Ukraine Poultry and Products Tariff and Non-tariff Barriers to Trade 2003 - UKRAINE - The lifting of the U.S. poultry meat import ban has reopened the Ukrainian market for U.S. producers. However, poultry not destined for further processing is subject to astonishingly high import taxes. Local importers are now searching for legislative loopholes in order to avoid these prohibitively high tariffs. Unclear laws and customs procedures significantly increase market risks for Ukraine’s poultry trade.

Executive Summary

The recent lifting of the U.S. poultry meat import ban allows U.S. producers to renew poultry meat shipments to Ukraine. Unfortunately, Ukrainian import duties on poultry meat remain prohibitively high. This discourages legal direct importing and forces importers to look for ways to avoid import taxes. At present, the only legal method to circumvent the high tariffs is to import via companies that are registered in the Free Economic Zones (FEZs). Special investment regimes established within the FEZs allow duty-free imports for goods destined for further processing. In many cases, imported poultry does not qualified as a “sufficiently processed good.” This results in reduced-duty poultry imports being subject to the nontransparent whimsy of local and central authorities.

Import Regime

Prior to 1996, poultry meat imports into Ukraine were profitable. This was due, in part, to low import duties. Chilled parts, chilled leg quarters and frozen leg quarters were assigned an import duty of € 0.30 per kilogram. All other poultry meat was assigned an import duty of 30% of value or € 1.50 per kilogram –- whichever was higher. In July 1996, the GOU increased the import duty to € 0.70 for chilled parts, chilled leg quarters and frozen leg quarters. Not surprisingly, traders found ways to circumvent paying this higher import duty on poultry.

Between 1996 and 2002 the bulk of poultry meat imports into Ukraine have been conducted through privileged importers, or arrived illegally. In 2002, the Government of Ukraine (GOU) took steps to remove the preferential import duty payments and succeeded in obtaining a corresponding ruling from the Constitutional Court of Ukraine.

Unable to pay the new higher duties, poultry traders retreated to another legislative loophole. One way they found to circumvent paying import duty was by working through the FEZs where raw materials for further processing could enter duty free. It is believed that an overwhelming share of frozen poultry products entering the FEZs simply transit, with little or no additional processing.

For whatever reason, local authorities and the GOU have chosen not to interfere with this flagrant violation of poultry import regulations. However, there is always the threat that poultry imports through the FEZs could be completely or partially stopped.

The commonly accepted reason for the GOU’s failure to intervene with FEZ poultry operations is insufficient domestic poultry production within Ukraine. Annual domestic production of 170,000 metric tons of poultry meat coupled with 42,000 tons of legally imported poultry meat does not satisfy domestic demand.

A considerable quantity of poultry is smuggled into Ukraine through the Republic of Moldova (Transdnister Republic) and Poland. Some market analysts believe that the quantity of poultry smuggled into Ukraine is comparable to or even exceeds the legal trade.

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Source: USDA Foreign Agricultural Service - December 2003