Ukrainе– EU Association Agreement - in focus Trade, Maritime and Customs

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1. Association Agreement with the EU

The Association Agreement between the European Union, the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (hereinafter "the Agreement") is an international agreement aimed at deepening integration between the EU and Ukraine in the sphere of politics, trade, culture, and strengthening of security.

The text of the Agreement consists of a preamble and seven titles ("General Principles", "Political Dialogue and Reform, Political Association, Cooperation and Convergence in the Field of Foreign and Security Policy", "Justice, Freedom and Security", "Trade and Trade-related Matters", "Economic and Sector Cooperation", "Financial Cooperation, with Anti-fraud Provisions", "Institutional, General and Final Provisions"). Priority is given to economic issues of the Agreement.

Purpose of the Agreement is the creation of the association, a gradual rapprochement between Ukraine and the EU, deepening economic and trade issues, as well as cooperation in the field of justice, freedom and security. Particular attention is paid to the provision on the free trade zone between Ukraine and the EU, which should ensure the gradual integration of the economy of Ukraine in the EU internal market.

On March 21, 2014 the political part of the Agreement was signed (for the political interaction, security and counter-terrorism). On June 27, 2014 2014 the economic (final) part of the Agreement was signed.

Officially, the Agreement shall enter into force after its ratification by the parliaments of Ukraine and the EU Member States.

On September 16, 2014 Ukraine ratified the Agreement, and for its part has completed all internal procedures for entry the Agreement into force.

Prior to ratification of the agreement by all EU member states, it is assumed the provisional application of the Agreement.

However, the Council of the EU decided to postpone the application of the Agreement regarding the establishment of a free trade zone (Title IV of the Agreement) to the end of 2015. Prior to this period, the EU will extend benefits for Ukraine upon unilateral cancellation of customs duties for Ukrainian goods.

Such titles as: "Political Dialogue and Reform, Political Association, Cooperation and Convergence in the field of Foreign and Security Policy", "Justice, Freedom and Security", "Economic and Sector Cooperation," "Institutional, General and Final Provisions" will take effect from 1 November, 2014.

In the field of trade the Agreement involves:

• Creation of the EU-Ukraine free trade zone. The area should be established during the transition period, which shall not exceed 10 years.

• Gradual reduction or elimination of customs duties on goods. Such changes will be carried out according to the approved schedule.

In the field of customs the Agreement involves:

• the introduction of modern methods of control of goods to simplify and facilitate the entry / release of goods;

• reduction of costs in the implementation of customs procedures;

• simplification of customs procedures;

• the introduction of a single administrative document for customs declaration;

• introduction of transparent rules for the licensing of customs brokers;

• the abolition of any requirements regarding the mandatory use of customs brokers;

• standardization of data and documents required for customs clearance;

• reduction and simplification of requirements and formalities - for faster release of goods;

• the abolition of any requirements concerning mandatory inspection before loading, or the place of destination;

• the abolition of any payments, similar to customs duties.

All of the above objectives will be implemented primarily through the alignment of Ukrainian legislation with the EU one. According to experts, the process of realizing the goals and objectives of the Agreement will take about 10 years.

Currently, the Cabinet of Ministers of Ukraine developed an action plan for implementation of the Agreement. Among other things, the plan involves developing and submitting to the consideration of a number of regulations in customs and trade areas concerning:

- issuance of certificates of displacement (origin) of goods from Ukraine;

- ratification of the Convention on a common transit regime;

- implementation of the provisions of the EU Regulation, which establishes the Community Customs Code (Modernized Customs Code of Ukraine);

- implementation of the provisions of the Council Regulation, which establishes a system of the Community with respect to exemption from duties.

Besides it is planned to develop a procedure for the provision and review of tariff quotas for imports of goods in Ukraine and provide a mechanism for gradual cancellation of import duties.

  II.  Prospects for the development of the customs sphere in connection with the signing of the Agreement

Experts point out that the signing of the Agreement should be followed by the changes in application of customs legislation. In particular, the possibility will be open for a real acceleration of customs procedures, for example – due to the joint border control. In practice, this means that the goods that cross the border, instead of double-checking - first by one side when you export, and then by the other at import - will pass a one-time joint control of two customs services within the common customs procedures.

In addition there is the likelihood that the institute of authorized economic operators will start working which will result in simplification of customs procedures for Ukrainian business entities in Europe.

However, it is noted that due to the delay of the introduction of a free trade zone, export and import of Ukraine will not change much until the end of 2016, real changes in the regulation of some processes, rather than their formal harmonization in accordance with EU standards, will not come immediately. All changes will require testing time and adjustments to the Ukrainian legislation. Ukrainian Cabinet of Ministers passed Resolution № 847-р dd. 17.09.2014 Upon implementation of the Agreement. According to which, the Plan for enforced implementation was adopted; the below is an extract, related to transport and trade.

Published in Forwarderlaw.com

Arthur Nitsevych

nitsevych@interlegal.com.ua