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18 September 2019

Deep and Comprehensive Free Trade Area with EU (DCFTA)

Key provisions of the DCFTA

On the 1 January 2016 the Agreement on Deep and comprehensive free trade area (DCFTA) between Ukraine and the European Union came into force. Temporary application of the economic part of Сhapter IV of the Agreement started on April 23, 2014, unilaterally – Ukraine had the right to use quotas on duty-free export to the EU, at the same time the EU countries supplied products under general conditions. Only on January 2016, the Agreement started to function bilaterally.

From October 2017 and from January 2018, 8 additional quotas for duty-free exports to the EU to honey, groats and flour, processed tomatoes, grape and apple juice, grains (oats, wheat, corn and barley) began to operate with the main quotas.

In the annexes of the Agreement are fully described the tariff regulation of trade between Ukraine and the EU. Regulations include:

  •          Customs duties
  •         Tariff quotas
  •         Entry prices

The EU customs duty charged when receiving the goods to its market. For most agricultural products custom duties on imports from Ukraine to the EU was abolished from 1 January 2016, in the framework of the DCFTA. For each product allocated a base rate of import duty and transition perod, which means time during which the rate of duty will be directly proportional reduced or completely abolished. The basic rate of duty is valid also for products, export quota on which was fully used and export continues above the volume of the quota.

Tariff quota is a two-level customs tariff deals with the quantity of goods, the amount of which can be exported/importd for the "reduced" or "zero" rate of duty for a specified period of time ("rate of duty within the quota"). After using the volumes of the tariff quotas, export/import of product can continue without limitations, but would be payed a higher tariff rate ("rate of duty outside the quota").

Exclusively the European Union (the relevant directives of the European Commission) carries out the administration of the EU tariff quotas on two principles:

"first come – first served" – registration of import of goods in the framework of the tariff quota makes depending on the availability of the unused balance of the quota at the time of submission of accompanying documentation. At the same time, the first one is the product, accompanying documents which came first.

"import license" – importers of Ukrainian goods make the appropriate application to the Directorate-General for Agriculture and Rural Development for the right to import (license). Howeve, there is a time limit within which the appropriate amount of quotas can be reserved.

The import license is used for following products:

 

  • Beef
  • Poultry (main and additional)             
  • Pork (main and additional)         
  • Eggs (main and additional)
  • Butter
  • Dry milk powder 
  • Milk, cream, condensed milk and yogurt             
  • Wheat
  • Corn
  • Barley

Under principle "first come - first served" exported the following products^

  • Barley groats and meal;
  • Cereal grains otherwise worked
  • Milk-cream processed products
  • Fermented-milk processed products
  • Cereal processed products
  • Malt and wheat gluten
  • Mushrooms (main and additional)
  • Sugar processed products
  • Bran, shaps and residues
  • Food preparations
  • Cigars and Cigarettes
  • Starch processed
  • Processed butter products
  • Malt-starch processed products
  • Grape and Apple juice
  • Sheep meat
  • Processed tomatoes
  • Sweetcorn
  • Other Sugars
  • Sugar syrups
  • Sugars
  • Oats
  • Garlic
  • Honey
  • Ethanol 

 The entry price is unified procedure, the basis of which is the determination of prices on the domestic market, according which are calculated all further customs payments. All fruits, vegetables, natural juices, and wines from all countries outside the EU perform customs clearing in this scheme. According to this system, the duty consists of general rates and additional customs payments, which amount depends on how much the price of the goods is lower than the established in the EU. Ukrainian products have trade preferences in the form of exemption from payment of the basic fee. Thus, the difference in price only charged, and the base fee is not charged.

The use of quotas is provided below

·         Tariff quotas

·         Entry prices

The EU customs duty charged when receiving the goods to its market. For most agricultural products custom duties on imports from Ukraine to the EU was abolished from 1 January 2016, in the framework of the DCFTA. For each product allocated a base rate of import duty and transition perod, which means time during which the rate of duty will be directly proportional reduced or completely abolished. The basic rate of duty is valid also for products, export quota on which was fully used and export continues above the volume of the quota.

Tariff quota is a two-level customs tariff deals with the quantity of goods, the amount of which can be exported/importd for the "reduced" or "zero" rate of duty for a specified period of time ("rate of duty within the quota"). After using the volumes of the tariff quotas, export/import of product can continue without limitations, but would be payed a higher tariff rate ("rate of duty outside the quota").

Exclusively the European Union (the relevant directives of the European Commission) carries out the administration of the EU tariff quotas on two principles:

"first come – first served" – registration of import of goods in the framework of the tariff quota makes depending on the availability of the unused balance of the quota at the time of submission of accompanying documentation. At the same time, the first one is the product, accompanying documents which came first.

"import license" – importers of Ukrainian goods make the appropriate application to the Directorate-General for Agriculture and Rural Development for the right to import (license). Howeve, there is a time limit within which the appropriate amount of quotas can be reserved.

The import license is used for following products:

·         Beef meat

·         Poultry meat and poultry meat preparations (main and additional)            

·         Pork meat (main and additional)          

·         Eggs and albumins (main and additional)

·         Butter and dairy spreads

·         Milk powder

·         Milk, cream, condensed milk and yogurts

·         Common wheat, flours, and pellets

·         Maize, flour and pellets

·         Barley, flour and pellets

The "first come - first served" is used for following products:

·         Barley groats and meal;

·         Cereal grains otherwise worked

·         Milk-cream processed products

·         Fermented-milk processed products

·         Cereal processed products

·         Malt and wheat gluten

·         Mushrooms (main and additional)

·         Sugar processed products

·         Bran, shaps and residues

·         Food preparations

·         Cigars and Cigarettes

·         Starch processed

·         Processed butter products

·         Malt-starch processed products

·         Grape and Apple juice

·         Sheep meat

·         Processed tomatoes

·         Sweetcorn

·         Other Sugars

·         Sugar syrups

·         Sugars

·         Oats

·         Garlic

·         Honey

·         Ethanol

The entry price is unified procedure, the basis of which is the determination of prices on the domestic market, according which are calculated all further customs payments. All fruits, vegetables, natural juices, and wines from all countries outside the EU perform customs clearing in this scheme. According to this system, the duty consists of general rates and additional customs payments, which amount depends on how much the price of the goods is lower than the established in the EU. Ukrainian products have trade preferences in the form of exemption from payment of the basic fee. Thus, the difference in price only charged, and the base fee is not charged.

The use of quotas

As of 13.03.2017 Ukraine has already fully used 5 quotas:

·         Honey

·         Sugar

·         Groats and meal

·         Grape and Apple juice

·         Maize, flour and pellets 

Use of quotas on a "first come - first served" principle, 2018

Use of quotas on a "Import license" principle, 2018

Use of additional quotas, 2018

Source: The General Directorate of the European Commission`s Taxation and Customs Union

For more detailed information, please contact:
Daria Grytsenko
Tel.: ‎‎+380 (44) 236-20-95
e-mail: grytsenko{@}ucab.ua