Ramp­ing up trade with EU

Ukraine’s com­plex jour­ney could lead to greater pros­per­ity

Kyiv Post Legal Quarterly - - Contents - By Olena Gordiienko gordiienko@kyivpost.com

Eas­ier ac­cess to the Euro­pean Union’s mar­ket of some 500 mil­lion con­sumers has be­come crit­i­cally im­por­tant to help­ing ease Ukraine’s eco­nomic cri­sis, ex­ac­er­bated by Rus­sia’s 10-month-old war in the coun­try’s east.

Ukrainian busi­nesses ex­ported $13.4 bil­lion worth of goods to the EU, the coun­try’s big­gest trade part­ner, dur­ing nine months of this year, which is 12.3 per­cent more than dur­ing the same pe­riod in 2013. Over­all, 32 per­cent of Ukrainian ex­ports land in the EU, mostly in Poland, Ger­many and Italy.

Rus­sia has been en­joy­ing the sta­tus of Ukraine’s sec­ond big­gest trade part­ner due to the Krem­lin’s huge amount of nat­u­ral gas sup­plies, while Ukraine pro­vided gas trans­porta­tion ser­vices cat­e­go­rized as ex­ports to the Rus­sian Fed­er­a­tion. How­ever, Ukrainian ex­ports to Rus­sia fell by 28 per­cent, or $3.05 bil­lion, as Pres­i­dent Vladimir Putin banned poul­try, dairy prod­ucts and con­fec­tionery com­ing from Ukraine this year.

Bring­ing hard-cur­rency rev­enue into the coun­try will sta­bi­lize the hryv­nia, Ukraine’s weak­en­ing cur­rency, and will help im­prove the cur­rent ac­count bal­ance, a key macroe­co­nomic in­di­ca­tor for the In­ter­na­tional Mon­e­tary Fund, the na­tion’s key cred­i­tor.

On April 23, the EU can­celled du­ties for 83

per­cent of Ukrainian agri­cul­ture prod­ucts and 95 per­cent of industrial goods, while in 2016 the full-scale free trade zone will come into ef­fect - if Rus­sia doesn’t force more de­lays. Ukraine will also grad­u­ally start de­creas­ing du­ties on Euro­pean goods, a process that will take up to 10 years to com­plete.

The terms of the agree­ment do not im­ply the ab­so­lute elim­i­na­tion of all tar­iffs. They will stay zero for most goods as long as the coun­try’s ex­port vol­ume doesn’t reach a cer­tain quota. Ev­ery­thing ex­ceed­ing that will get fully taxed.

Quo­tas are set by the Euro­pean Com­mis­sion upon the re­quest of Eu-based im­porters. There­fore, Ukrainian ex­porters can’t sell any­thing to the EU un­less they find a lo­cal part­ner who would ap­ply for the quota. This should be done fast, be­fore the com­peti­tors do the same and fill the whole quota for the coun­try.

Prime Min­is­ter Arseniy Yat­senyuk said on Dec. 9 that this year Ukraine’s ex­porters “al­most” used up all the quo­tas, and said his gov­ern­ment will ask for ex­ten­sion of quo­tas for next year.

Ex­port­ing to the 28-na­tion bloc re­quires sev­eral doc­u­ments, which are time-con­sum­ing to ob­tain. The pa­per­work is quite a chal­lenge for Ukrainian busi­nesses, most of whom lack ex­pe­ri­ence and clear un­der­stand­ing of all the cer­ti­fi­ca­tion pro­ce­dures.

There are spe­cific re­quire­ments for par­tic­u­lar prod­ucts. For ex­am­ple, a wine bot­tle la­bel should men­tion that the wine con­tains no sul­fates and spec­ify an ex­act per­cent­age of al­co­hol, not “be­tween 12 and 15 per­cent,” as is of­ten the case in Ukraine.

Depend­ing on the prod­uct type, eco­log­i­cal and health or safety con­trols, con­firmed by a UKRSEPRO cer­tifi­cate and is­sued by State Com­mit­tee for Tech­ni­cal Reg­u­la­tion and Con­sumer Pol­icy, may also be needed.

The April 23 trade pref­er­ences re­quire get­ting the EUR.1 cer­tifi­cate for ex­port­ing the goods to the EU. How­ever, if a com­pany wishes to trade us­ing the old tar­iff sys­tem, it might just get a so called Form A. Both cer­tifi­cates are is­sued by the Cham­ber of Com­merce in Kyiv.

Prepa­ra­tions for sell­ing goods to the EU may take be­tween two months and two years. It de­pends on the type of prod­uct and whether it meets the bloc’s re­quire­ments, said Hanna Shtepa, a lawyer with Baker & Mcken­zie.

Much “homework” needs to be done, agrees Nataliya Mykol­ska, head of in­ter­na­tional trade ex­per­tise at Sayenko Kharenko law firm.

The rules could be sim­pli­fied as soon as Ukraine es­tab­lishes a pos­i­tive im­age of the re­li­able sup­plier of high qual­ity goods on the global scene, the legal ser­vice of the Nether­lands Busi­ness Club in Kyiv said in an emailed state­ment. Af­ter­wards new agree­ments could be reached on doc­u­ment­ing the bi­lat­eral trade.

Ukrainian com­pa­nies might need pro­fes­sional ad­vice to get pre­pared to trade with the Brussels-led bloc, which is why they turn to the var­i­ous legal and busi­ness con­sul­tants as well as seek sup­port from in­ter­na­tional busi­ness as­so­ci­a­tion and ex­perts. It cat­alyzes the process quite sub­stan­tially, the busi­ness club ad­mits.

A woman chooses meat at a su­per­mar­ket in Kyiv. (Ukrainian News)

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