Ukraine and Canada sign Free Trade Agreement

22/ 04/ 2024

On April 10, 2024, the Verkhovna Rada of Ukraine adopted the Law of Ukraine On Ratification of the Free Trade Agreement between Ukraine and Canada. As of today, the President of Ukraine is expected to sign the Law. The Agreement was signed by the President of Ukraine and the Prime Minister of Canada on September 23, 2023. The new Free Trade Agreement will enter into force on the first day of the second month after the Parties receive written notification of the completion of ratification procedures. According to the best forecasts, the agreement will come into force in the summer of 2024, and Ukrainian businesses will have new attractive opportunities for expansion. What changes in trade in goods does the Agreement provide for? 1. Both Ukraine and Canada have canceled import duties on a significant number of goods. This is due to the fact that such import duties were abolished for such goods in accordance with the schedules of duty reduction as of January 1, 2024, provided for by the current free trade agreement. At the same time, the updated free trade agreement provides for the establishment by Ukraine of the following tariff schedules for Canadian goods (the Tariff Schedule of Ukraine): tariff quotas on pork; transitional categories of goods for the import of which the duty rate is determined depending on the transitional categories: A - the duty should be reduced by 1/5 of the basic rate B - the duty shall be reduced by 3/10 of the basic rate C - the duty shall be reduced by 1/2 of the basic rate These goods include meat and poultry by-products, margarine, certain types of fats and oils, etc. goods belonging to the transitional category D, to which the free trade regime does not apply - certain types of sugar. 2. Regulates the rules of trade in services. It provides for an almost unlimited number of areas of application of trade in services, with the exception of financial services, public procurement, services provided in the performance of public authority functions, subsidies or grants provided by the parties or a state-owned enterprise. In addition, the provisions of the Agreement on Trade in Services do not apply to aviation services. The Agreement establishes the national treatment of international trade in services (i.e., the provision of services or service suppliers of another party to the other party no less favorable than the treatment it provides under similar circumstances to its own services and service suppliers) and most favored nation treatment. 3. Regulates electronic commerce. In the field of electronic commerce, the imposition of duties on digital products is still limited. At the same time, the Agreement regulates the procedure for conducting such electronic commerce. The parties are obliged to ensure an adequate level of protection of online consumers and their personal data, including the restriction of unsolicited commercial electronic communications. 4. The possibility of applying cumulation of origin to goods that have preferential origin from the partner countries of Ukraine and Canada (member countries of the European Free Trade Association, the EU, Israel and the United Kingdom of Great Britain and Northern Ireland). This means that raw materials with confirmed preferential origin from the above countries can be used in the production of goods that acquire Ukrainian preferential origin. At the same time, when goods are purchased for export to Canada, such preferential raw materials (from the EU) will be considered as having Ukrainian preferential origin. The list of partner countries of origin may be expanded by agreement. The following conditions must be met: Ukraine and Canada must have free trade agreements with such countries; the inclusion of such a country must be agreed upon by Ukraine and Canada. 5. Other innovations. The updated Agreement also regulates the following issues: investment between Canada and Ukraine, investment protection, principles (national treatment and most favored nation treatment); obligations to take measures to raise awareness of the private sector on issues of combating and preventing corruption in international trade; the procedure for cooperation between Ukraine and Canada in the field of environmental protection in terms of building a circular economy, cooperation on limiting air pollution, rational management of chemicals, etc.

On April 10, 2024, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Ratification of the Free Trade Agreement between Ukraine and Canada”. As of today, the President of Ukraine is expected to sign the Law. The Agreement was signed by the President of Ukraine and the Prime Minister of Canada on September 23, 2023. The new Free Trade Agreement will enter into force on the first day of the second month after the Parties receive written notification of the completion of ratification procedures. According to the best forecasts, the agreement will come into force in the summer of 2024, and Ukrainian businesses will have new attractive opportunities for expansion.

What changes in trade in goods does the Agreement provide for?

1. Both Ukraine and Canada have canceled import duties on a significant number of goods. This is due to the fact that such import duties were abolished for such goods in accordance with the schedules of duty reduction as of January 1, 2024, provided for by the current free trade agreement.

At the same time, the updated free trade agreement provides for the establishment by Ukraine of the following tariff schedules for Canadian goods (the Tariff Schedule of Ukraine):

tariff quotas on pork;
transitional categories of goods for the import of which the duty rate is determined depending on the transitional categories:

- “A” – the duty should be reduced by 1/5 of the basic rate
- “B” – the duty shall be reduced by 3/10 of the basic rate
- “C” – the duty shall be reduced by 1/2 of the basic rate

These goods include meat and poultry by-products, margarine, certain types of fats and oils, etc.

goods belonging to the transitional category “D”, to which the free trade regime does not apply – certain types of sugar.

2. Regulates the rules of trade in services.

It provides for an almost unlimited number of areas of application of trade in services, with the exception of financial services, public procurement, services provided in the performance of public authority functions, subsidies or grants provided by the parties or a state-owned enterprise. In addition, the provisions of the Agreement on Trade in Services do not apply to aviation services.

The Agreement establishes the national treatment of international trade in services (i.e., the provision of services or service suppliers of another party to the other party no less favorable than the treatment it provides under similar circumstances to its own services and service suppliers) and most favored nation treatment.

3. Regulates electronic commerce.

In the field of electronic commerce, the imposition of duties on digital products is still limited. At the same time, the Agreement regulates the procedure for conducting such electronic commerce. The parties are obliged to ensure an adequate level of protection of online consumers and their personal data, including the restriction of unsolicited commercial electronic communications.

4. The possibility of applying cumulation of origin to goods that have preferential origin from the partner countries of Ukraine and Canada (member countries of the European Free Trade Association, the EU, Israel and the United Kingdom of Great Britain and Northern Ireland).

This means that raw materials with confirmed preferential origin from the above countries can be used in the production of goods that acquire Ukrainian preferential origin. At the same time, when goods are purchased for export to Canada, such preferential raw materials (from the EU) will be considered as having Ukrainian preferential origin.

The list of partner countries of origin may be expanded by agreement. The following conditions must be met:

Ukraine and Canada must have free trade agreements with such countries;
the inclusion of such a country must be agreed upon by Ukraine and Canada.

5. Other innovations.

The updated Agreement also regulates the following issues:

investment between Canada and Ukraine, investment protection, principles (national treatment and most favored nation treatment);
obligations to take measures to raise awareness of the private sector on issues of combating and preventing corruption in international trade;
the procedure for cooperation between Ukraine and Canada in the field of environmental protection in terms of building a circular economy, cooperation on limiting air pollution, rational management of chemicals, etc.