Preferential Trade with EU
In January 2016 the Title IV dedicated to Trade and Trade Related Matters of the EU Ukraine Association Agreement (the EU Association Agreement) came into force.
As a result, the import / export of goods originating from EU member states and Ukraine could be performed under both preferential and non-preferential regimes. The preferential regime would allow import / export of goods with zero / reduced customs duty rate (or quotas for some specifically defined goods).
In order to apply for the preferential duties and charges to import of goods / products (as well as customs restrictions or special requirements), the nationality of goods (Rules of origin) and the tariff classification must be determined.
Preferential Rules of Origin
If a company (e.g. a Ukrainian company) intends to import goods under a preferential regime into Ukraine from the EU, such goods should be exported from an EU state and need to originate in that state. The rules of origin explain whether goods may be considered originating from that state and, if yes, the preferential regime envisaged by the EU Association agreement would apply. The formal confirmation of such origin of goods is movement certificate EUR 1.
Rules and provisions regarding application of the preferential regime are described in Protocol I to the EU Association Agreement (the Protocol I).
Origination of Goods Concept
Under the EU Association Agreement, goods are considered as originating from the EU / Ukraine if:
— the goods are wholly obtained in the EU / Ukraine. Wholly obtained goods are natural products and goods made entirely from them;
— the goods have undergone sufficient working or processing in EU / Ukraine.
Wholly obtained goods cannot contain imported non-originating elements (e.g. mineral products, vegetable products, live animals, fish, etc.). Article 5 of the Protocol I provides for an exhaustive list of cases where the goods are considered as wholly obtained for the purpose of the Rules of origin.
Article 7 of the Protocol I provides for the list of working / processing operations which are viewed to be insufficient (minimal) and do not satisfy the Rules of origin. Annex II to the Protocol I of the EU Association Agreement establishes the minimum required set of operations or ingredients which would satisfy the Rules of origin. The information in Annex II to Protocol I is structured with reference to the tariff code of goods/products, so that an exporter/importer would be able to find the description of applicable technological operations and percentage of the particular ingredients which would satisfy the Rules of origin.
Proof of Origin. Movement certificate EUR 1
In order to apply for the preferential regime, the exporter of goods shall obtain movement certificate EUR 1. Movement certificates are issued by customs authorities of the exporting country based on written applications made by exporters. The procedure for issuance of a movement certificate in Ukraine is provided for by the Order of the Ministry of Finance of Ukraine On Approval of the Procedure of Issuance of a Movement Certificate EUR 1 by the Customs Offices in accordance with Association Agreement between Ukraine and European Union, European Community and Their Member States No. 1142 of 18 November 2014 and the Letter of the State Fiscal Service of Ukraine On Recommendations on Issuance of Movement Certificate EUR 1 No.47656/7/99-99-25-02-03-17 of 29 December 2015.
In order to obtain a movement certificate, the exporter shall file:
— the application, a specimen of which is defined in Annex III to the Protocol I;
— the completed original of movement certificate EUR 1 and two copies;
— documents substantiating the preferential origin of goods according to Protocol I, in case of the first supply of goods.
The documents are considered by customs authorities and the decision (positive or negative) should be made within three days as of the date of the registration of the application with the customs office. The list of customs offices authorized to issue movement certificates is provided on the official website of the State Fiscal Service of Ukraine.
It should be noted that in certain exceptional cases (e.g. because of errors or involuntary omissions, or in cases when a movement certificate was not accepted by the customs authorities at the moment of importation due to technical reasons), movement certificate EUR 1 can be issued retrospectively. Such a certificate should be endorsed with the description "issued retrospectively".
In cases where the total value of declared goods does not exceed EUR 6,000 or exported goods are declared by the approved exporter, an invoice declaration — a document, which, in addition to movement certificate EUR 1, would substantiate the preferential origin of the declared goods, could be filed to a customs office.
The exporter filing the invoice declaration should be ready to provide the customs office with all documents proving the origin of goods. Similarly to certificate of origin EUR 1, the invoice declaration may be filed at the moment of export of the goods or after their export. With reference to provisions of Article 22 of Protocol 1 and Article 16(1)(b) of this Protocol I, the procedure of completion and the form of the invoice declaration are provided by the Letter of the State Fiscal Service of Ukraine No. 47068/7/99-99-25-0203-17 of 24 December 2015.
A company that makes frequent shipments of goods under EU Association agreement may apply to customs office for the status of the approved exporter. Such company must offer to customs authorities all guarantees that are necessary to verify the originating status of goods. The status of the approved exporter is granted at sole discretion of the customs authorities. In such a case the customs authorities shall grant the exporter the customs authorization number which shall appear in the invoice declaration. If the exporter fails to provide the guarantees with respect to the originating status of the goods or makes incorrect use of the approved exporter status, such status may be withdrawn by the customs authorities.
Intellectual Property Rights
Apart from customs formalities, to benefit from cross-border trade it is advisable to ensure that the relevant intellectual property rights are duly protected not only in the country of origin but also in the destination country. This will also mitigate the risk of conflicts regarding infringement of intellectual property rights owned by others.
Depending on the goods to be marketed, protection of different intellectual property rights such as trademarks, copyright, designs, technologies, etc. may be sought, and an appropriate protection strategy needs to be developed. However, trademark protection is usually the most important issue.
Talking about the export of products from Ukraine to the EU, the first step may be investigation of the target market and search for registered objects to identify potential conflicts. It is worth noting that publicly available online databases now exist (such as TMView, DesignView, Global Brand Database, etc.) that can be used to carry out searches at no cost for various countries or territories. Then, the registration options shall be considered.
While it is still possible to register trademarks via the national route in each particular country, there are more cost-efficient and time-efficient options available, such as international registration under the Madrid system and a European Union trade mark that allow the filing of a single application to cover various countries.
In an application filed under the Madrid system the applicant may designate member states of the Madrid Agreement Concerning the International Registration of Marks or the Protocol relating to that Agreement. After the international registration is processed by the WIPO International Bureau, the matter shall be considered by the patent offices of all designated countries in accordance with local rules. An EU trade mark application shall cover the entire territory of the EU and is only considered by the European Union Intellectual Property Office (earlier known as the Office for Harmonization in the Internal Market), although the "all or nothing" principle should be mentioned. That is, where an obstacle to registration exists in any EU member state, the registration shall not be granted. The situation is quite similar with registration of designs, where the Hague system for international registration of designs and EU design registration may be of use.