Ukraine’s accession to the WTO Trade, legal and financial issues May 2008 Krzysztof Lipka, Partner Corporate Tax Group Tax & Legal Services Magdalena Patrzyk, Manager Indirect Tax and Customs Group Tax & Legal Services Igor Dankov, Manager Indirect Tax and Customs Group Tax & Legal Services

Ukraine’s accession to the WTO Trade, legal and financial ... · • Textile and Clothing Agreement • Trade-Related Investment Measures WTO - World Trade Organization. PricewaterhouseCoopers

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Ukraine’s accession to the WTOTrade, legal and financial issuesMay 2008

Krzysztof Lipka, PartnerCorporate Tax GroupTax & Legal Services

Magdalena Patrzyk, ManagerIndirect Tax and Customs GroupTax & Legal Services

Igor Dankov, ManagerIndirect Tax and Customs GroupTax & Legal Services


WTO - World Trade OrganizationWTO Key PrinciplesUkraine’s path to the WTOUkraine’s main accession documentsEffect of joining the WTOImpact on customs

Slide 3PricewaterhouseCoopersMay 2008

“I am very pleased towelcome Ukraine as a newmember. It is a significantstep for the WTO as this newmembership will strengthenthe multilateral tradingsystem. We will continuefacilitating fuller integrationinto the world economy ofother countries”

WTO Director-GeneralPascal Lamy

Slide 4PricewaterhouseCoopersMay 2008

WTO - World Trade Organization

The WTO is an international organization

The ultimate goal of the WTO is to abolish trade barriers aroundthe world so that trade between WTO Members can becompletely free.

“The WTO is a system of norms and rules designated to motivateopen and fair competition”.Location: Geneva, SwitzerlandEstablished: 1 January 1995Created by: Uruguay Round negotiations (1986-94)Membership: 152 countries (since 16 May 2008)Budget: 182 million Swiss francs for 2007Secretariat staff: 625Head: Director-General Pascal Lamy

Slide 5PricewaterhouseCoopersMay 2008

There are about 60 acts within the WTO- agreements, contracts, settlements,protocols.

In general, there are 3 major agreementsestablishing the basic principles ofinternational trade:

• GATT – General Agreement onTariffs and Trade (covering trade in goods)

• GATS – General Agreement on Trade in Services

• TRIPS – Agreement on Trade-Related Aspects of IntellectualProperty Rights

WTO documents

WTO - World Trade Organization

Slide 6PricewaterhouseCoopersMay 2008

There are also 12 other key multilateral agreements, which aresigned by all of the WTO Member governments• Agriculture agreement• Antidumping Agreement• Customs Valuation Agreement• Import Licensing Procedures Agreement• Preshipment Agreement• Rules of Origin Agreement• Safeguards Agreement• Sanitary and Phytosanitary Measures• Subsidies and Countervailing Measures• Technical Barriers to Trade Agreements• Textile and Clothing Agreement• Trade-Related Investment Measures

WTO - World Trade Organization

Slide 7PricewaterhouseCoopersMay 2008

WTO Key Principles

• Non-discrimination: Most-favoured-nation (MFN) regime:Under WTO agreements, countries cannot normallydiscriminate amongst their trading partners; i.e. granting onecountry a lower customs duty rate for one product requiresdoing the same for all other WTO members. However, thereare some vertical and horizontal exemptions; e.g. zero-tariffsbilateral undertakings, Free Trade Area agreements (FTA) andtariffs within the General System of Preferences (GSP) fordeveloping countries.

• National treatment: Imported and locally-produced goodsshould be treated equally. The same should apply to foreignand domestic services, and to foreign and local trademarks,copyrights and patents. Some exceptions are envisaged in anumber of WTO Agreements.

Slide 8PricewaterhouseCoopersMay 2008

WTO Key Principles

• Removing trade barriers through negotiations: Lowering tradebarriers is one of the most obvious means of encouragingtrade. The barriers concerned include customs tariffs andother non-trade measures such as import quotas, licensingrestrictions and import bans that restrict quantities selectively.Some of the WTO agreements allow countries to introducechanges gradually, through “progressive liberalization”.Developing countries are usually given longer liberalizationimplementation periods.

• Predictability through binding: WTO members are required tobe bound not to raise trade barriers above the agreed limits.

Slide 9PricewaterhouseCoopersMay 2008

Ukraine’s path to the WTO

• 15 years of negotiations(from 1993)

• 5 February 2008 –President Yushchenkosigned the Accession Protocol

• 10 April 2008 – Ukraine’s Parliament ratified the AccessionProtocol

• 16 April 2008 – the ratification instruments deposited to theWTO

• 16 May 2008 – Ukraine becomes the 152nd member of theWTO

Slide 10PricewaterhouseCoopersMay 2008

Ukraine’s main accession documents

• Accession Protocol• Working Group Report• Schedule of Specific Commitments

on Services• Schedule of Concessions and

Commitments on Goods

Slide 11PricewaterhouseCoopersMay 2008

Effect of joining the WTO

According to the President of Ukraine:• 95% of world’s trade is within the WTO• 1.7% GDP growth• 40% annual growth of investments (US$ 5 bn)• Exports will grow by 11%• State revenues will grow by up to 10%

Slide 12PricewaterhouseCoopersMay 2008

Effect of joining the WTO

• Integration of Ukraine into the world market economy• Improvement of business environment in Ukraine• Resolution of disputes within the WTO (anti-dumping

investigations)• Access to foreign markets may improve• Competition on domestic market will increase• Step towards joining EU (free trade with EU)

Experience: WTO accession has never resulted in killing anyindustry.

Slide 13PricewaterhouseCoopersMay 2008

Impact on selected industries (on media estimation)


• Metallurgy (+23%)• Chemical (+20%)• Hotel and restaurant sector (+14%)• Gas and electricity supply (+6%)• Telecommunications (+4%)

Effect of joining the WTO

Slide 14PricewaterhouseCoopersMay 2008


• Food (-23%)• Fishery (-17%)• Local automotive (manufacturing)• Agriculture (unless technology improves)• Wood• Manufacturing of agricultural machines

Effect of joining the WTO

Slide 15PricewaterhouseCoopersMay 2008

Customs – elimination ofcustoms processing fees:

• 0.2% - for customs clearance• US$ 30/15 - for placing goods

in customs bondedwarehouse; temporaryexport/import

• 0.05% - daily (from 16th day)for keeping goods undercustoms control

• US$ 1,500/1,000 –obtaining/extending of thelicence of a customs broker

Effect of joining the WTO

Overtime and off-locationcustoms clearance fees(US$ per hour):

• 20 – during working time• 40 – during overtime,

night, weekends• 50 – on holidays

Slide 16PricewaterhouseCoopersMay 2008

Customs duties (import)

• Significant reduction for a number of goods, up to zero• Average duty of 11,16% for agricultural goods and 4,85% for

industrial goods• Reduced duty rate will apply to goods originating from WTO


151 country vs. 82 country

• Standard duty rate remain the same• Standard duty rate will apply to imports by individuals

Parliament did not pass the law amending duty rates, new rateswere introduced by the customs authorities.

Effect of joining the WTO

Slide 17PricewaterhouseCoopersMay 2008

Customs duties (export)

Oil seeds – in 2008, the duty was reduced to 16 % (yearly reductionwill be continued over 6 years till the level reaches 10%).

Livestock – previously, the duty was calculated by combined rates andnow it is cut from 50-75% to 50% and will be reduced yearly by 5%, tillthe level reaches 10% .

Raw hides – the duty is fixed at 30% and will be gradually reduced to20% by 2018.

Scrap metal – duty for is already cut from EUR 30 to EUR 25 per tonand will be gradually reduced to EUR 10 per ton.

Scrap alloy metal – restriction on exporting scrap alloy metal iscancelled. Duty will be gradually reduced from 30% to 15% over 6years. However, for the next 5 years, the export of such metal will beallowed only for specialised metal processing entities.

Effect of joining the WTO

Slide 18PricewaterhouseCoopersMay 2008

Anti-dumping, countervailing duties and safeguard regimes

Anti-dumping duty:• No duty will be imposed if imports constituted less than 3% of

the total import volume• The principle of the lesser duty in an anti-dumping


Countervailing duty (subsidised export)• There are no precedents so far

Safeguard regimes:• Some non-compliance• Ukraine undertook to review the legislation upon accession

(e.g. allow the participation of foreign enterprises andgovernments)

Effect of joining the WTO

Slide 19PricewaterhouseCoopersMay 2008

Customs valuation

• Mainly complies with WTO Customs Valuation Agreement• Ukraine will apply WTO customs valuation, including the

Customs Valuation Agreement• So far, provisions of the Agreement (but not Interpretative

Notes) were incorporated into the Customs Code• Ukraine will implement WTO Decision 4.1 on Valuation of

Carrier Media bearing Software for Data ProcessingEquipment – the valuation of the software will be based on thevalue of the media

• Ukraine will not use minimum prices or fixed valuationschedules for the valuation of imports

• Customs valuation will comply with the WTO’s customsvaluation methods

Effect of joining the WTO

Slide 20PricewaterhouseCoopersMay 2008

Country of origin

• Ukraine’s rules for determining thecountry of origin comply with theWTO’s

• Preferential and non-preferentialrules of origin

• Ukraine committed to the WTO rulesof origin (Agreement on Rules oforigin)

• Advance ruling on the origin ispossible

Effect of joining the WTO

Slide 21PricewaterhouseCoopersMay 2008

Classification of goods for customs purposes

• Harmonised Commodity Description and Coding System (HS)• Ukraine is a member of the WTO’s HS Convention• From 2008 Ukraine is implementing HS version 2002• For the future, Ukraine has committed to classifying goods for

customs purposes, according to the HS

Effect of joining the WTO

Slide 22PricewaterhouseCoopersMay 2008

Free trade

• Ukraine concluded free trade agreements (FTAs) with all CIScountries and Macedonia

• New FTAs with Moldova become effective on from 16 May2008

• There is no indication that FTAs will be terminated from theaccession date

• Prospective free trade with the WTO

Effect of joining the WTO

Slide 23PricewaterhouseCoopersMay 2008

Customs procedures

WTO members noticed that, “Ukraine’s customs clearanceprocedures were cumbersome and encouraged Ukraine to makefurther progress in the simplification and reform of its customsregime”.

Ukraine did not make any clear commitments in this respect.

Further reform of the customs clearanceprocedures is expected duringimplementation of the KyotoConvention on the simplification andharmonisation of customs procedures.

Effect of joining the WTO

Slide 24PricewaterhouseCoopersMay 2008

Protection of intellectual property

• Owners of IP may register this IP with the customs office (freeof charge)

• The customs office suspends the customs clearance of goodsin IP rights are violated (up to 30 days)

• The IP owner must obtain a court decision• If no court decision, the IP owner compensates the importer

for losses• Customs may hold the goods if there are grounds to suspect a

violation of IP rights• Detained goods under suspicion cannot be exported from

Ukraine, unless there is a court decision ruling otherwise• Counterfeit goods must be destroyed under a court decision

Effect of joining the WTO

Slide 25PricewaterhouseCoopersMay 2008

Customs audits

• Since 1998, the customs authorities have had the right to auditbusiness entities. However, first real customs audits began in 2004.

• The 2004 Customs Code allowed customs control after the customsclearance of goods.

• In 2006 Ukraine joined the Kyoto Convention on the simplificationand harmonisation of customs procedures

• The Kyoto Convention aims at introducing a more rapid customsclearance of goods, through the use of information technology andnew techniques for customs control, such as risk assessment andaudit-based control.

• Reduction of customs duties does not mean elimination of control!• The authorities will actively seek the possibility to adjust customs

values and introduce frequent customs audits.

Effect of joining the WTO

© 2008 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the networkof member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independentlegal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Thank you!


Ukraine’s accession to the WTOTrade, legal and financial issuesMay 2008

Adrian Opaits, ManagerLegal Services GroupTax & Legal Services


Foreign Currency ControlForeign Investment RegimeTrade RestrictionsRegulatory barriers (Standardization)Regulatory barriers (Certification)Regulatory barriers (Sanitary and Phytosanitary )Intellectual PropertyEnforcement of WTO agreements in Ukraine

Slide 29PricewaterhouseCoopersMay 2008

Foreign Currency Control

• Payment period for import / export operation was extendedfrom 90 to 180 days

• Simplified procedure to obtain a permit to extend the paymentperiod from the Ministry of Economics (previously NBU)

• Abolition of the 5 days rule to transfer money in hard currencyto non-residents; NBU may establish such a period (has notyet been adopted)

Slide 30PricewaterhouseCoopersMay 2008

Foreign Investment Regime

• Additional protection of foreign investments under TRIMsagreement (relate only to goods trade)

• No trade preferences shall be provided to the producers basedon use of domestic materials, place and volume of production

• Free economic zones will bekept. The right of firms toestablish and operate in thesezones would not be subject toexport performance, tradebalancing or local contentrequirements.

Slide 31PricewaterhouseCoopersMay 2008

Trade Restrictions

• Ukraine shall lift the prohibition on the export of ferrous andnon-ferrous scrap; still certain limitations on the exportersremain for five-year period (special metallurgical plants)

• Import restrictions shall not beimposed on the quoted goodsuntil the quotes are fully used

• Customs clearance of thelicensed goods shall not bestopped, if there is a slightdeviation of value or quantityof these goods

Slide 32PricewaterhouseCoopersMay 2008

Regulatory barriers (Standardization)

• Priority of international standards overnational standards

• New Ukrainian standards and technicalregulations shall conform with TechnicalBarriers to Trade (TBT Agreement)

• Standards shall apply equally todomestic products and to productsimported from WTO Members

• Ukraine shall ensure that by 30December 2011, all of its technicalregulations shall use relevantinternational standards as a basis

Slide 33PricewaterhouseCoopersMay 2008

Regulatory barriers (Certification)

• Gradual shortening of the list of products subject to mandatorycertification in Ukraine

• Conformity assessment tests (including certificates ofconformity) conducted outside of Ukraine shall be acceptedand recognized in Ukraine, in accordance withinternational treaties

• Ukraine shall negotiate the Agreements for the mutualrecognition of the results of the conformity assessmentprocedures (expected in 2009)

Slide 34PricewaterhouseCoopersMay 2008

Regulatory barriers (Sanitary and Phytosanitary)

• All imported food products shall be testedand certified only by the sanitary serviceor veterinary service, as appropriate

• Producer becomes responsible for thesafety and acceptability of food forhuman consumption, reducing the controlcompetence of the authorities

• No additional certification or testing isrequired for products, certified as safe forhuman use by the competent authoritiesof exporting Members as notified torelevant bodies (IPPC, OIE and CodexAlimentarius)

Slide 35PricewaterhouseCoopersMay 2008

Intellectual Property

• Trademark may be admitted as well-known, regardless of itsregistration in Ukraine

• In addition to the names, Geographical indications now alsoinclude any graphical depictions of such places

• Priority and reputable trademark owner is now authorised toexecute the exclusive right to prohibit the use of thetrademark in the qualified geographical indications

• Equal fees for registering the IP objects in Ukraine. No majorchanges for foreign applicants while Ukrainian applicantsshould pay 2-5 times more

Slide 36PricewaterhouseCoopersMay 2008

Enforcement of WTO agreements in Ukraine

• From the date of WTO accession, Ukraine shall provide forthe right to appeal administrative rulings on matters subjectto WTO provisions to an independent tribunal

• No legal ground andprocedure provided inUkrainian legislationby now

© 2008 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the networkof member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independentlegal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Thank you!


Entering the WTOImpact on the banking and insuranceindustries

Vadim Belik, ManagerCorporate Tax GroupTax & Legal Services



• Non-resident insurersreceive access to theUkrainian insurance market

• For 5 years starting fromUkraine's accession to theWTO, residents may enterinto insurance agreements with foreign insurance companies only incertain cases

• Five years after accession, branches of foreign insurancecompanies may be registered in Ukraine

• Five years after accession, international insurance companies areexpected to receive full access to the Ukrainian market

May 2008Slide 40PricewaterhouseCoopers


• Ukrainian companies may obtain the following services from non-resident insurers (no need to register ROs of branches for foreigninsurers in Ukraine):

- insurance of risks related to marinetransportation, commercial aviation,space rocket launches and freight(including satellites), if the insuranceobject is the ownership interest relatedto the commodities being transported,and/or transport used for theirtransportation, and/or any responsibilityarising in connection with suchcommodities' transportation;

May 2008Slide 41PricewaterhouseCoopers


- insurance mediation, such as brokerage and agent operationsconcerning re-insurance, only dealing with the insurance of risksrelated to marine transportation and other risks from the above-mentioned list;

- re-insurance;

- ancillary insuranceservices such asconsultations,actuarial riskevaluation andsatisfaction ofclaims.

May 2008Slide 42PricewaterhouseCoopers


• Non-resident insurer must meet the following requirements toconclude insurance agreements with Ukrainian companies:

- Non-resident insurer is incorporated in a WTO member state,engaged in international cooperation in the field of prevention andcounteraction of the legalization (laundering) of illegally receivedprofit, terrorism financing, and also cooperates with the FinancialAction Task Force Group (FATF);

- Memorandum (agreement) on information exchange is in forcebetween Ukraine and the non-resident’s country;

- There is state supervision of the non-resident insurer's activity inthe country of its incorporation;

May 2008Slide 43PricewaterhouseCoopers


- Double tax treaty is in force between Ukraine and the non-residentinsurer’s country;

- Non-resident insurer is located on the territory of countries orterritories, which, in accordance with the decision of theOrganization for Economic Cooperation of the United NationsOrganization, possess an offshore-free status or a fee status on theterritory of other countries, if such offshore-free status isacknowledged by a determination of the respective trade andeconomic mission;

- Non-resident insurer has a licence for insurance activity in thecountry of

its incorporation;

- Non-resident insurer's financial credibility (fortitude) rating meetsthe requirements established by the authorized body.

May 2008Slide 44PricewaterhouseCoopers


• Section 9 of Article 15 of the Law of Ukraine On Insurance Lawremains in force, i.e. non-resident insurance or re-insurance brokersmay provide services only through permanent representative officesin Ukraine which should be registered as tax payers and includedinto the state register of insurance or re-insurance brokers.

• The State Commission on the Regulation of the Financial ServicesMarket (SCRFSM) of Ukraine adopted a number of regulatory acts,which came into force upon Ukraine's accession to the WTO.

- SCRFSM Order No 8197 introduced requirements to the procedurefor concluding agreements with non-resident insurers, under whicha person intending to conclude such agreements shall receive, froma non-resident insurer, a written confirmation stating that itsactivities correspond with the provisions of the Insurance Law. May 2008

Slide 45PricewaterhouseCoopers


- SCRFSM Decree No 8170 introduced the Order and itsrequirements for intermediary activities relating to the conclusion ofinsurance agreements with non-resident insurers on the territory ofUkraine.

- Insurance mediators may carry-out such intermediary activities onlywith those non-resident insurers, which have the right to carry outinsurance activities in Ukraine, in accordance with the Law.

- Also, this Order introduced requirements for information to bedisclosed by insurance mediators to their clients.

- The requirements for the financial credibility (fortitude) of non-resident insurers authorized to undertake insurance activities inUkraine were approved by the SCRFSM Decree No 7924. May 2008

Slide 46PricewaterhouseCoopers


May 2008Slide 47PricewaterhouseCoopers

• For the purposes of Ukraine's accession to the WTO - the SCRFSMadopted:

(i) the Order for branch registration of non-resident insurers;

(ii) the Order for branch liquidation of non-resident insurers;

(iii) the Regulation on supervising non-resident insurers' branchactivities and penalties for financial legislation infringement;

(iv) the guarantee deposit requirements for non-resident insurers’branches, and

(v) the licence terms the activities of non-resident insurers'branches activities.

All these legislative acts will come into force five years afterUkraine's accession to the WTO.


• Generally, foreign banks are allowed to open their branches inUkraine, however, no procedures for registering a Ukrainian branchof foreign bank are in place yet. NBU is given one year to elaboratesuch procedures.

• The issues yet to be resolved:

(i) participation in the national system of guaranteeingindividual deposits;

(ii) taxation of a Ukrainian branch;(iii) compliance with the regulatory requirements of the NBU;(iv) access of non-resident bank authorities to branches of

foreign banks in Ukraine;(v) other barriers?

May 2008Slide 48PricewaterhouseCoopers


© 2008 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the networkof member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independentlegal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Thank you!