Increased import duties on CPPs may result in higher food prices

19/ 10/ 2021

On October 7, the Verkhovna Rada of Ukraine registered a draft Law “On Amendments to the Customs Tariff of Ukraine on Unification of Import Duty Rates on Certain Goods” (№6149). The document proposes to increase (or unify) import duty rates for the vast majority of crop protection products from 0% to 2%. The initiators of this draft law forecast that the unification of import duty rates will lead to simplification of the classification procedure and acceleration of customs clearance of goods with no need for laboratory testing. However, according to business representatives, this is unlikely to happen because, for most commodity items, which are classified as CPPs, the current rate of import duty is 0%, and increasing it to 2% will not affect the complexity of the classification procedure and the speed of customs inspections. Instead, systematic and consistent reform of the Customs is required. And it should aim for providing better service and not for filling the state budget. What is more important is that this initiative can foster the development of unfair competition in the CPP market, as it will put some international companies in an unequal position not only concerning local producers but also to international CPP importing companies that import products from EU member states at a rate of 0%. As a result, this initiative, according to business representatives, will negatively affect the sentiments of investors. Besides, it will carry an additional financial burden on agriculture. After all, it is estimated that the cost of cultivating 1 hectare of land will increase by an average of 0.5 US dollars. Considering the amount of cultivated land, the overall cost can reach up to 500 million hryvnias annually. This, as forecasted by the EBA member companies, will cause an increase in the cost of production of most crops and, as a result, food products. And this figure may be significantly higher because due to the global energy crisis from 2022, major producer countries plan to significantly increase selling prices for CPPs. Therefore, such a legislative initiative will take a bite out of the wallets of every Ukrainian. It should be noted that the website of the Ministry of Finance did not publish the draft law for public discussion before its approval by the Cabinet of Ministers. Therefore, businesses did not even have the opportunity to express their opinion before the initiative was registered. Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal to pay attention to this situation, and the heads of the relevant Committees of the Verkhovna Rada - Danylo Hetmantsev and Mykola Solsky - to help exclude provisions on raising import duties from the Draft Law. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

The initiators of this draft law forecast that the unification of import duty rates will lead to “simplification of the classification procedure and acceleration of customs clearance of goods with no need for laboratory testing.” However, according to business representatives, this is unlikely to happen because, for most commodity items, which are classified as CPPs, the current rate of import duty is 0%, and increasing it to 2% will not affect the complexity of the classification procedure and the speed of customs inspections. Instead, systematic and consistent reform of the Customs is required. And it should aim for providing better service and not for filling the state budget.

What is more important is that this initiative can foster the development of unfair competition in the CPP market, as it will put some international companies in an unequal position not only concerning local producers but also to international CPP importing companies that import products from EU member states at a rate of 0%. As a result, this initiative, according to business representatives, will negatively affect the sentiments of investors.

Besides, it will carry an additional financial burden on agriculture. After all, it is estimated that the cost of cultivating 1 hectare of land will increase by an average of 0.5 US dollars. Considering the amount of cultivated land, the overall cost can reach up to 500 million hryvnias annually. This, as forecasted by the EBA member companies, will cause an increase in the cost of production of most crops and, as a result, food products.

And this figure may be significantly higher because due to the global energy crisis from 2022, major producer countries plan to significantly increase selling prices for CPPs. Therefore, such a legislative initiative will take a bite out of the wallets of every Ukrainian.

It should be noted that the website of the Ministry of Finance did not publish the draft law for public discussion before its approval by the Cabinet of Ministers. Therefore, businesses did not even have the opportunity to express their opinion before the initiative was registered.

Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal to pay attention to this situation, and the heads of the relevant Committees of the Verkhovna Rada – Danylo Hetmantsev and Mykola Solsky – to help exclude provisions on raising import duties from the Draft Law.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.