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Ukraine to introduce additional surcharge on imports to safeguard the Balance of Payments

13 January 2015

On 28 December 2014 the Verkhovna Rada of Ukraine (the Ukrainian Parliament) adopted the Law No. 73-VIII “On measures to stabilize the balance of payments of Ukraine in accordance with Article XII of the GATT 1994” which introduces the import surcharge on almost all goods imported into Ukraine. Such action was suggested by the Government of Ukraine in order to improve the Balance of Payments and increase international reserves of the National Bank of Ukraine which are claimed to be affected by the economic crisis in Ukraine.
 
The surcharge rate is to be fixed at the level of 10% for food products (HS groups 1 to 24) and at the level of 5% for non-food products (HS groups 25 to 97). The goods with their customs value below EUR 150 will be exempted from the import surcharge. The surcharge will also not be levied on essential goods, i.e., oil, natural gas, electricity, coal, gasoline, nuclear fuel, and on the goods imported from other states according to intergovernmental agreements, except for goods imported from states-members of free trade area agreements.
 
The Law will become effective upon publication of the decision of the Cabinet of Ministers of Ukraine on the completion of consultations with international financial institutions.
 
The Ukrainian importers and business associations have already spoken out against the governmental initiative. In their opinion, such law may have unforeseen and negative consequences, e.g., the decrease of taxation due to imports downfall and the increase of smuggling. Furthermore, in their opinion such initiative contradicts the expectations of the European partners of Ukraine in view of the recently signed EU-Ukraine Association Agreement and the adopted unilateral trade preferences for Ukraine.
 
Meanwhile, the European Commission stated that the measures to safeguard the balance of payment shall be adopted in strict compliance with the requirements of the WTO covered agreements. The EU considers that the WTO Committee on Balance-of-Payments Restrictions is a suitable forum to hold consultations with this regard. Furthermore, the EU took due consideration of the fact that Ukraine postponed the entry into force of the Law given the necessity to hold consultations with international financial institutions.
 
It is known that the European Commission and Ukraine held urgent bilateral consultations concerning the introduction of additional import surcharges on 5 January 2015.

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