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Explanatory Note on Ukraine’s approach to cumulation under Political, Free Trade and Strategic Partnership Agreement between Ukraine and the United Kingdom of Great Britain and Northern Ireland

Introduction

1. The Political, Free Trade and Strategic Partnership Agreement between Ukraine and the United Kingdom of Great Britain and Northern Ireland (the Agreement) entered into force on 1 January 2021. Ukraine and the United Kingdom   have agreed to consider EU goods and materials circulating in bilateral trade between the Parties as having originating status in one of the Parties to the Agreement (“multilateral (diagonal) cumulation”[1]).

2. The provisions of Protocol I on the concept of “origin of goods” and methods of administrative cooperation to the Agreement (Protocol I) are based on the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (the Convention) at the same time, the UK is not a party to the Convention. Therefore, the provisions of Protocol I agreed between Ukraine and the United Kingdom are applied only in a bilateral format.

This note provides an explanation on cumulation arrangements between Ukraine and the United Kingdom.

Cumulation

3. Protocol I sets out the principles of cumulation to identify the country of origin of goods and the criteria for processing under which they acquire preferential origin status, as well as the procedure for issuing and verifying documents on the origin of goods.

Cumulation can be applied if the materials and products acquire originating status in accordance with rules of origin identical to those laid down in Protocol I.

4. Cumulation provisions in the Agreement consist in bilateral cumulation between Ukraine and the United Kingdom, but also allow for multilateral (diagonal) cumulation using materials and goods originating in the EU (in both Parties) and their processing (in Ukraine or the United Kingdom), if certain conditions are met, which are as follows:

5. Articles 3.7.a (i) and 4.5.a (i) of the Agreement define that to apply cumulation to the EU, both parties shall have administrative arrangements with the EU for application of multilateral (diagonal) cumulation by both parties, and provided that materials and goods of the EU origin acquired the status of origin in accordance with the rules of origin, which are identical to the rules set out in Protocol I. Preferential trade agreements in force between Ukraine and the EU, as well as between the UK and the EU clearly meet this requirement.

How multilateral (diagonal) cumulation and proofs of origins operate in practice

6. Without prejudice to the provisions of Article 2.2 of Protocol I and subject to Article 4.1 of this Protocol, products shall be considered as originating in Ukraine if they are obtained (produced) there, using materials originating in the United Kingdom or the European Union according to the provision of Protocol I provided that the processing carried out in Ukraine goes beyond the operations specified in Article 7 of this Protocol. It shall not be necessary for such materials to have undergone sufficient working or processing.

7. Products exported to the United Kingdom from the customs territory of Ukraine under the conditions of the Agreement shall be accompanied by proof of origin as agreed in the Agreement, namely a movement certificate EUR.1 or a declaration of origin.

8. Ukraine will issue proofs of origin unless it does not have any doubts that the products comply with the terms of the Agreement between Ukraine and the United Kingdom.

At the same time, a movement certificate EUR.1 or a declaration of origin confirming the preferential origin of European Union goods under the Association Agreement between Ukraine of the one part, and the European Union, the European Atomic Energy Community and their Member States, of the other party (the EU Agreement) entitle one to apply cumulation and such goods in Ukraine as materials for the production of finished products are exported (with cumulation) between Ukraine and the United Kingdom in accordance with the provisions of the Agreement.

9. In this case, the customs shall be entitled to require proof of origin of materials and goods from the EU for cumulation purposes (movement certificate EUR.1 or declaration of origin).

Verification

10. The customs authorities of Ukraine and the United Kingdom can also do a request on verification of proofs of origin according to Protocol I. The customs authorities of the exporting country shall carry out the verification. They are entitled to demand any proof (evidence) and carry out any verification of the exporter’s accounts and other checks they consider appropriate. If the customs authorities of the importing country decide to suspend the preferential treatment for the goods under inspection until the results of this inspection are available, they shall invite the importer to dispose of the goods with any precautionary measures deemed necessary. The customs authorities that put the request shall be informed of the results as soon as possible. These results shall indicate whether the verified documents are authentic and whether the goods in question can be considered as originating in Ukraine or the United Kingdom and according to the other requirements of Protocol I.

Conclusion

11. Therefore, conditions have been created for the application of multilateral (diagonal) cumulation with the use of materials and goods originating in the European Union while producing goods within the customs territories of Ukraine and the United Kingdom. This approach is used exclusively in bilateral free trade between Ukraine and the United Kingdom.

 

[1] Such cumulation has a particular definition in relation to the exports to the EU – it will not apply to Ukrainian manufacturers using UK content in such exports, which is true also for UK manufacturers using Ukrainian content and exporting to the EU.

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