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3 October 2012

International Trade News September 2012

I. HOT ISSUE

Russia imposed utilization fee on vehicles|1|
 

The Government of Russian Federation adopted the Resolution No. 870 dated August 30, 2012 by which a utilization fee on vehicles imported into Russia and manufactured in Russia was imposed. The Resolution came into force on September 1, 2012. The Resolution regulates in detail all the issues related with the collection of utilization fee, exemption from such fee etc. Thus, according to the Resolution utilization fee must be paid by importers of vehicles from all countries, except for the Customs Union, and Russian manufacturers, except for those which made a commitment to ensure the safe management of wastes. Some experts consider that the Resolution violates the principles of WTO law, in particular, principle of national treatment, contained in Article III of the General Agreement of Tariffs and Trade as only the Russian producers are allowed to make the above commitments and thus, may be exempted from the utilization fee.

Utilization of vehicles originating from the Russian Federation

The Cabinet of Ministers of Ukraine issued the Resolution "Some Issues of Storage and Utilization of Waste Resulting from the Loss by Vehicles of Consumer Properties" No. 843 dated September 3, 2012. The Resolution entered into force on September 14, 2012. The Resolution establishes that the entities and individuals importing vehicles under codes of UCG FEA 8702-8705 and 8707 originating from the Russian Federation shall: (a) ensure further storageand utilization of waste (in particular, bodies, batteries, plastics, rubber and other products), resulting from the loss of their consumer properties by themselves or (b) enter into agreements on the performance of the work on organizing their storage and utilization.

The Resolution approves the limit prices for the services of the organization of storage and utilization of unserviceable vehicles and vehicle bodies:

Category of vehicles

Limit price in UAH

New vehicles

Vehicles since the turnout of which more than 3 years have passed

Vehicle equipped with motors

4730

29150

Motor carswith engine capacity, cubic cm

not more than 1000

4730

29150

1000–2000.

7370

45430

2000–3000

14080

88660

3000–3500

19085

156750

more than 3500

30250

192555

Motor cars imported by individuals for personal use irrespective of engine capacity

550

825

Vehicles aimed for carriage from 10 persons, freight transportation, vehicles of special assignment and bodies for vehicles with total weight, kg:

not more than 2500

19000

33440

2500–3500

30400

47500

3500–5000

38000

60800

5000–8000

41800

173280

8000–12000

50920

262580

12000–20000

55860

382280

more than 20000

110200

448400

The Resolution does not provide for the rules establishing the mechanisms of its implementation and control over its performance, the procedure for determining the utilization companies. According to experts, the Resolution may be regarded as violating the GATT 1994, particularly:  the principle of national treatment (as there are no any utilization obligations of legal entities and individuals in respect of vehicles produced in Ukraine) and the principle of most-favored nation (as there are no any utilization obligations of legal entities and individuals in respect of vehicles produced in any other countries, except for Russia).

Two Draft Laws on utilization of vehicles submitted to Parliament of Ukraine

Two Draft Laws No. 11259 and 11260 regulating recycling old vehicles and introducing amendments to the Tax Code of Ukraine on the payment of an ecological tax for recycling vehicles were registered in the Parliament of Ukraine on September 27, 2012. The documents have not yet been published and considered by the Parliament of Ukraine.

New CIS FTA came into force

On September 20, 2012 new CIS FTA came into effect in three states, which have ratified it: Belarus, Russia and Ukraine. For Armenia, which also has ratified the Agreement, it will come into force on October 17, 2012. In addition, on September 27, 2012 Moldova became the 5th CIS country which ratified new CIS FTA. 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.

II. UKRAINE & WTO

Ukraine wants to raise maximum tariffs on 350 imported goods|2|
 

In a document marked "secret" sent to members of the World Trade Organisation on September 14, 2012, Ukraine states that it intends to raise the limit on the tariffs it can legally impose on more than 350 goods. Based on figures in the proposal, Ukrainian initiative would hit overall imports worth more than USD 4.6 billion in 2011. The document consists of 85 pages of annexes detailing the items affected. It says Ukraine is prepared "to enter into negotiations and consultations" with WTO members for the concessions. The proposal is based under Article XXVIII of the GATT. Since creation of the WTO in 1995, Article XXVIII has been used about 30 times, mostly for small or technical adjustments to countries' tariffs, and almost always for fewer than 10 tariffs at a time.

Establishment of the Panel in Australia case|3|
 

After the first stage consultations failed, Ukraine requested at the Dispute Settlement Body meeting, on August 31, 2012, the establishment of a panel on a dispute on “measures concerning trademarks and other plain packaging requirements applicable to the tobacco products and packaging”. Australia rejected the first request by Ukraine. The second request by Ukraine for the establishment of a panel to examine the complaint against Australia was considered by the Dispute Settlement Body (DSB) on September 28, 2012. DSB agreed to establish a panel in this case (DS434).

III. REGIONAL TRADE LIBERALIZATION

FTA with Turkey|4|

On September 13, 2012 the Prime Minister of Turkey Recep Tayyip Erdogan took part with President of Ukraine, Viktor Yanukovych, in the second meeting of the Ukrainian-Turkish Council of strategic level in Kiev where he expressed hope that the Free Trade Agreement will be signed by the end of this year. The relevant delegation was formed under the Order of the Cabinet of Ministers of Ukraine "On Delegation of the Governmentof Ukraine for Participation in Negotiations on the Conclusion ofthe Free Trade Agreement between the Government of Ukraine and the Government ofthe Republic of Turkey" No. 698-p dated September 19, 2012. Although it must be mentioned that the negotiations are not easy, because Ukraine and Turkey are direct competitors in many sectors (particularly in agriculture).

IV. TRADE DEFENSE REMEDIES

Ukraine's Interpipe wins reduction in EU antidumping duty to 13.8%|5|
 

On August 28, 2012 the Council of EU lowered the import duty applying to two Ukrainian producers, companies of Interpipe Group – CJSC Niko Tube Nikopolsky Tube Rolling Plant and CJSC Nizhnedneprovsky Tube Rolling Plant – to 13.8 percent from 17.7 percent. The decision, which took effect on September 5, 2012, was the outcome of a 13-month review of the duty that Interpipe had requested.

Notifications of the Ministry of Economic Development and Trade

On September 28, 2012 three notifications of the Ministry of Economic Development and Trade of Ukraine were published in the newspaper "Yryadovyy Kuryer". The Ministry of Economic Development and Trade of Ukraine notified that the term of application of definitive anti-dumping measures on import of ammonium nitrate originating from Russian Federation expires on August 29, 2013;  the term of application of definitive anti-dumping measures on import of goods manufactured from ferrous metals without electrical insulation originating from China expires on June 28, 2013; the term of application of definitive anti-dumping measures on import of hardboards originating from Belarus expires on July 8, 2013. The notifications are published according to Article 19 of the Law "On Protection of National Manufacturer from the Dumping Import" in order to enable the national producer to initiate the sunset review of the relevant measures (if needed).

V. CUSTOMS RELATED ISSUES

Amendments to Customs Code of Ukraine|6|

The Parliamentary Committee for Finances, Banking Operation, Tax and Customs Policies jointly with the State Customs Service of Ukraine are drawing up some amendments to the Customs Code of Ukraine. The director of the Customs Control and Clearance Department at the State Customs Service of Ukraine, Serhiy Syemka, said that at present, the authorities areworking on some technical changes. For example, now there are some difficulties with the formation of export supplies of goods at ports, transit procedures and criteria for financial guarantees, as the respective provisions of the Customs Code of Ukraine are ambiguous. Syemka said that the above-mentioned amendments are error corrections, and they would not change the general content of the Customs Code of Ukraine.

Representatives of the American Chamber of Commerce and the European Business Association (EBA) do not see the necessity to amend the Customs Code of Ukraine, as the term of its functioning is too short to make any conclusions. They expressed fears that in the conditions of the non-fulfilment of the revenues target by the State Customs Service of Ukraine, amendments aimed at increasing the level of such revenues could be made.

A number of by-laws are adopted in connection with the entrance into force of the new Customs Code of Ukraine

In connection with the adoption of the new Customs Code of Ukraine, the Ministry of Finance of Ukraine continues to adopt the orders, which content is similar to the previously existing and abolished orders of the State Customs Service of Ukraine, to name but a few: the Order "On Approval of the Departmental Classifications of Information on the State Customs Affairs Used in the Processing of Customs Declarations" No.1011 dated September 20, 2012 (which comes into force on October 01, 2012); the Order "On Approval of the Procedure for Reimbursement of the Expenses for Storage of Goodsand Vehicles at Warehouses of Customs Authorities, the Procedure of Calculating the Amountof Expenses in Cases of Violation of Customs Regulations and their Compensation and the Amounts of Compensation for the Warehousing the Goods and Vehicles" No. 731 dated June 15, 2012.

VI. AGRICULTURE

Exporters are obliged to export no more that 19.4 mt of grain

The Ministry of Agricultural Policy and Food of Ukraine has reached an agreement with grain traders operating on the domestic market that no more than 19.4 million tonnes of wheat, barley and corn will be exported from Ukraine in the current agricultural year (July 2012-June 2013). On September 5, 2012 the director of the Department of Economic Development of the Agrarian Market at the Ministry of Agricultural Policy and Food of Ukraine, Serhiy Kvasha, told reporters that according to the annex to the Memorandum signed by the Ministry and grain traders it was agreed that in the 2012/13 agricultural year companies can freely export 4 million tonnes of wheat, 3 million tonnes of barley and 12.4 million tonnes of corn from Ukraine. He said that the volumes agreed with exporters are in line with the volumes calculated by the Ministry as of August 20, 2012 and ending grain stocks were specified.

Production and sale of organic agricultural products and raw materials

On September 18, 2012 the Parliament of Ukraine adopted the Law of Ukraine "On Production and Sales of Organic Agricultural Products and Raw Materials". The Law defines the legal, economic and organizational principles of the production and sale of organic products; establishes the requirements for the cultivation, production, processing, certification, labelling, transportation, storage and marketing of organic products and raw materials.

Specifically the Law introduces: a) control at all stages of organic products production; b) procedures for inspection and certification of production (growing), processing the organic products (raw materials), registration of subjects of production. In addition, the Law defines: a) requirements for inspectors; b) requirements for certificate authority (they must be accredited and authorized to carry out inspection and certification of organic products); c) mechanisms of state support of production of organic products etc.

New rules ofthe export-import operations in the grain market|7|

On September 19, 2012 the Cabinet of Ministers of Ukraine approved the amendments to the Resolution of the Cabinet of Ministers of Ukraine "Procedure for Issuance of a Certificate of Quality of Grain and its Products" No. 848 dated July 23, 2009 elaborated by the State Inspection of Agriculture of Ukraine. The said amendments stipulates that a quality certificate of grain and its processing products shall be issued on mandatory basis only for export and import operations as well as transportation of grain and its products purchased by the state and local budgets. In all other cases, a quality certificate is issued at the request of the subject of the grain market. Furthermore, the amendments brought the order of the above certificate issuance into conformity with the Law of Ukraine "On Grain and Grain Market of Ukraine".

State support of insurance of agricultural crops by cheapening insurance payments

On September 10, 2012 the Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Procedure and Conditions for Granting State Support to Agricultural Producers in Insurance of Agricultural Crops by Cheapening of Insurance Payments (Premiums) and the List of Agricultural Crops and Types of Insurance Risk (Products), for which the Compensation Cost of Insurance Payments (Premiums) is Provided" No. 813 dated August 15, 2012 entered into force. Under the Resolution state support shall be provided to agricultural producers in the form of compensation up to 50% of the cost of the insurance premium. The Ministry of Agrarian Policy and Food of Ukraine is the main controller of budget funds to be used for the said state support. The Resolution provides for the requirements to agricultural producers; the documents necessary for compensation of the insurance premium which shall be served within 5 business days after the conclusion of the insurance contract; the reasons for the denial of compensation of insurance premium etc.

VII. PHARMACEUTICALS

Maximum extra charges on pharmaceuticals

The Cabinet of Ministers of Ukraine has established the maximum extra charges on the sale of pharmaceuticals by its Resolution "On Amending the paragraph 1 of the Resolution of the Cabinet of Ministers of Ukraine No. 955 dated October 17, 2008" No. 880 dated September 24, 2012. According to the Resolution for pharmaceuticals and medical devices included in the National List of Essential Pharmaceuticals and Medical Devices (except narcotic, psychotropic pharmaceuticals, precursor chemicals and medical gases) and the Minimum Assortment of (Socially Oriented) Pharmaceuticals and Medical Products for Pharmacies designated by the Ministry of Health of Ukraine, the limit supply and sales extra charges shall not exceed 10 percent of wholesale prices and limit trade (retail) extra charges based on the purchase price not exceeding the following size:

Purchase price, UAH

Trade (retail) extra charge to the purchase price, %

Up to 100 (included)

25

From more than 100 to 300 (included)

23

From more than 300 to 500 (included)

20

From more than 500 to 1000 (included)

15

More than 1000

10

VIII. OTHERS

Advertising of tobacco products is banned

On September 16, 2012 the Law of Ukraine "On Amending Certain Legislative Acts of Ukraine regarding the Prohibition of Advertising, Sponsorship and Promotion of Tobacco Products" No. 3778-IVof September 22, 2011 entered into force. Under the Law advertising of tobacco products is banned not only on radio, television, print media and outdoor advertising media, but also in the Internet, stores and kiosks, as well as sponsorship and promotion of tobacco products.

Ministry of Economic Development and Trade of Ukraine proposed to ban the production and sale of phosphate based household chemicals

The Ministry of Economic Development and Trade of Ukraine proposed to reduce the permissible proportion of phosphate in production of synthetic detergents from 2013, and complete ban of the phosphate-containing products of this group by 2020. The relevant Draft Law "On State Regulation of Synthetic Detergents and Household Chemicals" was published on the website of the Ministry. In particular, it is expected to ban the production and sale on the market of Ukraine of synthetic detergents and household chemicals, the mass fraction of phosphate in which in terms of phosphorus oxide is more than 17% (from 1 January 2013), more than 10% (from 1 January 2015), more than 5% (from 1 January 2018). Since January 1, 2020 the use of phosphates in the manufacture and sale of household products will be completely banned.

Cancellation of the mandatory certification of hotels

On September 5, 2012 the Cabinet of Ministers of Ukraine adopted the Resolution "On Amendments to the arrangements approved by the Cabinet of Ministers of Ukraine dated March 15, 2006 № 297 and on July 29, 2009 № 803" No. 830. The Resolution has cancelled the mandatory certification of hotels and other facilities providing services of temporary accommodation. According to the Web site of the Ministry of Economic Development and Trade of Ukraine, the purpose of the Resolution is to ensure consistency in the law. The implementation of this document would reduce the costs of tourism industry businesses.

Initiating creation of agency for exports support|8|

The Cabinet of Ministers of Ukraine approved the Draft Law on the creation of an Agency for Exports Support and will send it to the Parliament of Ukraine for approval, the First Vice Premier-Minister of Ukraine Valeriy Khoroshkovsky said. It is expected that the agency will provide government guarantees for exporters when they receive investments and promote their products abroad. It is not the first attempt to adopt the law on this issue. Just to remind: in late October 2011 the Cabinet of Ministers of Ukraine submitted to the Parliament of Ukraine the Draft Law No. 9373 "On State Financial Support for Export Activity", which set forth creation of the State Financial Institution on National Exports Support. In May 2012, the Draft Law was adopted in spite of considerable criticism from parliamentary experts. The President of Ukraine Viktor Yanukovych vetoed the Draft Law and on July 5, 2012 the Parliament of Ukraine finally rejected it.

Avoidance of double taxation and prevention of tax evasion between Ukraine and the Kingdom of Saudi Arabia

On September 18, 2012 the Convention between the Governmentof Ukraine and the Government of the Kingdom of Saudi Arabia "On the Avoidance of Double Taxation and Prevention of Tax Evasion with Respect to Taxes on Income and Capital and its Protocol" was ratified by the Law of Ukraine No. 263. The entrepreneurs of the two countries will obtain guaranties that profits from business activities in the territory of another country, as well as from sources in that other country in the form of dividends, interest and royalties, will not be subject to double taxation. The Convention also ensures that businesses of one country will be taxed in the other State on the same conditions as the entrepreneurs of that other State.


|1|http://www.government.ru/gov/results/20492/

|2|http://wto.in.ua/?lang=en&get=3&id=2584

|3|http://wto.in.ua/?lang=en&get=3&id=2567

|4|http://wto.in.ua/?lang=ua&get=3&id=2577

|5|http://wto.in.ua/?lang=en&get=3&id=2568

|6|Interfax-Ukraine Front Page dated September 6, 2012

|7|http://www.disgu.gov.ua/index.php?option=com_content&view=article&id=548:derzhsilgospinspekciya-spryyaye-sproshchennyu-procedury-vedennya-biznesu-na-zernovomu-rynku-&catid=37:novyny

|8|Interfax-Ukraine Front Page dated August 31, 2012

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