Ukrainian Trade Protection Practice in 2020

Olena Omelchenko, Partner, Attorney at Law, Head of International Trade Practice

Source: Who’s Who Legal 2020

Over the past year, Ukraine has repeatedly found itself at the centre of events that have shaped international trade and market-protection policies.

• Based on the 22nd EU-Ukraine Summit outcome, the parties have agreed to conduct a comprehensive assessment of the achievements of the Association Agreement in 2021 and to initiate consultations on its renewal with a view to further trade liberalisation
• In the context of the covid-19 pandemic, the export of certain medicines and medical supplies has been subject to restrictions
• Ukraine and Turkey have resumed negotiations on free trade area after a long hiatus

The past year also saw a fair share of interesting precedents relating to the application of anti-dumping measures and a further expansion of the embargo in Russo-Ukrainian trade.

Trade remedies instruments

As one could expect, the covid-19 pandemic has led to the overall decline in global trade in Ukrainian goods and services. Concurrently, the low tariff and non-tariff protection of the Ukrainian market has become an obstacle to the development of national production.

For these reasons, among all possible mechanisms of trade defence in Ukraine, anti-dumping and safeguard duties have remained the most accessible and relevant tools for the protection of domestic producers.

Political relations between countries continue to influence the application of trade restrictions. Practically all trade in goods between Ukraine and the Russian Federation is still restricted by trade embargoes or anti-dumping measures.

Statistics show that Ukraine most actively applied trade defence instruments against imports from Russia, China and Belarus, while being extremely careful with imports from the EU.

For the first time in Ukrainian trade defence practice, a foreign producer has initiated the procedure of the administrative review of anti-dumping measures applied to ammonium nitrate. The review was launched by a Russian manufacturer, represented by Ilyashev & Partners Law Firm, due to the need to implement the decision of the WTO Dispute Settlement Body.

This year has been marked by the highest number of requests from Ukrainian producers for protection of the domestic market against dumping and subsidised imports from Belarus. This is an increasingly pressing need, since the majority of state-owned Belarusian exporters are stepping up their exports of goods at dumping prices in order to secure foreign-currency revenues, while in certain sectors Belarusian enterprises have received loans from China secured with state guarantees to upgrade their production facilities. The free-trade area agreement of October 18, 2011 provides for customs-exempt bilateral trade between Ukraine and Belarus, excepting any anti-dumping and anti-subsidy measures and safeguards that may be applied under GATT procedures. In practice, however, all investigations into imports from Belarus are accompanied by political negotiations at the level of the countries’ ministries, which substantially complicates the efforts aimed at protecting the interests of Ukrainian manufacturers.

In addition, in 2020 consideration was given to the need of the application of safeguard measures with respect to the import of goods from the Republic of Belarus in connection with its unfriendly and discriminatory actions against Ukrainian foreign economic entities.

At the same time, anti-dumping investigations on imports of aerated concrete blocks and matches from the Republic of Belarus ended with the application of anti-dumping duties at the level of 34.19 per cent and 21.32 per cent respectively.

For the first time, the producers of the Republic of Belarus and Moldova tried to initiate the administrative review of anti-dumping duties, which were unprecedently high for Ukrainian practice, namely, 57.03 per cent on imports of goods from the Republic of Belarus, 94.46 per cent on imports of goods from the Republic of Moldova and 114.95 per cent on the imports of goods from the Russian Federation. However, due to the lack of newly discovered grounds, the review was not initiated.

In 2020, Ukraine has conducted a record number of safeguard investigations.

After Ukraine lost the case DS493: Ukraine — Anti-Dumping Measures on Ammonium Nitrate, national producers initiated two safeguard investigations with respect to certain types of fertilisers and proposed to apply quotas, but as a result of pressure from agricultural consumers, these investigations were terminated without any measures.

Moreover, there also were safeguard investigations initiated with respect to wires, plastic materials and cut roses.

The application of preliminary safeguard measures on polymer products and preliminary anti-dumping measures on steel fasteners from China for the first time in the last 10 years definitely was a breakthrough in Ukrainian trade defence practice.

The metallurgical sector suffered the most in external markets. In particular, measures applied by the USA and the EU have significantly affected the interests of all Ukrainian metallurgists. Currently, the majority of manufacturers are focused on the new EU initiative – the Green Deal.

Trade embargo as economic sanction

As should be expected, Ukraine and Russia have extended their trade embargo, which covers almost all volume of trade in value-added goods.

Export restrictions due to covid-19

In the light of covid-19, Ukraine has restricted the export of buckwheat, ethyl alcohol, as well as personal protective equipment, in particular: medical masks, respirators, medical gloves, insulating medical gowns, etc.

Legislative developments

New draft laws No. 4132, 4133, 4134 on the application of trade defence instruments in Ukraine were registered at the Ukrainian Parliament. These drafts are aimed at improving the investigation procedure and clarifying the legislative terminology, taking into account the WTO dispute settlement practice.

Undisputedly, these draft laws will improve the transparency of the process, establish the phases of the investigation procedure and eliminate the legal uncertainty that exists in the current Ukrainian legislation.

As well as this, excessive detail of the procedure will significantly complicate the work of the Ministry for the Development of Economy, Trade and Agriculture of Ukraine, which will inevitably lead to procedural violations, which in turn will become an additional ground for appealing to court against the decisions based on the results of investigations. The part of the evidentiary process, which lies on the domestic producer will be significantly complicated, while importers and exporters will obtain more opportunities to protect their own interests.

Generally speaking, the draft laws do not introduce new approaches to combatting unfair competition from foreign producers and importers.

The draft laws provide for the possibility of initiating ex officio investigations. However, it is unlikely that this norm will be applied practically, due to the fact that the Ministry for the Development of Economy, Trade and Agriculture of Ukraine and the Interdepartmental Commission on International Trade on their own are unable to gather the information, which is needed to initiate proceedings without the cooperation with business.

The issues of the status and operation of the Interdepartmental Commission on International Trade, which decides on the application of anti-dumping, countervailing and safeguard measures, have not been resolved.

Unfortunately, the draft laws left out of account the recent reform of the EU’s trade defence instruments in terms of reducing the time of investigations and new approaches to methods of calculating duties, providing an opportunity to significantly increase their size. Furthermore, the draft laws do not provide additional options for gathering information that would help to protect the domestic producer from dumped, subsidised or growing imports more effectively.

Generally speaking, the draft laws do not envisage the real reform of trade defence in Ukraine and do not introduce new approaches to combatting unfair competition from foreign producers and importers. Hence they need to be discussed with the representatives of business and refined, taking into account the latest world practices.

Dispute Resolution

In 2020, for the first time Ukraine and the EU have resorted to a bilateral dispute settlement procedure under the Association Agreement regarding the Ukraine’s moratorium on timber exports. Due to quarantine restrictions, the arbitration panel considered the case remotely, including online hearings. As the arbitration panel was established for the first time, the parties had to settle a wide range of organisational issues, starting with the choice of the language of the process and ending with the procedure for paying the fees to the arbitrators.

In conclusion, the past year has been important for Ukraine primarily in terms of gaining experience in resolving disputes under the Association Agreement and the protection of the internal market.