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Additional Import Duty Requires Consultations with WTO Trade Partners – Lawyer

Kyiv. November 22, 2012.

Additional import duty may be applied in case of country’s balance of payment breakdown and does not contradict to the provisions of the General Agreement on Tariffs and Trade (GATT), requiring, however, consultations with trade partners within the Balance of Payments Committee of the World Trade Organization (WTO), informed Irina Polovets, an associate in Volkov and Partners Law Firm to the “Interfax-Ukraine” agency.
“Measure of the additional import duty application complies with the WTO rules,” noted Ms. Polovets, commenting on the previous mass media information concerning the Cabinet of Ministers plans to impose additional import duty amounting to 10% of products customs cost in case of balance of payments sharp decrease.
“Another issue is how it will be adopted and which products the duty will cover. Applying such measures, Ukraine has to conduct consultations with trade partners whose interests may be affected by the measure within the Balance of Payments Committee of the WTO. As a rule the International Monetary Fund takes part in the consultations to evaluate the country’s balance of payment,” she added.
According to Iryna Polovets, an additional import duty, if imposed, will not itself contradict to the article 12 of the GATT, however, this article requires that the Members of the WTO gradually reduced the duties progressively as the balance of payments improves.
“Indeed, provisions of the article were initially drafted in 1947 allowing for restrictions in case the balance of payments changes for the worse. Still, according to the agreement with regard to provisions of GATT on balance-of-payments the WTO members bound to give preference to the measures, which would have the less adverse affect to the trade,” noted Ms. Polovets.
These are the so-called “price-based measures”, additional import duties, import deposit requirements and other measures, explained the lawyer.
“In case of commodities subjected to additional duty, according to the WTO rules, countries applying restrictions have to try and avoid unnecessary damage to commercial and economic interests of the other WTO members; in particular adverse effect to the export of primary commodities,” underlined the lawyer.
Furthermore, according to her the duty must not be of a protectionist’s nature.
“Ukraine has already had a negative experience with the like duty implementation: trade partners described 13% import duty for refrigerators and vehicles 2009 as one aimed to protect certain industries,” concluded Iryna Polovets.
As a reminder, on November 22, the Minister of Economic Development and Trade Petro Poroshenko announced that the Ministry considers various ways to provide support to the domestic producers; however, but the way media highlighted it does not correspond to reality.
At the same time the Minister did not tell the exact variants, which are under consideration in the Ministry.
According to the State Statistics, for the last nine months of 2012 the export-import liability (negative balance) increased by 19.7%, or USD1.886 billion, up to USD11.475 billion. Therefore, exports increased by 1,8% up to USD50.799 billion, and imports – by 4.7%, up to USD62.273 billion.
Within the last few months exports and imports increase came to a halt. Nonetheless, the balance is still negative. In particular, in September 2012 it amounted to USD1.36 billion, which is 3.4% better than in September 2011. In September 2012 vs. September 2011 commodities exports decreased by 7.2% down to USD5.546, and imports – by 6,5%, down to USD6,906 billion.
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