Ukraine-Canada Free Trade Agreement
Following is an overview of the key provisions of the Ukraine-Canada Free Trade Agreement.
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Purpose of the Agreement
According to the State Statistics Service of Ukraine, the volume of bilateral trade of goods between Canada and Ukraine in 2014 totaled $263.8 million USD, more than 12% decrease compared to 2013. The volume has been declining in the recent years. Neither party to the Agreement is a major trade partner of each other. However, it is presumed that the signing of the FTA will improve the trade volumes between both the countries and help in the economic reforms of Ukraine and promote a broad-based stability. It must be noted that the Agreement is applicable only to goods trade; services trade is not within the ambit of the Agreement presently.
National Treatment and Market Access
Both parties shall render national treatment to the goods originating from the other party, whereby the treatment accorded shall be no less favorable than the most favorable treatment accorded to the goods, directly competitive or substitutive, originating within its own territory.
Upon entry into force of the Agreement, Ukraine will immediately eliminate tariffs on 86 percent of Canada’s exports, with the balance of tariff concessions to be implemented over periods of up to seven years. Accordingly, a large amount of Ukrainian tariff on agricultural products, fish and seafood and industrial products and machineries will be eliminated.
Upon entry into force of the Agreement, Canada will immediately eliminate tariffs on 99.9 percent of imports from Ukraine on goods including agricultural products, fish and seafood and industrial products and machineries.
To ensure seamless market access and to remove all constrains in the form of non-tariff barriers, rights and obligations under Article XI of the GATT 1994 have been incorporated as part of the Agreement. Accordingly, export/import price requirements are prohibited but it does not preclude the right of the parties to impose restriction on imports/exports from other non-parties via the territories of parties to the Agreement.
Both parties shall abide by the directives contained in Article VIII of the GATT and remove any undue customs charges on the imports of goods from the other party. However, the prohibition relating to customs duty/charges does not affect the anti-dumping duties, or charges imposed on directly competitive/substitutable goods. Likewise, customs duties on exports shall be in accordance with the rights and obligations under WTO.
Balance of Payment
Both parties shall avoid imposition of restrictive measures due to Balance of Payment (BoP) issues, however the party facing crippling BoP issues shall adopt restrictive measures in accordance with GATT provisions upon due notification to the other party. Such measures should be for a limited period only and only to the extent necessary.
Export Subsidy and special safeguards for agricultural goods
Export subsidy on agricultural goods that are exported or on those incorporated in products that are exported shall not be adopted or maintained when other Party has, immediately or after the transitional period, fully eliminated the tariff, on that agricultural good. Likewise, a party shall not apply duties on agricultural goods from the other party as safeguard measures.
A party shall not maintain or impose a measure requiring that distilled spirits imported from the other Party for bottling be blended with distilled spirits of the Party.
Rules of Origin and Origin Procedure
A product, subject to conditions, shall be deemed to originate in a party where the last production took place if
- It has been wholly obtained in the territory of a party or both the parties
- Has been produced exclusively from the materials originating in the territory of a party or both the parties
- Has undergone sufficient production
The Agreement also sets out the regulations and obligations of exporters regarding ‘Origin Declaration’, based on which the preferential tariff treatment envisaged in the Agreement shall be embedded. The exporter is required, among other things, to provide necessary documents and statements at the behest of the customs authority, incorrect information contained in the declaration shall be notified, the declaration shall be presented along with the exports or within two years or longer as per the legislation of the importing party. Similar obligations are also detailed in the Agreement for importers. Subject to conditions, the declaration shall also be waived.
Exporter, importer and the producer, who gives statement to support origin declaration, are required to maintain all relevant records and documentation for a period of three years; it can be in any medium as long as it is retrievable and must be produces when warranted by the authorities. Failure would result in denial of preferential tariff treatment.
The Agreement also sets out the obligations of both parties in the interpretation, implementation, and verification of the rules of origin and origin procedures.
The Agreement contains commitments to reduce red tape at the borders through simplified customs procedure, speedy clearance for express shipment, officials shall cooperate to converge data and documentation requirements and verification. Both parties shall maintain absolute transparency over regulations and legislations relating to import and export of goods, seek consultation from public/stakeholders on proposed regulations and maintain contact points for interested persons seeking information on trade matters.
In order to safeguard a domestic industry from serious impairment due to import surge resulting from tariff reduction, the Agreement contains an Emergency Action chapter that includes provisions allowing for temporary tariff increases in exceptional circumstances.
Sanitary and Phytosanitary Measures (SPS)
The Agreement reaffirms Canada and Ukraine’s commitments under WTO Agreement that recognizes the rights of members to take measures necessary for the protection of human, animal, or plant life or health; but these measures shall be based on scientific findings, and do not create unjustified restrictions on trade. Canadian and Ukrainian officials will facilitate communication and expeditiously resolve matters relating to SPS to ensure that market access gains conferred by the Agreement remains unchallenged.
Technical Barriers to Trade
The Agreement ensures that technical regulations, conformity tests and other standards-related measures are not used as barriers to trade. It will minimize/eliminate negative impacts of discriminatory and burdensome regulatory requirements. There are provisions relating to product labeling – A Party shall permit wines to be labeled as “Icewine”, “ice wine”, “ice-wine” or a similar variation of these terms, only if the wine is made exclusively from grapes naturally frozen on the vine, a measure to protect Canada’s icewine heritage.
Recognizing the potential of E-commerce the Agreement requires both parties to not apply customs duties and other charges to digital products transmitted electronically.
Competition Policy, Monopolies and State Enterprises
The Agreement sets out a framework for effective enforcement action against anti-competitive business conduct, which would undermine the purpose of the Agreement. The designated monopolies and state enterprises shall operate in a manner consistent with the Agreement and accord non-discriminatory treatment in the sales of goods/service to each other’s entities in relation to monopoly goods or services.
Companies from the territories of both parties shall be accorded preferential access to procurement opportunities at the central government level in both countries. Suppliers will have the right to fair, non-discriminatory and predictable treatment when bidding on government procurement tenders and the like.
Intellectual Property (IP)
The Agreement set out the obligations of both parties to establish a sound regime for the protection and enforcement of IP rights. It also facilitates cooperation of both parties in sharing of best practices to enhance the protection of IP rights and to combat IP rights infringements. The parties shall resort to a consultative mechanism to resolve IP-related matters.
Both parties are required to cooperate and commit to not lowering their levels of environmental protection to attract trade or investment and agree to effective enforcement of their environmental laws; promote greater accountability, public participation and transparency. The parties shall facilitate access to domestic remedies in the face of a violation of an environmental law.
Both parties are to effectively enforce their laws, in accordance with Labour Organization’s 1998 Declaration on Fundamental Principles and Rights at Work. Thus, they shall ensure and implement protections for occupational health and safety, hours of work, wages and migrant workers. It also provides for a dispute settlement mechanism rendering monetary penalties in cases of non-compliance, and institutional mechanisms to monitor compliance.
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