights related to inclusion of their personal data into the personal data base, failure to register the databases etc. The Law envisages administrative or criminal liability depending on damages caused by the respective violation. Moreover, the Law stipulates the following penalties: (a) fine from 100 to 1000 nontaxable minimum individual incomes (approximately 150-1500 EUR), (b) corrective work up to 2 years, (c) arrest up to 6 months, (d) confinement up to 5 years, (e) imprisonment up to 5 years.

Just to remind: on June 1, 2010 the Law of Ukraine “On Personal Data Protection” No. 2297-VI was adopted. The said Law provides for comprehensive regulation of personal data processing in Ukraine, namely: compulsory registration of personal data databases, prohibition of collection, processing and distributing of any personal data through relevant databases unless prior written consent for such actions is given by the respective person etc.

Non-compete covenants in vertical agreements employed in Ukraine may be shortly verified by the Anti-Monopoly Committee of Ukraine

In November 2011 the representatives of the Anti-Monopoly Committee of Ukraine (“AMCU”) on numerous occasions publicly announced that in 2012 it will watch closely vertical agreements on the Ukrainian FMCG market as to their compliance with the Ukrainian legislation in the field of competition protection.

For recent trends of distribution and franchise agreements in Ukraine please see.

II. REGIONAL TRADE LIBERALIZATION

FTA to be signed between Ukraine and Serbia

On November 10, 2011 the President of Ukraine, Mr. Yanukovych, held the meeting with the President of Serbia, Mr. Tadich. One of the key topics discussed during the said meeting was conclusion of the free trade agreement between Ukraine and Serbia. Conclusion of the said agreement will deepen trade-economic relations between both countries1.

New CIS FTA

On November 11, 2011 the Agreement on Free Trade Area of the States – members of the Commonwealth of Independent States was made publicly available on the web-portal of the government of Ukraine2 and will be shortly sent to the Parliament of Ukraine for ratification3 . Just to remind: on October 18, 2011 the prime-ministers of the CIS countries signed the new version of the CIS FTA. 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.

Ukraine and Montenegro signed FTA4

On November 18, 2011 the First Vice-Prime-Minister – the Minister of Economic Development and Trade of Ukraine, Mr. Klyuyev, and the Minister of Economy of Montenegro, Mr. Kavaric, signed the Free Trade Agreement between the Government of Ukraine and the Government of Montenegro. The said Agreement is expected to actively stimulate trade and economic cooperation between both states, to increase exports of Ukrainian goods and services to Montenegro's market and to have positive impact on both countries' economies. As Mr. Klyuyev pointed out, the most promising areas for further bilateral cooperation are accordingly the housing and industrial construction, the Ukrainian participation in the modernization of Montenegro railway and shipbuilding industry, city and intercity buses procurement, the supply of food products and organization of production of the said products on the territory of Montenegro.

III. UKRAINE AND WTO

Ukraine reserved rights to modify its schedule of WTO market access commitments5

The government of Ukraine reserved its rights under Article XXVIII:5 of the GATT 1994 to modify its schedule of market access commitments for the duration of the next three-year period beginning on January 1, 2012 (Schedule CLXII – Ukraine, G/MA/262, November 9, 2011). As of today it is still unclear bound rates for which products will be subject to modification. On November 16, 2011 the Ministry of Economic Development and Trade of Ukraine adopted the Order “On Establishment of Interdepartmental Working Group On Analysis of Issue related to Modification of Import Duty Rates under WTO Agreements” No. 226. Under the Order the said group shall suggests the respective proposals with due substantiation by December 20, 20116.

Consultations between Ukraine and Moldova7

During the 13th meeting of the Intergovernmental Moldavian-Ukrainian Committee on Trade and Economic Cooperation held on November 10-11, 2011, the representatives of Ukraine and Moldova discussed, among others, disputes WT/DS421 (Republic of Moldova – measures affecting the importation and internal sale of goods (environmental charges)) and WT/DS423 (Ukraine – taxes on distilled spirits). Based on the results of the said consultations, Ukraine undertook to employ all necessary measures to establish the same excise tax rates for alcoholic beverages, incl. Moldavian divin, by the end of 2011. In its turn, Moldova undertook to adopt the Draft Law eliminating discrimination of the imported products by the end of 2011.

IV. CUSTOMS ISSUES

New Customs Code of Ukraine was adopted

On November 3, 2011 the Parliament of Ukraine adopted the Law "On Amending the Customs Code of Ukraine and Certain Other Legislative Acts" No. 8130-д, with the effect from January 1, 2012 (if signed by the President of Ukraine). As compared to the effective Customs Code, the new Customs Code almost completely changes the current regulations of customs clearance procedures, to name but a few: the time of customs clearance is shortened by 4 hours, the customs valuation procedures are improved, the scope of electronic declaration is expanded, the customs clearance procedures for individuals are simplified etc.

Certification of electronic customs cargo declaration copies

By its Letter No. 11.1/2-12.2/14986-ЕП dated November 2, 2011 the State Customs Service of Ukraine explained that the paper copy of the electronic customs cargo declaration duly certified by the customs authorities shall be enough for the foreign currency control purposes until the National Bank of Ukraine adapts its respective acts (particularly the Resolution of NBU No. 136 dated March 24, 1999) to electronic customs clearance declarations.

V. AGRICULTURAL MARKET

State support of companies involved in agricultural sector

On October 20, 2011 the Cabinet of Ministers of Ukraine adopted the Resolution "On Amendments to the Resolution of the Cabinet of Ministers of Ukraine No. 794 dated August 20, 2011" No. 1091. According to the Resolution, in addition to the compensation of interest rate paid for credits received by the companies involved in agricultural sector, the government of Ukraine is going also to compensate to the said companies leasing payments for lease of equipment subject to observance of the set requirements and procedures. For the said purposes about 100 million UAH is going to be assigned from the state budget.

VI. MEDICINE & PARMACEUTICALS

Falsified medicine value for the liability purposes

On November 2, 2011 the Ministry of Health of Ukraine posted on its official website the Draft Order "On Approval of Small, Large and Especially Large Amounts of Falsified Medicines"8. The said Draft Order is aimed at defining what should be understood by the following terms for the purposes of the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine regarding Prevention of Medicine Falsification" No. 3718-VI:

• “small amount of falsified medicines” (i.e. medicine value by 50 non-taxable minimum incomes – approximately 4300 EUR);

• “large amount of falsified medicines” (i.e. medicine value by 150 non-taxable minimum incomes – approximately 4

300-13000 EUR); and

• “large scale amount of falsified medicines” (i.e. medicine value more than 150 non-taxable minimum incomes – approximately more than 13000 EUR).

Just to remind: on November 1, 2011 entered into force the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine regarding Prevention of Medicine Falsification" No. 3718-VI dated September 8, 2011. The said Law directly prohibits such actions as production, purchase, transportation, delivery or storage with the aim to sell or sale of the falsified medicines.

Green light to the unregistered medicines used for pharmaceutical development

On November 21, 2011 the Parliament of Ukraine adopted the Draft Law «On Amending Article 17 of the Law of Ukraine "On Medicines" (with respect to Ensuring Pharmaceutical Development of Medicines» No. 8175. The Draft Law allows import of unregistered medicines intended for pharmaceutical development. If the Draft Law is signed by the President of Ukraine, the companies that have received a license for production of medicines as well as research institutions involved into medicines development are allowed to import limited quantities of the unregistered medicines for the purposes of pharmaceutical development.

VII. PRODUCT SAFETY LEGISLATION

Requirements to materials contacting with food products

On November 11, 2011 the Draft Law "On Requirements to Items and Materials Contacting with Food Products" was registered with the Parliament of Ukraine under No. 9450. The Draft Law provides for general and specific requirements to items and materials contacting with food products. Additionally, it sets forth the order of keeping the register of substances allowed to be used in the process of materials and items production as well as the procedure for exclusion and inclusion of the substances in that register.

Notifying on product safety

The Ministry of Economic Development and Trade of Ukraine published on its official website the Draft Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Procedure for Notifying the State Market Surveillance Authorities about Products not Meeting the General Requirements for Products Safety and the Form of such Notification"9. The Draft Resolution establishes the order, form and obligations for submission of notifications to the market surveillance authorities by the national producers and distributors about the products not meeting general product safety requirements.

The system of prompt mutual notification about the products entailing serious risks

The Ministry of Economic Development and Trade of Ukraine published on its official web-site the Draft Resolution of the Cabinet of Ministers of Ukraine “On Approving the Order of Functioning of the System of Prompt Mutual Notification about the Products Entailing Serious Risks and Rules for Submitting Notifications to the System of Prompt Mutual Notification about the Products Entailing Serious Risks”10. The Draft Resolution establishes the rules of functioning of the system of prompt mutual notification about the products entailing serious risks among different state authorities, the rules of submission of the respective notifications to the said system as well as the rules of access of end consumers and the state authorities to the said system.

The national informational system of market surveillance

The Ministry of Economic Development and Trade of Ukraine published on its official web-site the Draft Resolution of the Cabinet of Ministers of Ukraine “On Approving the Order of Functioning of the National Informational System of Market Surveillance and the Rules of Submission of the Relevant Information Thereto and Provision of Notifications Therefrom”11. Under the Draft Resolution the informational system of market surveillance should include the electronic register of all decisions adopted by market surveillance authorities under the Law of Ukraine “On General Safety of Non-Food Products” No. 2736-17 and the Law of Ukraine “On State Market Surveillance and Control of Non-Food Products” No. 2735-VI. The major objective of the said electronic register is exchange of information about the decisions adopted in respect of certain non-food products among the market surveillance authorities and the market control authorities to ensure due control under the circulation of the said products on the Ukrainian market.

VIII. OTHER DEVELOPMENTS

New state support export regulations in Ukraine

On November 1, 2011 the Draft Law "On State Support of Export Activity" was registered with the Parliament of Ukraine under No. 9373. The Draft Law stipulates the possible forms of state support of export activity (e.g. export credit insurance, state guarantees provision) and establishes new state bodies to be involved in export support activities, in particular, the State Export Credit Agency.

UAH use in settlements with non-residents

On November 22, 2011 the National Bank of Ukraine submitted to the Parliament of Ukraine the Draft Law «On Introduction of Amendments to Article 7 of the Decree of the Cabinet of Ministers of Ukraine "On System of Currency Regulation and Currency Control"» No. 9488. The Draft Law allows using hryvna for settlement between residents and non-residents without obtaining individual licenses of the National Bank of Ukraine.

New Ukrainian internal trade regulations

On November 10, 2011 the Cabinet of Ministers of Ukraine12 submitted with the Parliament of Ukraine the Draft Law "On Domestic Trade" No. 9443 aimed at regulation of internal trade activities in Ukraine. The Draft Law sets forth numerous requirements applicable to commissions, distance and online trading activities, trade premises etc. Notably, the business has already voiced a lot of concerns as to some provisions of the Draft Law, to name but a few: establishment of deadlines for payments for the food products supplied, requirements to area and size of trade premises.

Humanization of liability for infringements in the field of economic activity

On November 15, 2011 the Parliament of Ukraine adopted the Law of Ukraine "On Amending Certain Legislative Acts of Ukraine (regarding Humanization of Liability for Some Infringements in the Sphere of Economic Activity)" No.9221. The said Law provides for the replacement of criminal liability for certain types of economic activities by the administrative liability in the form of the imposition of a fine, to name but a few: fictitious bankruptcy, conducting forbidden types of commercial activities, unlawful opening or use of bank accounts in foreign countries.

Ukrainian anti-corruption legislation may be further amended

On November 17, 2011 the Draft Law «On Amending Certain Legislative Acts of Ukraine in Connection with Adoption of the Law of Ukraine "On Preventing and Fighting Corruption"» No. 9473 was submitted to the Parliament of Ukraine. The main aim of the said Draft Law is to bring several legislative acts of Ukraine into compliance with the Law of Ukraine "On the Principles of Preventing and Combating Corruption" No. 3206-VI. Particularly, the Draft Law adds the Labour Code of Ukraine, the Law of Ukraine “On State Service”, the Law of Ukraine “On Militia”, the Law of Ukraine “On Notaries” etc. with the rules as to the prevention of the conflict of interests, restrictions regarding the employment of related persons, dismissal of individuals brought to liability for violations of anti-corruption legislation etc.

Please see breif analysis of the new anti-corruption legislation here.

For more information please, contact Tatyana Slipachuk or Nataliya Mykolska.

To subscribe for the international trade newsletter, please contact Tatyana Skrypka.

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1http://ura-inform.com/ru/economics/2011/11/11/freetrade

2http://www.kmu.gov.ua/control/en/publish/article?art_id=244693467&cat_id=244314975

3http://www.kyivpost.ua/business/article/ugoda-pro-vilnu-torgivlyu-z-snd-na-shlyahu-do-ratifikaciyi-32509.html

4http://www.me.gov.ua/control/uk/publish/article?art_id=174605&cat_id=38461

5http://wto.in.ua/index.php?lang=ua&&page=2&get=3&id=2301

6http://wto.in.ua/index.php?lang=ua&&page=2&get=3&id=2306

7http://wto.in.ua/index.php?lang=ua&&page=2&get=3&id=2302

8http://www.moz.gov.ua/ua/portal/dn_20111102_p.html

9http://www.me.gov.ua/file/link/174675/file/proekt19-11-11.doc

10http://www.me.gov.ua/file/link/174864/file/Postanova.doc

11http://www.me.gov.ua/file/link/174848/file/Postanova1.doc

12http://me.kmu.gov.ua/control/uk/publish/article?art_id=173475 

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