International Trade in Goods and Services in Ukraine: Overview

The following recent trends currently affect the regulation of international trade in Ukraine.

Ukraine has been concluding free trade agreements (FTAs) to facilitate bilateral trade. To date, Ukraine has concluded 18 FTAs covering 47 states. FTAs with the EU and Canada entered into force in 2017. In 2018, Ukraine acceded to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (Pan-Euro-Med Convention). FTAs with the UK and Israel entered into force on 1 January 2021. Negotiations of an FTA with Turkey and of an update of the FTA with the EU are currently underway. See Question 2.

Ukraine actively applies trade defence remedies to protect domestic producers, as allowed by the World Trade Organization (WTO) (mainly anti-dumping and safeguard measures). There has been a recent increase in safeguard measures. In addition, Ukraine applies anti-dumping and special protection measures to some products from Belarus, which is not a WTO member.

Ukraine has also been actively using other WTO instruments. For example, Ukraine has recently been making more statements at WTO committees and initiating more disputes. In 2020, Ukraine joined a Multi-Party Interim Appeal Arbitration Arrangement (MPIA) based on Article 25 of the Dispute Settlement Understanding (DSU). The MPIA establishes a special procedure among the parties to the arrangement to secure an appeal mechanism until the WTO Appellate Body (AB) becomes operational again.

Ukraine has acted as complainant and respondent in several international trade disputes in recent years.

The political tensions and mutual trade restrictions between Ukraine and Russia have resulted in an increase in WTO disputes between the two countries. Ukraine has initiated three disputes against Russia (DS499, DS512 and DS532), while Russia has initiated one (DS525). One of the disputes initiated by Ukraine (DS512) reached panel stage, and another (DS499) was subject to review by the panel and the AB.

DS512: Russia - Measures Concerning Traffic in Transit related to multiple restrictions on traffic in transit from Ukraine through Russia to third countries. In particular, Russia had banned all international cargo transit from Ukraine destined primarily for Kazakhstan and the Kyrgyz Republic. The panel report was adopted on 26 April 2019. The main question was whether violations of Ukraine's transit rights by Russia may be justified under the security exception of Article XXI of the General Agreement on Tariffs and Trade 1994 (GATT). The panel ruled that:

DS 499: Russia - Railway Equipment related to the prevention of Ukrainian producers from exporting their railway products to Russia. Restrictive measures included the suspension of valid conformity assessment certificates for Ukrainian producers, refusal to issue new conformity assessment certificates, and non-recognition of conformity assessment certificates issued by the competent authorities of other EAEU members (namely Belarus and Kazakhstan). The case was subject to the panel and AB review. The report of the AB was adopted on 5 March 2020. The measures at issue were found inconsistent with Russia's obligations under the Technical Barriers to Trade (TBT) Agreement and the GATT.

Ukraine acted as a respondent in DS493: Ukraine - Ammonium Nitrate, initiated by Russia. The case was subject to the panel and AB review, and arbitration under Article 21.3(c) of the DSU (regarding the "reasonable period of time" for implementing the recommendations and rulings of the Dispute Settlement Body (DSB)). The report of the Appellate Body was adopted on 30 September 2019. The dispute concerned anti-dumping measures applied by Ukraine against ammonium nitrate (fertiliser) from Russia. The main measure at issue was the gas cost adjustment applied to counteract the "dual pricing policy" implemented by Russia. Natural gas is the main raw material used for the production of ammonium nitrate. The Russian domestic price of gas used for the production of ammonium nitrate was considerably lower than the price of exported gas, and sometimes lower than Gazprom's cost of production. As a result, various states (including Ukraine) have applied gas cost adjustments to replace the state-controlled price with market pricing, which equalises competitive conditions and removes distortions on the Russian gas market. The panel agreed with Ukraine that investigating authorities in anti-dumping investigations are entitled to adjust the costs of raw materials of foreign producers if there is sufficient evidence for doing so. However, the panel and the AB concluded that Ukraine had acted inconsistently with its obligations under the Anti-Dumping Agreement because the investigating authorities had not provided an adequate basis to reject the reported gas cost. In other words, both the panel and the AB concluded that the Ukrainian anti-dumping duties were not compliant with the relevant WTO agreements.

Ukraine acted as a respondent in the trade dispute initiated by the EU under the EU-Ukraine Association Agreement. The report of the Arbitration Panel was issued on 11 December 2020. The dispute concerned the following restrictions applied by Ukraine on exports of certain wood products to the EU:

According to the Panel Report, the 2005 export ban was justified under Article XX(b) of the GATT (incorporated into the Association Agreement) as necessary to protect plant life or health. However, the 2015 temporary export ban was found incompatible with the obligation of Ukraine under the Association Agreement, which prohibits export restrictions. The Panel also found that this measure was not justified under Article XX(g) of the GATT, incorporated into the Association Agreement (which allows measures "relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption").

Since 2014, political relations between Ukraine and Russia have affected both countries and have resulted in the application of mutual restrictions, including in relation to the regulation of international trade. At the start of 2016, Russia:

In response to the annexation of Crimea and military actions in the eastern part of Ukraine, Ukraine:

Since then, both countries have expanded the scope of their mutual restrictions. For example, at the end of 2020, Russia expanded an existing food embargo against Ukrainian goods, while Ukraine has extended the scope of its import ban. Sanctions introduced by the President of Ukraine are also subject to revision and extension. The most recent of these took place in May 2020 (see Question 16). In November 2018, Russia imposed special economic measures on certain individuals and legal entities of Ukraine, which include freezing of their bank accounts, uncertificated securities and property in Russia, and a ban on transfers of money from Russia. This list was also extended in February 2021.

One of the benchmark objectives of the Ukrainian Government is the facilitation of exports. At the end of 2017, the Cabinet of Ministers of Ukraine (CMU) approved the Export Strategy of Ukraine for 2017-2021. This is an action plan that indicates the key strategies for export development in Ukraine, including institutional reform and improvement of agencies focusing on the promotion of exports. The government is currently updating the Export Strategy.

Ukraine joined the WTO on 16 May 2008 and is a member of the Marrakesh Agreement establishing the WTO. It is a party to the following multilateral agreements:

In addition, since 2016, Ukraine has participated in the Government Procurement Agreement (GPA), a WTO plurilateral agreement.

Ukraine has also ratified the:

Ukraine has concluded 18 FTAs covering 47 countries in total but is not a member of any customs union. Ukraine is a member of the following FTAs:

In addition to the CIS FTA, a number of bilateral FTAs with CIS countries (namely Belarus, Tajikistan, Kazakhstan, the Kyrgyz Republic, Armenia, Moldova, and Uzbekistan) remain in force but are expected to be terminated.

In 2017, Ukraine acceded to the Pan-Euro-Med Convention, which sets uniform rules of origin for trade in products manufactured in countries with which the EU has FTAs and customs unions. The Pan-Euro-Med Convention entered into force for Ukraine in February 2018.

Official publications of the international agreements concluded by Ukraine are available on the website of the Parliament of Ukraine (in Ukrainian).

Both the Ministry for Development of Economy, Trade and Agriculture of Ukraine (Ministry of Economy) and the Ministry of Foreign Affairs of Ukraine (MFA) are responsible for the negotiation of trade agreements in Ukraine. The Ministry of Economy:

The MFA provides diplomatic maintenance and assistance in negotiations of potential trade agreements.

There is no fixed time limit for the duration of negotiations. For example, Ukraine is has been negotiating an FTA with Turkey since 24 January 2011. More than ten rounds of talks have been completed. In February 2020, the parties entered into a Memorandum of Understanding on FTA Negotiations, according to which the negotiations are planned to be completed in 2021.

Ukraine has also recently concluded N FTA with Israel. Negotiations of the FTA started on 22 July 2013. The negotiations were suspended in 2013 due to the political situation in Ukraine and were resumed in the second half of 2015. Finally, after around ten rounds of talks, the Israel-Ukraine FTA was signed on 21 January 2019 and ratified by Ukraine on 11 July 2019. The FTA entered into force on 1 January 2021.

The negotiations of the UK-Ukraine FTA started before the UK formally left the EU on 31 January 2020 and were completed relatively quickly. The text of the agreement was signed on 8 October 2020 and ratified by the Ukrainian Parliament on 16 December 2020. The UK-Ukraine FTA entered into force on 1 January 2021.

On accession to the WTO, Ukraine became a party to the GATS and made a considerable level of commitments in relation to trade in services (horizontal commitments and sector-specific commitments). Sector-specific commitments are commitments made regarding specific services sectors or sub-sectors. According to Ukraine's Schedule of Commitments, the country liberalised modes one to three (cross-border trade, consumption abroad and commercial presence) in:

This liberalisation has been undertaken with respect to both market access and national treatment obligations.

Horizontal commitments apply to all sectors included in the Schedule of Commitments. Ukraine left mode four (presence of natural persons) in all these categories unbound. Foreign nationals must generally obtain a work permit, but certain categories of employees are exempted from this requirement, such as:

Ukraine has also scheduled exemptions and reservations relating to national treatment with respect to land ownership and access to subsidies and other forms of state support.

In addition, Ukraine has committed to publish promptly its legislation relating to trade in services and to allow any interested parties to submit their comments and proposals.

Ukraine is not currently participating in the TiSA negotiations being held under the framework of the WTO.

Four of Ukraine's FTAs provide for liberalisation in service sectors, the:

Official publications of the international agreements concluded by Ukraine are available on the website of the Parliament of Ukraine (in Ukrainian).

Regulatory Framework. The general legal framework is established by the Law On Financial Services and State Regulation of Financial Services Markets No. 2664-III dated 12 July 2001. Certain financial services, such as banking activities, insurance business and securities transactions, are also subject to special laws, including the:

The provision of financial services is subject to licensing/registration by the competent Ukrainian authorities. Generally, only legal entities incorporated in Ukraine are eligible to obtain the relevant licence/registration. Therefore, with certain exceptions, there are no express rules governing the financial activities of foreign financial institutions in Ukraine. Foreign financial institutions must therefore take special care when contacting clients/prospects in Ukraine. The rules relating to foreign institutions include that:

Cross-border public offerings/marketing of securities in Ukraine requires the filing of a prospectus or a public offer with the National Securities and Stock Market Commission, the Ukrainian securities regulator. Cross-border marketing of securities in Ukraine also requires a filing with the Commission. An exemption applies to cross-border offerings/marketing limited to 150 potential investors contacted individually or on a similar basis.

In addition, there are rules applicable to customers of cross-border financial services in Ukraine that inevitably affect foreign suppliers of these services. In particular, these rules relate to cross-border loans taken by Ukrainian borrowers. Ukrainian borrowers must generally submit information on cross-border loan agreements to the National Bank of Ukraine (NBU), the Ukrainian central bank. In this regard, Ukrainian legislation requires Ukrainian banks to verify that interest rates under cross-border loan agreements reflect existing market conditions. Otherwise, a Ukrainian bank may be required to prohibit a Ukrainian borrower to make payments of interest under a relevant cross-border loan agreement.

The cross-border supply of financial services into Ukraine may be substantially liberalised for European suppliers in the mid-term. Under Articles 93 (Market Access) and 94 (National Treatment) and Annexes XVI-B and XVI-E to the EU-Ukraine Association Agreement, Ukraine is under an obligation to:

Main Requirements. The main requirements differ depending on the type of financial institution, as follows:

Regulatory Framework. The legal requirements depend on the nature of the legal services provided. For example, the Law On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations No. 755-IV dated 15 May 2003 applies to all non-governmental providers of legal services based in Ukraine (such as law firms, notaries or advocates). The activity of law firms is not regulated by specific legislation. However, some legal services are regulated in detail, for example:

Ukraine has not concluded any agreements for the mutual recognition of legal professional qualification or standards.

Main Requirements. Ukrainian and foreign legal entities, and individual entrepreneurs or public organisations, can provide consultancy on domestic or international law without special legal qualifications, except in relation to advocacy. An entity that provides legal services either for free or on a commercial basis must register with the state.

To obtain the status of advocate in Ukraine, a person must:

Foreign advocates can provide advocacy services in Ukraine if they are included in the Unified Advocates Register of Ukraine (the Advocate Council of Ukraine determines the necessary documentation for this).

Notary services can only be provided by Ukrainian citizens.

Under the Law On Licensing of Economic Activity Types No. 222-VIII dated 2 March 2015, services sectors that are subject to special licensing requirements include:

The full list is available at Legislation of Ukraine.

Corresponding CMU Resolutions determine the special licensing requirements for each of the listed activities, for example:

In addition, the list of natural monopolies of Ukraine is approved by the Antimonopoly Committee of Ukraine (AMCU) and comprises both state-owned and private enterprises. The list includes, among others, a wide range of companies supplying natural gas, electricity, water and water drainage, and transporting heat energy. It is available on the AMCU website.

The State Customs Service of Ukraine (SCS) is responsible for implementing the state customs policy and enforcing customs laws and regulations in Ukraine.

The functions of the SCS in the field of customs regulation include the following:

(Regulation on the SCS of Ukraine, approved by CMU Resolution No. 227 dated 6 March 2019.)

Depending on the type of violation, both customs authorities and courts have the power to hear cases on the violation of customs rules (Article 522, Customs Code of Ukraine No. 4495-VI dated 13 March 2012 (Customs Code)). Under the Code on Criminal Procedure, state courts have exclusive competence in criminal proceedings, including to impose criminal penalties for violations of customs rules under the Criminal Code (Article 30, Code on Criminal Procedure of Ukraine No. 4651-VI dated 13 April 2012).

Customs decisions can be challenged through judicial and administrative procedures, while import restrictions can only be challenged before a court.

Any person has the right to administratively challenge decisions, acts or omissions by the customs authorities by filing a complaint with the head of the relevant customs body. If a decision, act or omission is taken by the head of a customs post, the petition can be filed with the relevant customs house (of which the customs post is a structural division). If the action is taken by the head of the customs house, specialised customs body or customs organisation, it can be challenged before the SCS as the central executive authority responsible for implementing the state customs policy (Articles 24 to 30, Customs Code).

A ruling issued by the customs office on a customs offence can also be appealed to the SСS or a court. Filing an appeal suspends the enforcement of the customs offence ruling until the appeal is finally considered (Articles 529 to 533, Customs Code).

Both customs decisions and import restrictions can be challenged before an Ukrainian administrative court at any time. The decisions of a first instance administrative court can be appealed to the relevant Administrative Court of Appeal, the decisions of which can be revised by the Supreme Court of Ukraine (on limited grounds).

Ukraine bound 100% of its tariff lines on accession to the WTO. Currently, Ukraine's average bound rate is 5.8% (10.9% for agricultural products and 5% for non-agricultural products) and average applied rate is 4.5% (9.2% for agricultural goods and 3.7% for non-agricultural goods). Approximately 30% of all tariff lines are bound at 0%.

Import tariffs are specified in the Customs Tariff for Ukraine (Law on Customs Tariff for Ukraine No 674-IX dated 4 June 2020).

In addition, imported products are subject to internal taxes and other charges that are applied in the territory of Ukraine (border tax adjustment). Examples of these taxes and charges are value added tax (VAT) and excise duties. The rates and application of these charges are regulated by the Tax Code of Ukraine No. 2755-IV dated 2 December 2010.

Preferential tariffs are applied to goods originating from countries that have concluded FTAs with Ukraine. These include the:

Official publications of the international agreements concluded by Ukraine are available on the website of the Parliament of Ukraine (in Ukrainian).

On importation into the territory of Ukraine, goods must comply with sanitary and phytosanitary measures, depending on their characteristics, as well as relevant technical requirements (including packaging, marking or labelling regulations). Imports of certain goods covered by embargoes and sanctions are restricted.

The lists of goods subject to sanitary, phytosanitary control, compliance with food, feed, animal by-products, animal health and welfare requirements are specified in CMU Resolution No. 960 dated 24 October 2018.

The lists of goods (or their characteristics) covered by technical regulations are specified in the respective technical regulations.

Exports and imports subject to licensing and quotas are approved by CMU resolution on an annual basis. As of 2021, the relevant lists of goods were approved by CMU Resolution No. 1329 dated 28 December 2020 specifying:

In addition, importation and placement of certain goods on the Ukrainian market may be prohibited depending on other factors (such as infringement of IP rights). In particular, putting "fake goods" into circulation is prohibited (Article 6(4), Law of Ukraine On Protection of Consumers' Rights No. 1023-XII dated 12 May 1991). Clearance of goods suspected of infringing IP rights can be suspended, their marking can be changed and, in certain instances, these goods can be destroyed (Articles 397 to 403, Customs Code). Other remedies may also apply, including criminal liability, depending on the type of violation (see, for example, Articles 176, 177,and 229, Criminal Code).

In addition to the WTO legislative framework, trade remedies are regulated at the national level in Ukraine by the following laws:

The following state authorities are involved in trade remedies proceedings:

Information on pending trade defence proceedings, effective trade defence remedies, and other information relating to the regulation of trade remedies in Ukraine is available on the website of the Ministry of Economy.

The competent authorities can, but are not obliged to, impose duties at a level lower than the margin of dumping if this level is adequate to remove injury (Article 16(5), Anti-Dumping Law). In practice, the lesser duty rule is not applied in cases of considerable market distortions (for example, state regulation of prices of raw materials).

Anti-dumping duties cannot be imposed if they are contrary to the public interest, even if all the conditions for adoption of anti-dumping duties are satisfied (Article 36, Anti-Dumping Law). Investigative authorities must take the following into account as part of the public interest test:

In 2020, several investigations were terminated without measures because the investigative authorities considered that their application could potentially contradict public interests.

A decision by the Interdepartmental Commission on International Trade on the application of trade remedies can be challenged before the administrative court not later than one month after imposition of the relevant remedies (Article 31, Foreign Economic Activity Law). See Question 8 for the structure of administrative courts in Ukraine.

Under current court practice, foreign producers and exporters cannot challenge trade remedy decisions before the Ukrainian courts because their rights are not violated by the measures (as these are borne by importers).

Trade sanctions are applied in Ukraine based on:

The following governmental authorities can take the initiative to impose sanctions under the Sanctions Law:

Decisions to introduce, abolish and/or amend personal sanctions are made by the National Security and Defence Council of Ukraine and enacted by a decree of the President of Ukraine.

The CMU can also impose retaliatory measures under Article 29 of the Foreign Economic Activity Law.

The Customs Code is the main legal instrument setting out export requirements. Chapter 15 deals with the export of goods. The procedure for completing a customs declaration is set out in Chapter 40 of the Customs Code and CMU Resolution On Questions related to the Application of Customs Declarations No. 450 dated 21 May 2012.

Depending on the nature of the transaction, some specific regulations may be applicable, for example, the Law On Currency and Operations Connected with Currency dated 21 June 2018 regulates foreign currency payments involving Ukrainian companies.

A number of legal acts establish special procedures, including export permits, conduct of state inspections and so on, for the export of specific goods, including, for example:

The SCS generally enforces controls on the importation and exportation of goods through the customs border. However, depending on the type of products, specific authorities are responsible for the issuance of export permits and for export controls. For example:

A number of export duties and restrictions apply that Ukraine has committed to gradually reduce on its accession to the WTO. The list of products subject to export duties includes:

There is also a special procedure regulating exports of goods designated for military purposes and dual-use. Export of the goods is primarily regulated by the Law On State Control over International Transfers of Military and Dual-Use Products No. 549 dated 20 February 2003.

The list of goods designated for military purposes is set out in the Procedure for Exercising State Control over International Transfers of Goods Designated for Military Purposes, approved by CMU Resolution No 1807 dated 20 November 2003.

The list of dual-use goods is set out in the Procedure of State Control over International Transfers of Dual-Use Goods, approved by CMU Resolution No. 86 dated 28 January 2004.

Under the Sanctions Law, sanctions can be imposed on, among others:

To date, Ukraine has not applied any sectoral sanctions.

The Sanctions Law specifies the following grounds for the introduction of sanctions:

Sanctions under the Sanctions Law include:

There are currently personal sanctions against individuals and legal entities (sanction lists) related to the Russian Federation listed in the Decision of the National Security and Defence Council of Ukraine On Application of Special Personal Economic and Other Restrictive Measures (Sanctions) dated 28 April 2017 and enacted by Decree of the President No. 133/2017 dated 15 May 2017 (as amended on 14 May 2020).

The sanction lists were initially introduced in September 2015 for a one-year period. Further new sanction lists were subsequently adopted and are subject to constant revision and extension. The most recent amendments were introduced in May 2020.

In February 2021, personal sanctions were introduced against Ukrainian citizens related to the Russian Federation and legal entities relating to these individuals. These are listed in the Decision of the National Security and Defence Council of Ukraine On Application and Amendments of Special Personal Economic and Other Restrictive Measures (Sanctions) dated 19 February 2021 and enacted by Decree of the President No. 64/2021 dated 19 February 2021.

According to the sanction lists currently in force, sanctions are applicable to legal entities and natural persons for periods of one to three years, or permanently.

Under Article 29 of the Foreign Economic Activity Law, the CMU can introduce trade restrictions (retaliatory measures) in response to discriminative or unfriendly actions by a state recognised by the Parliament of Ukraine as an aggressor and/or an occupier. The restrictions that can be introduced under Article 29 include:

The following trade restrictions have been enacted in relation to the Russian Federation under Article 29 of the Foreign Economic Activity Law:

As compliance with trade sanctions is strictly monitored by the state authorities (including the Security Service of Ukraine and SСS), it is not generally possible in practice to circumvent trade restrictions.

Products will not be cleared for export if it is established, in the course of customs controls, that the goods are not authorised for export due to non-compliance with export regulations.

Depending on the nature of the violation, type of exported product, intention of the infringer and other factors, violations of export regulations can lead to administrative and criminal liability, for example:

There are no mandatory compliance programmes for companies in relation to sanctions applied under the Sanctions Law and retaliatory measures. However, due to the practical consequences of sanctions (such as the impossibility of making payments through banks, the customs clearance of products and so on), in practice, many businesses usually take all reasonable measures to ensure compliance with applicable legislation before conclusion of any contracts and check whether counterparties are included on any sanctions lists.

However, there are mandatory compliance requirements for:

The interaction between the government and businesses on the introduction of trade barriers against Ukraine is governed by the Regulation on Protection of Ukraine's Rights and Interests in Trade and Economic Field within the Framework of the WTO approved by CMU Resolution No. 346 dated 1 June 2016 (Trade Interests Regulation).

The Trade Interests Regulation defines, among other things, the rules and procedures on protection of the rights and interests of Ukrainian companies through all the stages of the WTO dispute settlement process, from the consultation stage to the implementation of recommendations or rulings of the WTO DSB. The Regulation expressly recognises the right of Ukrainian companies to apply to the Ministry of Economy if any WTO member violates the WTO agreements, as well as sets out further procedures (such as for the initiation of a dispute).

In addition, the state bodies and foreign diplomatic missions of Ukraine monitor trade barriers applied by WTO members with respect to Ukraine. When relevant violations are detected, the Ministry of Economy must be notified within five business days to initiate the relevant procedures and address the violations.

Although Ukrainian law is silent on how local exporters can refer issues to the Government of Ukraine under bilateral treaties, in practice it is likely that the same procedure can be applied for violations under FTAs.

On 27 December 2017, the CMU approved the Export Strategy of Ukraine: Roadmap for Strategic Development of Trade for the Period 2017-2021 (Export Strategy), envisaging an action plan for key vectors of export development in Ukraine. As specified in the Export Strategy, the most promising sectors for Ukraine's exports are:

The document also provides a list of new markets that would replace traditional export markets where access was restricted due to the political situation. These include EU, Egypt, India, Belarus, Georgia, Moldova, Japan, China, Bangladesh, and so on. Under the Export Strategy, Ukraine will create institutional and other capacities to facilitate exports. The Export Strategy is currently being updated.

Ukraine is also revising its legislation in the field of trade defence instruments to fully align it with established WTO jurisprudence. In 2020, the Ministry of Economy presented updated draft laws elaborated in collaboration with the legal and business community. These draft laws were submitted for the consideration of the Ukrainian Parliament at the end of 2020 and are expected to be adopted in the near future.