How to unshadow Ukrainian import?

14/ 06/ 2017

Gray imports are gaining momentum in Ukraine: the number of offers to buy a variety of goods on numerous Internet resources - from products and clothing to complex home appliances and cars. The lack of strict interpretation of the principle of exhaustion of trademark law in Ukrainian legislation leads to the practice of using an international principle and the inability to prove the fact of smuggling. As a result of this situation, everyone loses: manufacturers, due to the richness of the market, can not develop their network and control the quality of the goods sold under their brand; consumers are in danger of confronting the dubious quality of the product purchased in the online store and the lack of service; the state loses its funds to the budget from the sale of official products, and the investment attractiveness of the country is significantly reduced. That is why the European Business Association supports the introduction of the national principle of exhaustion of rights (NP) * in Ukraine and the draft law 5419 by Viktoria Ptashnik and other peoples deputies. The mentioned draft law among many positive innovations in the field of intellectual property also includes the incorporation into the legislation of the NP, which in practice means the need for obtaining a permit from the right holder for the import and sale in Ukraine of goods that were put into circulation in the territory of another state. A number of Ukrainian and international institutions follow the same position, in particular the introduction of a national principle in Ukraine, and the bill 5419 is supported by the European Commission. The position of the Association in support of the NP is based on the following arguments: Using NP - experience of best international practices The national principle introduces states that care about their domestic market. For example, in the United States of America there is, in fact, a national principle, and the European Union uses a regional principle that is national in the context of the single EU market. That is, it can be said that the EU has a national principle, but since the customs borders between the EU member states are virtually absent, it operates in the whole region. The NP will help fight smuggling and improve the investment attractiveness of the country Retailers and importers who honestly and transparently conduct business in Ukraine consider NP as an effective tool to combat smuggling. Today, the fact of smuggling after crossing the border is almost impossible to prove, so the NP can become a post-audit tool, when representatives of the legal business will be able to independently monitor the market, prove the facts of smuggling and fight them in court. Conversely, smugglers may be abused by an international principle, arguing that their goods have entered Ukraine legally. NP will promote the development of fair competition First of all, competition must be honest when everyone works in the same conditions. And not when the competitive advantages are created due to unpaid taxes and customs payments to the state budget. NP in the future will lead to a decrease in the cost of goods NP will not increase the cost of legally imported goods sold in Ukraine, which has been reported more than once by both official importers and retailers that transparently conduct business in Ukraine. At the same time, an increase in the legal market of goods in Ukraine, on the contrary, will lead to a reduction in the cost price of imported goods at the expense of the scale effect. Given the fact that the value of a unit of production is significantly influenced by the size of the market, it can be argued that supporting the introduction of the international principle, we create the preconditions for the official goods that are imported to Ukraine with the necessary certificates of quality and subject to warranty service, cost us more expensive than in neighboring states. In turn, the larger the market - the greater interest of producers in it. The bigger the interest - the bigger the assortment, more service centers, more goods and a lower price. * NP - national principle of exhaustion of rights - provides that in the case of the first introduction of the product into circulation under a certain trademark outside the territory of Ukraine, permission of the owner of the trademark for the sale of this product in Ukraine is required.

“Gray” imports are gaining momentum in Ukraine: the number of offers to buy a variety of goods on numerous Internet resources – from products and clothing to complex home appliances and cars. The lack of strict interpretation of the principle of exhaustion of trademark law in Ukrainian legislation leads to the practice of using an international principle and the inability to prove the fact of smuggling.

As a result of this situation, everyone loses: manufacturers, due to the richness of the market, can not develop their network and control the quality of the goods sold under their brand; consumers are in danger of confronting the dubious quality of the product purchased in the online store and the lack of service; the state loses its funds to the budget from the sale of official products, and the investment attractiveness of the country is significantly reduced.

That is why the European Business Association supports the introduction of the national principle of exhaustion of rights (NP) * in Ukraine and the draft law 5419 by Viktoria Ptashnik and other people’s deputies. The mentioned draft law among many positive innovations in the field of intellectual property also includes the incorporation into the legislation of the NP, which in practice means the need for obtaining a permit from the right holder for the import and sale in Ukraine of goods that were put into circulation in the territory of another state. A number of Ukrainian and international institutions follow the same position, in particular the introduction of a national principle in Ukraine, and the bill 5419 is supported by the European Commission.

The position of the Association in support of the NP is based on the following arguments:

Using NP – experience of best international practices

The national principle introduces states that care about their domestic market. For example, in the United States of America there is, in fact, a national principle, and the European Union uses a regional principle that is national in the context of the single EU market. That is, it can be said that the EU has a national principle, but since the customs borders between the EU member states are virtually absent, it operates in the whole region.

The NP will help fight smuggling and improve the investment attractiveness of the country

Retailers and importers who honestly and transparently conduct business in Ukraine consider NP as an effective tool to combat smuggling. Today, the fact of smuggling after crossing the border is almost impossible to prove, so the NP can become a post-audit tool, when representatives of the legal business will be able to independently monitor the market, prove the facts of smuggling and fight them in court. Conversely, smugglers may be abused by an international principle, arguing that their goods have entered Ukraine legally.

NP will promote the development of fair competition

First of all, competition must be honest when everyone works in the same conditions. And not when the competitive advantages are created due to unpaid taxes and customs payments to the state budget.

NP in the future will lead to a decrease in the cost of goods

NP will not increase the cost of legally imported goods sold in Ukraine, which has been reported more than once by both official importers and retailers that transparently conduct business in Ukraine. At the same time, an increase in the legal market of goods in Ukraine, on the contrary, will lead to a reduction in the cost price of imported goods at the expense of the scale effect. Given the fact that the value of a unit of production is significantly influenced by the size of the market, it can be argued that supporting the introduction of the international principle, we create the preconditions for the official goods that are imported to Ukraine with the necessary certificates of quality and subject to warranty service, cost us more expensive than in neighboring states. In turn, the larger the market – the greater interest of producers in it. The bigger the interest – the bigger the assortment, more service centers, more goods and a lower price.

* NP – national principle of exhaustion of rights – provides that in the case of the first introduction of the product into circulation under a certain trademark outside the territory of Ukraine, permission of the owner of the trademark for the sale of this product in Ukraine is required.