Effective January 2016, a free trade zone has been established between Ukraine and the European Union. Ukrainian manufacturers were able to export 98% of goods to Europe without paying customs duties at the border, although some categories were only within quotas (for example, wheat, corn, tomatoes, honey and juice).
Ukrainian business obtained an immediate reduction in tariff barriers – the fact that previously made Ukrainian goods more expensive in the European market. However, besides the tariff ones, there are still non-tariff barriers. And everything is a bit more complicated concerning them.
In order to fully enter the European market with 500 million consumers economically, Ukraine has committed to do the “homework”. In particular, to bring the technical requirements and standards for goods in circulation in the Ukrainian market in line with European ones as well as to change the procedures for state supervision of compliance with these requirements.
Why is it necessary?
When all Ukrainian requirements for goods and supervision procedures are in line with the European ones and the European Union trusts Ukraine and its supervisory authorities, in future, domestic companies will not need to receive certificates and other similar documents for export twice. For the already exporting companies, it will save time and money because it will be enough to go through the procedure once. It will open the European market and facilitate access to other world markets for domestic manufacturers.
With regard to the requirements for non-food products, the parliament has already adopted seven basic laws; the government and various public authorities have updated and approved 62 technical regulations, about two thirds of which comply with European acts. Technical regulations govern a certain sector of production and they are binding upon manufacturers.
In addition, more than half of national standards are harmonized according to European and international standards (13,211 out of 23,677). Standards are recommendations on how to comply with all the requirements of the regulation for certain goods, for example, for a refrigerator or for a table. They are voluntary. It means that a manufacturer may use its own standard, but in this case it must prove that it does not contradict the regulation and meets the essential safety requirements.
However, in order for the European Union to really trust Ukraine and be sure that Ukrainian producers actually comply with the requirements of technical regulations, we still need to reform the public infrastructure. The relevant bodies, in particular the National Accreditation Agency of Ukraine, the National Standardization Body, and the State Service of Ukraine for Food Safety and Consumer Protection have already started operating. In general, the Ministry of Economic Development and Trade is responsible for coordinating the implementation of changes in the non-food industry. However, we have a serious problem, for example, with laboratories: the equipment there needs to be updated, and budget funds do not suffice as usual.
The European Union helps implement these changes through the financing of such projects as Strengthening the Harmonization between Ukraine and the EU in the Field of Technical Barriers to Trade (TBT) within the framework of the EU4Business initiative and Strengthening the Capability of the National Standardization Body of Ukraine.
Clarifying requirements for non-foods
“Ukraine has long had to reform its system of monitoring compliance with the requirements for non-foods by manufacturers,” says Dmitro Lutsenko, national expert of the EU TBT Project. “The system asserted pressure on business; there were many controversial provisions and requirements that were often duplicated. For example, there were mandatory standards, sanitary norms and regulations, requirements in the field of occupational safety, fire safety requirements, etc. for one and the same product. All these documents were developed by different people at different times, sometimes in the 1960s-1970s. Therefore, they were not harmonized with each other. At the same time, it was not possible to fulfill all these requirements; therefore, business was always at risk of sanctions from supervisory authorities.”
How did the system work earlier? Since Soviet times, state standards for each individual product (DSTU, or GOST) have been mandatory in Ukraine. Each company must first pay money to receive a piece of paper confirming that the product complies with the state standard and undergo a mandatory certification procedure. And only then the new product could be released to the market.
In Europe, the approach is different: only technical regulations (regulatory legal acts) that set out requirements for products of the relevant sector are mandatory. The only important thing is that the product complies with the regulation, and security can be ensured by the enterprise either through a state standard or a self-developed standard. The procedure for assessing compliance of products with the regulation is specified in the regulation itself. And it is carried out by the manufacturer on its own or by an accredited and designated compliance assessment body, which is either public or private.
According to Dmytro Lutsenko, the new system optimizes business regulation. And he gives an example: the manufacturer using the measuring equipment imports it from abroad. But until now, it was difficult to clarify and understand what procedures should be applied to this equipment. Therefore, the company sought advice from a state-owned enterprise and officially paid for it. And it has always been more favourable for the state enterprise to say that it is the obligatory and most burdensome procedure, because it also received money for it. Today, all necessary procedures are indicated in the technical regulations for relevant measuring equipment.
An easier procedure for assessing compliance with requirements
Until recently, Ukrainian manufacturers of a wide range of industrial products have necessarily been required to certify their products before selling. The country is not shifting to a European model – manufacturers will need to pass an assessment of compliance of their products with technical regulations, the same as in the EU. This transition was completed in 2018, when the Decree of the Cabinet of Ministers of Ukraine of 1993, which created the legal basis for mandatory certification, was abolished.
Each regulation establishes the requirements for safety of the relevant type of products. For example, we have already adopted European regulations for low-voltage equipment (covering almost every household appliance from kettles and ovens to TV sets and computers), and equipment that works under pressure (from pipes and shut-off valves to pressure and steam cookers), medical equipment, equipment for mines, elevators, measuring instruments, explosive materials of industrial purpose and for toys.
The European model changes the approach: the manufacturer is solely responsible for the fact that its product complies with the regulation. No certificate gives the indulgence of responsibility.
For some types of products, it is enough just to make an independent assessment by the manufacturer and get a declaration from it that the product meets the established requirements. Instead, for product categories that are considered to be more dangerous to human life and health (for example, medical equipment), an appropriately accredited and designated compliance assessment body (public or private) must assess compliance with the technical regulations and issue a certificate.
All goods are selectively checked through the so-called market surveillance, when the goods are already on shelves of a store. In Ukraine, there are nine bodies for state market supervision: the State Service of Ukraine for Food Safety and Consumer Protection, State Service on Medicines and Drugs Control, Maritime Administration, State Service of Ukraine on Labour, State Emergency Service, State Architectural and Construction Inspection, State Service of Ukraine for Transport Safety and State Environmental Inspectorate. They are responsible for certain technical regulations and have the right to come to a store for the purpose of a scheduled inspection and check the products sold for compliance with the technical regulations. If, conventionally, children’s toys contain a critical amount of lead or do not have safety instructions, such products will be forbidden for selling forever or until they are brought into line with the regulation.
But the things that have already been done are not sufficient to ensure that Europeans do not force Ukrainian entrepreneurs to undergo a parallel assessment of compliance with technical regulations already in the EU. In order for this to become a reality, it is necessary to sign the ACAA (Agreement on Conformity Assessment and Acceptance of Industrial Products) in each sector in accordance with the scope of technical regulations. First of all, it will cover 27 types of products for which Ukraine has assumed obligations under Annex III to the EU-Ukraine Association Agreement, but in future it is possible to expand them.
By signing this agreement, the European Union recognizes that our legislation, institutions and infrastructure, technical regulations and standards meet its requirements.
“Now Ukraine is generally ready to sign this agreement,” says Dmytro Lutsenko. “It turns out that this issue is purely political: Europe needs to be ready for such a move. But it is still an open question whether it is ready for it.”
However, even after signing an agreement, such “liberalization of regulation” will extend only to the first priority areas: machines (from drills and chainsaws to cranes and turbines), for low-voltage equipment covering almost all household appliances as well as to the requirements for electromagnetic compatibility of goods. Other sectors will improve gradually after adapting the relevant regulations and standards to European norms, creating, strengthening and training of conformity assessment bodies and laboratories of the required level. After all these changes, Ukraine and the EU will extend such an agreement to each sector. And only then it will be possible to talk about the complete elimination of technical barriers to trade.
How Ukrainian producers are already exporting to the EU
Despite the fact that it is still a long way to go to the full economic integration and elimination of technical barriers, a large number of Ukrainian companies have already adapted to European norms. This is evidenced by the steady growth of exports to the European Union, which accounts for more than 40% of Ukrainian sales abroad.
According to Dmytro Prokopchuk, Head of Commercial Division at Teplobak, different requirements for a product in Ukraine and in Europe really hinder exporters. It produces heaters and buffer tanks and sells them to 11 countries (exports account for 65% of sales).
“We started working closely with the EU in 2015. The most difficult thing was to figure out to which regulations and requirements our products should conform. At first, we determined that we needed to comply with three different regulations, but it turned out that there was only one. Neither the Ministry of Economic Development and Trade of Ukraine nor the Chamber of Commerce and Industry nor any other organizations could help us. They did not have qualified professionals working with the technical regulations of the EU,” says Dmytro Prokopchuk.
Changes in the technical documentation for producers as a result of the EU-Ukraine Association Agreement are clearly a positive moment as confirmed by Dmytro Iorhachov, General Director of Odeskabel. The company produces fiber optic cable and exports a third of its products (EU accounts for 12% of total exports). In order to get its first contract in Italy, the first EU partner country, the company even had to change the technology of production to meet the European requirements.
At the same time, some companies not so much face the problem of technical refinement of products in line with the EU requirements but the financially costly process of testing it. Anatolii Stepakhno, Chairperson of the Management Board of the Pilot Plant of Welding Equipment of the Institute of Electric Welding named after Ye. O. Paton notes:
“There were not enough specialized laboratories funded at public expense, where it would be possible to pre-test the products before submitting them for certification. And in general, the main financial costs involved the certification process itself.”
The plant sells welding equipment to more than 20 countries of the entire world (the share of exports to the EU countries is about 21%).
However, a new system of technical regulation and market supervision is needed not only to simplify the lives of exporters, although exports themselves are very important for the growth of the Ukrainian economy. The point is also that Ukraine should finally have clear requirements for the safety of goods for the domestic market. Moreover, after the adaptation to European norms, the Ukrainian system will become more understandable for foreign investors as well. Investors will be more comfortable working in the conditions they have used to (and requirements for EU products are a kind of gold standard in the world) rather than trying to get used to unclear intricate requirements.
By Viktoriia Onyshchenko, Iryna Hudz