Business calls for postponement of legislative requirements for re-equipment of production facilities

07/ 03/ 2023

The business community, united by the European Business Association, the American Chamber of Commerce in Ukraine, the Committee of Excisable Goods Producers of the Union of Ukrainian Entrepreneurs, and the Association Ukrtyutyun, calls on the Verkhovna Rada of Ukraine to consider promptly postponing the entry into force of the legislation that requires the re-equipment of production facilities. On December 16, 2021, prior to the start of the full-scale Russian invasion of Ukraine, Law of Ukraine No. 1978-IX was adopted, which provides for structural changes to the current regulation of tobacco products that require the re-equipment of production facilities. At the same time, it is during a full-scale war that the provisions of the Law come into force that provides for changes to the product that require re-equipment of production lines, revision of the product portfolio and significant investments. According to the business community, some innovations are impractical to implement, and some are very expensive, but there are requirements that cannot be met in a full-scale war. To change the shape and size of a cigarette pack, the new equipment must be installed on the production lines. The installation, adjustment and maintenance of the equipment are done exclusively by specialists from the company that manufactures the equipment, who will not be able to come to Ukraine until the war ends. The inability to re-equip production facilities will lead to a reorientation towards imported products, with all the ensuing consequences, including an outflow of foreign currency earnings, reduced investment, lower production capacity, interruptions in product supply, growth of the illegal market, as a result, a decrease in tax revenues. Manufacturers and importers of tobacco products that are members of business associations have repeatedly drawn the attention of the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine to the need to amend Law No. 1978-IX to postpone certain requirements until after the war. Unfortunately, to date, the relevant legislative changes have not been made, and there is little time to do so, as the Ukrainian market will begin to reorient to imported products on April 1, 2023. The business community calls on the Verkhovna Rada of Ukraine to consider the possibility of introducing relevant amendments to the legislation as soon as possible and prevent the occurrence of these possible negative consequences for both the business community and the state economy.

On December 16, 2021, prior to the start of the full-scale Russian invasion of Ukraine, Law of Ukraine No. 1978-IX was adopted, which provides for structural changes to the current regulation of tobacco products that require the re-equipment of production facilities.

At the same time, it is during a full-scale war that the provisions of the Law come into force that provides for changes to the product that require re-equipment of production lines, revision of the product portfolio and significant investments. According to the business community, some innovations are impractical to implement, and some are very expensive, but there are requirements that cannot be met in a full-scale war.

To change the shape and size of a cigarette pack, the new equipment must be installed on the production lines. The installation, adjustment and maintenance of the equipment are done exclusively by specialists from the company that manufactures the equipment, who will not be able to come to Ukraine until the war ends.

The inability to re-equip production facilities will lead to a reorientation towards imported products, with all the ensuing consequences, including an outflow of foreign currency earnings, reduced investment, lower production capacity, interruptions in product supply, growth of the illegal market, as a result, a decrease in tax revenues.

Manufacturers and importers of tobacco products that are members of business associations have repeatedly drawn the attention of the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine to the need to amend Law No. 1978-IX to postpone certain requirements until after the war.
Unfortunately, to date, the relevant legislative changes have not been made, and there is little time to do so, as the Ukrainian market will begin to reorient to imported products on April 1, 2023.

The business community calls on the Verkhovna Rada of Ukraine to consider the possibility of introducing relevant amendments to the legislation as soon as possible and prevent the occurrence of these possible negative consequences for both the business community and the state economy.