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- Anzhela Makhinova
Partner, Sayenko Kharenko
Ms Makhinova is recognized as being among the leading individuals for International Trade by The Legal 500, “Best in international trade” by the LMG Europe Women in Business Law Awards; in International Trade for Ukraine and in Franchising by Client Choice Awards; in Franchising by Who’s Who; in Trade by the Best Lawyers International; in Trade and Customs by Who’s Who: Trade & Customs. She is a country expert on franchising, distribution and agency for the International Distribution Institute and a Chair of the Working Group on International Trade of the ACC. Ms Makhinova is the lawyer of the year in trade by the Best Lawyer International.
Trade Defence Remedies in Ukraine: Benchmark Trends in 2021 and War-related Developments
2021 has once again demonstrated that trade defence remedies are being used more and more frequently not only around the world but also in Ukraine. This article focuses on benchmark trends of 2021 in the field of trade defence remedies in Ukraine and on developments that occurred because of the war initiated by russia against Ukraine.
In 2021, Ukraine initiated 11 anti-dumping investigations and reviews of effective anti-dumping measures against imports of glass containers from Belarus; salt extra from Belarus; cement from Moldova; rebars from Belarus; pipes from China; aluminium ladders from China, Slovakia, Poland and Belarus; wires from China; bitumen from russia and Belarus; potato starch from Belarus; particle boards from Belarus and russia; and wet fibreboards from russia. At the same time, eight anti-dumping measures were applied or extended for the next five years against imports of plywood from Belarus; potato starch from Belarus; particle boards from Belarus and russia; wet fibreboards from russia; insulation materials from russia and Belarus; cement from Turkey; lamps from Kyrgyzstan; and hinged devices (mechanisms) for window and balcony door units from Turkey.
As for safeguards, Ukraine initiated six safeguard investigations and reviews against imports of cheese, three-cone chips, PVC profiles, sulfuric acid, ceramic tiles, and sodium hypochlorite and has applied two safeguard measures against imports of sulfuric acid and fresh cut roses.
Since several safeguard investigations (against imports of cheese, three-cone chips, sodium hypochlorite) were pending when the war started, they were suspended for several months and terminated without measures.
Review of Price Undertakings
In Ukraine, price undertakings are applied quite rarely in the course of anti-dumping investigations. Currently, Ukraine applies 38 anti-dumping duties and has accepted only three price undertakings. The said price undertakings set out minimum prices and a general possibility for the Ministry of Economy of Ukraine, the agency responsible for conducting trade defence investigations, to revise them in case market conditions change.
In practice, the applied price undertakings have never been revised before, as neither Ukrainian law nor the respective price undertakings provide any requirements or procedures on how such revision should be conducted. However, in 2021, upon the domestic industry’s request, the Ministry initiated a review of price undertakings applied to a Chinese pipe producer since 2014. The domestic industry insists that minimum prices must be revised because the relevant international prices, prices on the Ukrainian market, and raw materials prices have considerably changed in recent years. The Chinese producer, however, believes that revising price undertakings based on a request from the domestic industry is impossible because minimum prices must be calculated based on the foreign producer’s dumping margin. Therefore, the only way is to revise the price undertakings based on the results of the last sunset review, where the foreign producer has duly submitted its questionnaire and proved the absence of dumping. The said proceeding is pending, and after its completion in 2022, the Ministry will establish the relevant practice.
Exclusion of Products from Anti-dumping Measures
In Ukraine, the domestic industry usually initiates investigations against all types of products, even those that are not produced by domestic industry. This approach is taken to avoid further circumvention of measures. In recent investigations, the Ministry scrutinised the above issue and if (a) there are justified grounds to believe that the products are, indeed, different (e.g., different characteristics, production process, end uses); (b) it is possible to identify this fact in the documents accompanying a cargo; (c) it is possible to easily verify the difference during the customs clearance, the Ministry excludes the relevant products from the scope of the measure. The Ministry applied this approach in the anti-dumping investigations related to imports of insulation materials from Belarus and russia and plywood from Belarus.
Peculiarities in defining the domestic industry
Under WTO rules and Ukrainian regulations, while defining the domestic industry, the Ministry is allowed to exclude Ukrainian producers that relate to foreign producers/exporters/importers or that import the products subject to an investigation.
In 2020, the Ministry considered this issue in one anti-dumping investigation and had not excluded the Ukrainian producer importing by itself the products subject to the investigation. This approach was premised on the conclusion that the respective imports were temporary and forced by russian aggression, during which the relevant production equipment was destroyed.
In 2021, there were three anti-dumping cases when the applicants had excluded the Ukrainian producers from the scope of the domestic industry at the application submission stage. In all investigations, the Ministry has excluded the relevant Ukrainian producers, mainly substantiating its position by the following arguments: (a) imports of such Ukrainian producers were more than 3% of import volumes subject to an investigation; and (b) contrary to the approach taken in the investigation conducted in 2020, the Ministry has not analysed any reasons for such imports by the Ukrainian producers.
Termination of Investigations by the Withdrawal of Applications on Investigation/review Initiation
There are more and more cases in Ukraine when investigations are being terminated without measures through withdrawal of applications on investigation/review initiation. For instance, a safeguard investigation relating to the importation into Ukraine of ceramic tiles was initiated on 1 June 2021 and further terminated on 23 July 2021. Likewise, an anti-dumping investigation relating to the importation into Ukraine of aluminium ladders from China, Slovakia, Poland and Belarus was initiated on 1 September 2021 and terminated on 8 December 2021. Notably, under Ukrainian law, the application withdrawal by domestic industry is allowed only at the stage of application consideration and before investigation/review initiation. However, the above cases demonstrate that the Ministry applies the same approach if domestic industry withdraws the application at the later stages of the investigation/review.
Review of Safeguard Measures
On 28 July 2020, the Interdepartmental Commission on International Trade, the agency responsible for adopting major decisions in the investigations and reviews, initiated a safeguard investigation on imports into Ukraine of wires notwithstanding country of origin and export. Following the results of this investigation, on 14 September 2021, the Commission applied a safeguard duty of 23.5%. This duty should have been applied from 14 October 2021.
Since the above decision affected national interests and prevented the implementation of the state program for informatisation and modernisation of the energy infrastructure, on 25 September 2021, the Commission initiated a review of the applied measures. Even though this review is set out directly in Ukrainian law, this example is the first one in the last 22 years since the implementation of the trade defence investigation in Ukraine. This is because Ukrainian law does not stipulate a precise procedure for such review. The safeguard measures were terminated before they had been expected to enter into force on 13 October 2021. This example is a very important precedent for end users and other interested parties of the investigations conducted in Ukraine because such review is much more convenient than a judicial review.
Safeguard Measures Refund
On 28 May 2020, Ukraine applied preliminary safeguard duties at the rate of 18 per cent to imports of PVC suspension that covers all types of this product, including those used for wallpapers, PVC profiles, PET bottles for food and beverages etc. However, the domestic industry does not produce all relevant types of products, as proved in this investigation. Therefore, on 21 November 2020, the Commission applied definitive safeguard duties to a narrower range of products and at a lower rate of 12 per cent. On 27 April 2021, the Commission adopted a separate decision on the safeguard duties refund due to the lower rate and exclusion of some products from the definitive measure. This is the first case in the history of trade defence measures applied in Ukraine.
Recent Case Law
The case law for 2021 has demonstrated that:
(a) the Ukrainian courts are still reluctant to apply injunctive reliefs in the form of suspension of the measures applied during the period of court consideration;
(b) the Ukrainian courts have once again confirmed that a one-month limitation period for challenging trade defence measures implemented in Ukraine must be calculated from the date of the adoption of the relevant decision by the Commission. This approach is taken even though the information on the outcome of an investigation becomes publicly available only after the publication of an official notice in the official government newspaper “Uryadovyy Kuryer”. In practice, the publication can take place from two days to three weeks after the adoption of the relevant decision;
(c) the Ukrainian courts consider that the Ministry and the Commission have very broad discretion almost in all aspects of the investigation, to name but a few: definition of the products subject to the investigation, injury, dumping, etc. This is because the Ukrainian legal acts regulating the conduct of trade defence investigations are written in quite a general manner and do not precisely regulate the procedure of trade defence investigations.
After the commencement of the war, the Ministry suspended all investigations from 28 February 2022 approximately until July 2022. The above resulted in considerable delays in all investigations, reviews and/or the procedures for reviewing new applications.
On 17 and 31 August 2022, the Commission conducted its first meetings after the commencement of the war. At the meetings, the Commission, among other procedural decisions, terminated three safeguard investigations (against imports of cheese, three-cone chips, sodium hypochlorite) without application of measures. The Commission has adopted these decisions referring to the national interests. Even though the relevant decisions do not contain detailed explanations of what should be understood by “national interests”, one could conclude that these are the following circumstances:
(a) considerable delay in the period of investigation. In the above three investigations, the investigation periods ended on 31 December 2020 or 30 June 2021. Considering the current stages of the investigations, one could expect that the measures could be implemented only in December 2022. This means that 1,5 or 2 years will pass between the investigation period and the actual implementation of measures that directly violates the WTO rules;
(b) considerable change in circumstances (e.g. some producers, unfortunately, have been destroyed or have lost access to raw materials and, thus, cannot produce the products in question, etc.).
Moreover, in several meetings, the Ministry’s representatives have confirmed that imports have decreased considerably because of the war. Therefore, it will be hardly possible to initiate safeguard investigations in Ukraine in the near future. As for anti-dumping cases, the Ministry is ready to consider them.
Notably, the Ministry will probably consider suspension of certain effective anti-dumping or safeguard measures shortly.