Information for fruit and vegetables business in CIS
Import duty reduction on fresh vegetables, fruits, berries and nuts will be most disadvantageous for Ukrainian apple producers
Beginning August 16, 2005 a new Law of Ukraine №2775-IV "On changes to be introduced to certain Laws of Ukraine", will have a serious impact on the produce industry development in Ukraine in general and on vegetable and fruits growers in particular. According to AMP analysts changes which occurred in international trading system will primarily impact less effective farmers. And a decrease in duties will be beneficial for those who apply modern technologies of production and modern PHH practices for vegetables, fruits and berries.
It appears that the most sensitive to declining import duties will be the apple market. The new version of the Tax Tariff contains a seasonal duty for commodity apples, from Dec. 1 until March 31 it will equal 5%, and during the remainder of the year it will be 0.5 Euro/kg. Previously the duty throughout the year was from 0.5 to 1.0 Euro/kg. Therefore, Polish apples of high quality, which were mainly brought to Ukraine illegally, will now, during the winter season, be legally brought to Ukraine and sold wholesale for 2-4 UAH/kg, including all charges for distribution. This will have a negative impact on orchard growing in Ukraine, since Ukrainian orchard growers, having no access to long-term credits, would prefer at this point in time to build up resources for investment through selling apples at higher selling prices during the winter season. It is hoped that along with decreasing import duties on apples the Government will pay attention to problems of orchard growers and will help to overcome the tendency toward declining orchard acreage in the country, practice that has been going on for many years.
Vegetable growers are in an advantageous position when compared with orchard growers. The full import duty rate for most vegetables was simply reduced to privileged levels for the following commodities: potato, tomato, onion, garlic, late varieties of cabbage, fennel, sweet corn, and squash. A 15% import duty was introduced for early cabbage for the period from January 1 to April 14. A door was opened to the Ukrainian market for early potatoes when the import duty was set to 20%.
Law makers also simplified importing head varieties of lettuce during the period December 1 to March 31 by removing the specific duty and introducing only a 20% duty on value. The same changes will be implemented for root celery, artichoke, asparagus, and eggplant during the period January 1 to April 30, and on mushrooms without seasonal limitations. The import duty set for these commodities ranges from 0.33 to 0.6 Euro/kg.
A decrease in import duties for sweet and other peppers was from 0.3-0.6 Euro/kg to 20%, and for spinаch - to 15%. During the winter period this will facilitate decreasing the price for sweet peppers on the domestic market and increasing the volume of legal imports.
Import duties for nuts decline significantly as well. If nuts are imported in bulk (in packages of more than 10 kg.) the import duty is 0%.
Import duties declined for melon crops. At present melons and watermelons can be imported by paying a 5% import duty during the period Dec. 1 to March 31. During the remainder of the time import of these commodities will be limited by an import duty of 0.3 Euro/kg, which is at the low end of the prior import duty range of 0.3 to 0.6 Euro/kg. By the way, it is not quite clear why the duty is in effect until March, the season for producing early melons and water melons in Ukraine does not start earlier than mid June.
For pears, apricots, cherries, plums and some other fruits the full import duty is brought to the level of the privileged duty and now equals 0.5 Euros/kg. The process of importing strawberries out of season has been simplified and now from January 1 through April 30 this commodity can be imported by paying a 20% import duty instead of 0.6-1.2 Euros/kg as previously. For strawberry import will (???) be on the level of 0.6 Euro/kg, which also corresponds to import duty for strawberry from May to late December. Such berries as black and red currents, cranberry, blueberry and cowberry will be levied at a 20% duty throughout the year instead of 0.6-1.2 Euros/kg as it was in the previous Tax Tariff.
To summarize, a decrease of import duties for vegetables and fruits involves many logical and positive developments; however, there exists a realistic threat for the industry. Undoubtedly, the customers will benefit through simplified import operations for many vegetables, fruits and berries not grown in Ukraine, as well as lower duties for products which are not produced in the winter season. Lower duties will provide additional support to stronger producers and stimulate Ukrainian farmers to more active utilization of modern technologies.
At the same time an impact which lowers import duties on orchard growing in Ukraine causes serious concern. It is desirable that the above changes should be accompanied by technical support of the state to farmers as well as practical steps to resolve the problem of financing new orchard planting by Ukrainian producers provided they utilize modern technologies.