Abuses of rights in trade investigations: how foreign business can protect itself on the Ukrainian market
Author: Anton Sintsov
Source: Lexology, 22 Oktober 2020

The economic crisis can push unscrupulous national producers to initiate trade investigations in order to displace foreign competitors. Ukrainian consumers may be first who can suffer from this. How can foreign business resist in the Ukrainian market?

In early 2020 the Ministry of Economy announced its intentions to support national producers by activating trade remedy instruments, in particular, by conducting anti-dumping investigations.

Amid a general recession and current international trends, such attention of the Ministry of Economy to national interests and trade remedy instruments looks quite understandable.

But what about a situation where national producers abuse their status and initiate trade investigations just to get a greater market share?

Trade remedy instruments - current trends

Trade remedy instruments include anti-dumping, anti-subsidy, and safeguard (special) investigations, the main idea of which is to protect the national producer from unfair and/or excessive import of foreign products.

A recent WTO report shows that between mid-October 2019 and mid-May 2020, during the COVID-19 crisis, WTO Members initiated 177 new trade investigations and 62 investigations were terminated, for a total of 239 trade remedy actions.

During the review period, 239 trade remedy actions were recorded for WTO Members. Anti-dumping initiations continue to be the most frequent trade remedy action, accounting for around 80% of all initiations during the review period.

According to the WTO, 20 trade remedy actions were recorded in Ukraine in 2019, 17 of these trade remedy actions were: anti-dumping (8 initiated and 9 completed) and 3 – safeguard (initiated); anti-subsidy investigations were not conducted.

However, in 2020, in the context of the announced support of the Ministry of Economy, we see an increase in the number of investigations. Thus, within 10 months of 2020, 23 trade remedy actions have already been recorded, such as anti-dumping – 13 (5 initiated, 8 completed), anti-subsidy – 1 (not initiated), safeguard – 9 (4 initiated, 5 completed).

Trade investigation procedure: 3 stages

Conventionally, the procedure for conducting trade investigations can be divided into three stages: (1) submitting a complaint; (2) initiation and conducting an investigation; (3) final determination.

At the first stage, the national producer submits a complaint to the Ministry of Economy, which, depending on the type of trade investigation, justifies three key elements: unfair / increase of import, injury for national business, and a causal link between them.

The Ministry of Economy proceeds to the second stage if the complaint is sufficiently substantiated, and the Commission has decided to start an investigation. During the investigation, the interested parties can register and submit their position papers, which the Ministry of Economy evaluates and prepares preliminary conclusions and recommendations for the Commission.

The third final stage involves the adoption by the Commission of a final determination based on the final conclusions and recommendations of the Ministry of Economy. At this stage, the Commission has the right to impose trade duties or terminate the proceeding without duties being imposed.

National interests are on the verge of abuse

Ukrainian laws that regulate the procedure for conducting trade investigations are primarily aimed to protect national producers. Therefore, the Ministry of Economy, when conducting trade investigations, is largely guided by the position of national producers.

Despite such legislative support for national producers, in practice, bona fide foreign companies manage to protect their interests, for example, as in the anti-dumping investigation against import of syringes from India, Turkey, and China in 2019.

However, the situation becomes more complicated when national producers, wishing to displace foreign business, abuse their rights, and submit complaints to the Ministry of Economy with distorted data.

Trade laws do not regulate mechanisms for combating such abuses, therefore the Ministry of Economy, if the position of the national producer is unfounded, has the right (depending on the stage of investigation) to return the complaint or to recommend non-imposition of measures.

Foreign business - elements of remedy

However, the "filter" in the form of the Ministry of Economy does not always work reliably, and in the conditions of abuse of the national producer, foreign business should rely not only on the quality of its legal position but also use other elements of remedy that are aimed at non- imposition of measures.

1. Support of diplomatic missions

The factor of international economic interests is one of the main factors that the Ministry of Economy must assess during trade investigations.

Such special attention to the international factor related to the fact that Ukraine is a party to 16 free trade agreements with 46 countries and continues to build international relations with other strategic partners.

Unreasonable imposition of measures may lead to violation of the terms of international agreements, to imposition of "mirror" measures against Ukrainian products in export markets, to initiation of WTO disputes, which are not yet ending in favor of Ukraine: the case DS468 "Ukraine - special measures for passenger cars" in 2015 and the case DS493 "Ukraine - anti-dumping measures against ammonium nitrate" in 2019.

Therefore, at the stage of starting an investigation, it is important for foreign business not only to voice the international factor but also to draw the attention of diplomats to the initiated investigations since, as practice shows, they may not always be aware of conducting investigations.

The participation of diplomatic missions in trade investigations is a good counterbalance to the position of the national producers and helps the Ministry of Economy to comprehensively assess the consequences of the application of measures.

2. Participation of national consumers

Another important factor that the Ministry of Economy must consider before making a final determination is the factor of national interests.

Traditionally, national interests mean not only the interests of national producers but also the interests of national consumers who determine the market demand, launch the mechanism of national production and imports in the market.

As practice shows, the interests of producers and consumers are not always coinciding since the producers, pursuing their business interests, may not consider the opinion of the consumers.

That is why national consumers more and more often enter into trade investigations and inform the Ministry of Economy of their position, since ignoring the process can lead to the imposition of measures and, as a result, a shortage of products, price increase, violation of competition principals, and strengthening of the local monopoly on the market.

During trade investigations, it is important for foreign businesses to draw the attention of the Ministry of Economy to the need to assess not only the interests of national producers but also the opinions of national consumers.

In the history of the Ukrainian trade, the timely involvement of diplomats and consumers has more than once become a reason for revising the opinions of experts from the Ministry of Economy and members of the Commission in favor of non-imposition of measures. Recent examples are two special investigations on nitrogen and complex fertilizers which ended in 2020 without measures.

If the legal position is powerless, and the opinions of diplomats and consumers are not convincing for the Ministry of Economy, foreign business, in order to maintain a place in the Ukrainian market, should consider price undertakings.

3. Undertakings

Undertakings are a certain form of compromise (usually regarding an export price) that foreign companies can propose in order to stay on the export market and agree on acceptable terms of trade with the Ministry of Economy.

According to the procedure, undertakings are submitted at the end of the second stage of the investigation – immediately after the preliminary conclusions and recommendations of the Ministry of Economy were circulated between all interested parties.

At the level of international and national legislation, undertakings are applied only for anti-dumping and anti-subsidy investigations and are not provided for safeguard investigations, since the idea of the first two investigations is to assess the fairness of export prices, while within the framework of the safeguard one, the volume of imports is analyzed and GR negotiations are used.

Among Ukrainian partners, undertakings are commonly used in the European Union – 11 of them and 8 in the USA (known as "suspension agreements"), while in Ukraine we have only 3: in the anti-dumping investigation against import of seamless pipes from China in 2014, in the anti-dumping investigation against import of salt from Belarus in 2019 and in the anti-dumping investigation against import of steel seamless hot-deformed pipes from China in 2020.

The small number of undertakings in Ukraine can be explained by the difficult procedure of negotiations – through the Ministry of Economy and initiators (national producers), who, as a rule, insist on disadvantageous conditions for the exporter.

But despite such unpopularity of undertakings in Ukraine, foreign business should not ignore such an element of remedy, since if the undertakings were agreed then the trade measures should not be applicable for a foreign exporter.


In the context of the recently announced protectionism of national interests, we expect that the level of attention of the Ministry of Economy to abuses may decrease, while pressure from national producers on foreign business in the form of attempts to impose trade measures may increase.

In order to resist pressure and abuse by national producers, foreign business should not rely only on the objectivity of the Ministry of Economy and the quality of its legal position. It is important to use all permissible instruments of the Ukrainian trade, which will help to prove the bona fides of imports and prevent the unreasonable imposition of trade measures.

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