Introduction to AA/DCFTA for Agriculture Course - Understanding Market Access and Export Opportunities in Ukraine

1. An Introduction to the AA/DCFTABasic Principles and Understanding for AgricultureCourse number: EUI33/7.A-12 Mark Hellyer A4U STE on DCFTA Policy Implementation June 2017

2. Overview of the Presentation Introduction What is the DCFTA and the difference between FTA and DCFTA Market Access to EU Applicable charges, Rules of Origin and Approvals for Export Standards Applicable for both exports and national compliance Protected Names How it affects producers and opportunities to protect Ukrainian designations Q&A

3. Part 1 Introduction What is the DCFTA and the difference between FTA and DCFTA • Scope of DCFTA Commitments • Benefits of the DCFTA • Objectives of this Presentation

4. What Makes DCFTA Different? • Traditional FTAs • Title IV to create a DCFTA between 2 parties over 10 years – EIF 1st Jan 2016 • Market Access • Alignment of business acquis, no difference • Adoption of norms – efficiency gains

5. Benefits of the DCFTA • Potential benefits: • 1. Market Access improvements = increase exports • 2. EU Business regime adopted in Ukraine • no difference (in regulation) selling in Ukraine or EU • leads to increase exports as its easier to comply for all business (esp SMEs) • 3. Imports of more competitive final and intermediate products • competition increases Ukraine’s competitiveness • Imported products, cumulation increase export competitiveness • inputs cheaper increases competitiveness and consumers get cheaper and wider range of products Better market access (> 500 million consumers) • Improved the business climate • Increase competitiveness cheaper safer products • Increased production and sales domestically, EU and globally DCFTA Analytical Papers

6. Objective of this presentation To provide broad understanding of implications for Agricultural and Agri-processing producers in regions of Ukraine • Information to allow you to answer specific questions and concerns • Exports • Compliance nationally • Give sources of where to get specific information/data - practical

7. Part 2 Market Access to EU Applicable charges, Rules of Origin and Approvals for Export • Market Preferences (Tariffs, levies, TRQs and entry prices) • Rules of origin • Approvals and certification (animal origin, composite products, non-animal origin and fruit and vegetables)

8. Tariffs and Other duties Applied • Ad valorem import duty (ErgaOmnes) • staged decline (base rate 12%, staging 5, initially 2% decline and 2% by end of each year until zero by end year 5) • Import levy (most cases Eliminated) • EA (EAR) • ADFM (EDFMR) • ADSZ (ADSZR) • Entry Prices (15 products) • Based on 3 month wholesale price – EU sets reference price • If entry price below reference price in set ranges, specific duty applies € per 100 kg based on difference Clarifications Imports and Exports Normal tariff may have declined since agreement but still use agreement to calculate GSP rate can be lower than staged rate (transition – 2 years from EIF i.e. Dec 2018)

9. Tariff Rate Quotas Zero tariffs and levies on exports up to quota amount After quota, normal tariff applies E.G. Honey (HS 0409): 0% for first 5,200 tonnes net, thereafter 17.4% applies Clarifications GLOBAL TRQS Rate after quota is reached is current normal tariff, not base rated given in agreement Aggregate TRQs: eg 16kT for poultry (selected 0207, 0210 and 1602) Meat of bovine animals Meat of swine Meat of sheep or goats Meat and edible offal, of the poultry Milk and cream, yogurt Milk in powder Products from processed milk Butter and dairy spreads Products from processed butter Birds' eggs and albumins Honey Garlic Sweetcorn Wheat and Cereal flours Barley Oats Maize (corn), Cereal groats, meal and pellets Malt, whether or not roasted Starches Cane or beat sugar Other sugars Processed products from sugar Chocolate and other food preparations containing cocoa Prepared foods obtained from cereals Tomatoes prepared or preserved Mushrooms Grape and apple juice Sugar syrups (HS 2106) Food preparation Undenatured ethyl alcohol Residues of starch manufacture and similar residues Cigars and cigarettes Acyclic alcohols Dextrins and other modified starches Finishing agents, dye carriers

10. Example: Chocolate Bars (‪1806 20 95 90‬) Within Quota of 2,000 MT TRQ

11. Example: Market Entry Prices (apples) • ErgaOmnes • Global TRQ Rate 0% + for 696 MT • Thereafter 3.4% + entry price • Standard Import Price • Applied to Commission based contracts (121.1 EUR/100 kg)

12. Rules of Origin • Origin is the "economic" nationality of goods in international trade • Originating products benefiting from preferential access must either • (1) be manufactured from raw materials or components which have been grown or produced in the beneficiary country; or • (2) at least undergo a certain amount of working or processing in the beneficiary country • Under DCFTA proof is EUR 1 certificate of origin

13. Agricultural Rules of Origin • Basic Approach • Wholly Obtained • Processed (specific) e.g. Fruit Juices • Manufacture: in which the value of all the materials used does not exceed 30 % of the ex-works price of the product Article 4 Cumulation in Ukraine “[…] products shall be considered as originating in Ukraine if such products are obtained there, incorporating materials originating in the European Union […] Protocol I, Title II of AA: DEFINITION OF THE CONCEPT OF "ORIGINATING PRODUCTS” page 1 997 Pan Euro Med Rules of Origin Diagonal Cumulation

14. SPS Control in the EU Exports of products of Non-Animal Origin Exports of products of Animal Origin • Only countries that have been authorised by the EU can export products subject to SPS measures. • FVO • Verify compliance of EU food regulations with practices in MS • Verify equivalence in Third Countries • Carry out inspections of the Competent Authorities • Approved Facilities • DG Sante database of countries and facilities by sector • Exports must have Health certificate by approved bodies • Selected Importers in EU • Selected border posts, Advance notification • Exports must have Health certificate by national bodies or testing from accredited laboratories Ukraine Adopting Acquis – Approval for all over time: Approved Countries for Fruits and Vegetables (Art 15 of Regulation 543/2011)

15. Sources of Information: DG Trade Export Helpdesk

16. URLs DG Trade Export Helpdesk http://exporthelp.europa.eu/thdapp/index.htm?newLanguageId=EN EU TARIC Database http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en TAXUD – Utilisation of TRQs http://ec.europa.eu/taxation_customs/dds2/taric/quota_consultation.jsp?Lang=en&Code=090009&Year=2015&Expand=false SPS Authorised Countries and Establishments http://ec.europa.eu/food/safety/international_affairs/trade/third/index_en.htm

17. Part 3 Standards Applicable for both exports and national compliance • Main areas (General Hygiene (HACCP) and SPS measures) • Traditional Methods – exceptions • Other technical regulations and standards (marketing standards and labeling)

18. Main SPS Measures Control of Contaminants Section 1 – sets limits for nitrate in lettuce, spinach and baby foods. Section 2 – sets limits for various mycotoxins in, for example, groundnuts, nuts, dried fruit (including dried vine fruit) and products thereof, cereals and cereal products, milk, infant formulae, dietary foods intended for infants, spices, fruit juices, coffee products, wine, spirit drinks, cider, apple products, processed cereal based foods for infants and young children and baby foods. Section 3 – sets limits for various heavy metals in, for example, milk, meat, fish, cereals, vegetables, fruit and wines. Section 4 – sets limits for 3-MCPD in Hydrolysed vegetable protein and soy sauce. Section 5 – sets limits for dioxins and dioxin-like PCBs in meat, fish, milk, eggs, oils and fats. Section 6 – sets limits for PAHs in oils and fats, smoked meats, smoked fish, fish, crustaceans and bivalve molluscs, infant foods. MRL Pesticides and Veterinary Medicines Listed MRLs of Pesticides in Animal products and plant products Listed MRLS in Annex Products Animal Origin only from authorised countries and can be subject to sample checking at reference laboratories General Food Safety (Animal And non-animal Origin) General Hygiene (HACCP) Materials in contact with Food If Animal: Animal health and Animal Welfare Traceability • - Products: always required for any substance incorporated into food or feed. More stringent requirements on traceability, such as: Animals, GMOs, Fruits and vegetables, Certain animal products (beef, fish, honey), Olive oil • - Operators: ensuring that food business operators are able to identify the immediate supplier of a product and the immediate subsequent consignee (“one step back-one step forward” principle), from the EU importer up to retail level, excluding supply to the final consumer. • Although traceability provisions do not apply outside the EU, the requirement does extend to the EU importer since he must be able to identify from whom the product was exported in the third country. Food and feed operators are also required to have systems and procedures in place that allow for this information to be made available to the Competent Authorities upon request

19. How Business and Farmers will be Affected

20. Traditional FoodsREGULATION (EC) No 852/2004 on the hygiene of foodstuffsArticle 13 - Amendment and adaptation of Annexes I and II (HACCP approach) 3. Member States may, without compromising achievement of the objectives of this Regulation […] national measures adapting the requirements […] 4. (a) (i)enabling the continued use of traditional methods, at any of the stages of production, processing or distribution of food; or (ii) accommodating the needs of food businesses situated in regions that are subject to special geographical constraints. 5. Any Member State wishing to adopt national measures […] shall notify […]. The notification shall: (a) provide a detailed description of the requirements that […] need to be adapted and the nature of the adaptation sought; (b) describe the foodstuffs and establishments concerned; (c) explain the reasons for the adaptation, including, where relevant, by providing a summary of the hazard analysis carried out and any measures to be taken to ensure that the adaptation will not compromise the objectives of this Regulation;

21. Marketing and Labelling Requirements Quality and Grades of all Fruits and Vegetable (general): Minimum maturity requirements; Tolerance; Marking of origin of produce. Specific requirements for Apples Citrus fruit Kiwifruit Lettuces, curled leaved and broad-leaved endives Peaches and nectarines Pears Strawberries Sweet peppers Table grapes Tomatoes • General labelling (SPS and TBT): ingredients; nutrition; weights, allergens, dates, instructions, alcohol strength, origin, lot marking • GMO (TR) versus GMO Title V • Product Definitions defining what consumers understand (still sell, just what you call it): • Cocoa and chocolate products • Honey • Fruit juices and similar products • Fruit jams, jellies and marmalades • Partly or wholly dehydrated preserved milk • Natural mineral waters • Coffee and chicory extracts

22. Example: Marketing of Strawberries Includes Minimum requirements In all classes, subject to the special provisions for each class and the tolerances allowed, the strawberries must be: — intact, undamaged, The strawberries must be sufficiently developed and display satisfactory ripeness. The development and the condition must be such as to enable them: — to withstand transportation and handling, and — to arrive in satisfactory condition at the place of destination. The minimum size shall be: — 25 mm in ‘Extra’ Class, — 18 mm in Classes I and II. There is no minimum size for wood strawberries. Extra’ Class - A total tolerance of 5 per cent, by number or weight, max 0.5% class II

23. Example: Product Definitions - Jams Jam’ is a mixture, brought to a suitable gelled consistency, of sugars, the pulp and/or purée of one or more kinds of fruit and water. However, citrus jam may be obtained from the whole fruit, cut into strips and/or sliced. The quantity of pulp and/or purée used for the manufacture of 1 000 g of finished product must not be less than: — 350 g as a general rule, — 250 g for redcurrants, rowanberries, sea-buckthorns, blackcurrants, rosehips and quinces, — 150 g for ginger, — 160 g for cashew apples, — 60 g for passion fruit. In addition, the labelling of jams, jellies, marmalades and sweetened chestnut puree must include the following: fruit content per 100 grams of product; total sugar content if no nutrition claim is made for sugars on the labelling pursuant to Directive 90/496/EEC; residual content of sulphur dioxide, where it is more than 10 mg/kg. Annex II to the Directive establishes a list of authorised additives such as honey, sugar, fruit juice and certain spirits. Other legal definitions include: Extra Jam – 450g general Rule Jelly - gelled mixture of sugars and the juice and/or aqueous extracts of one or more kinds of fruit. Marmalade – Jam or jelly definition plus peel

24. Sources of Information DGTRADE export helpdesk

25. Part IV Protected Names How it affects producers and opportunities to protect Ukrainian designations • Definitions • Exemptions • Databases

26. Geographical Indications & Protected Names PDO and PGI - linked to the place or region where it is produced, processed or prepared Protected Designation Of Origin (PDO) – ingredients sourced from region Protected Geographical Indication (PGI) – ingredients sourced anywhere Traditional Speciality Guaranteed (TSG) identifies products of a traditional character, either in the composition or means of production, without a specific link to a particular geographical area. Ukraine Registration system – mutual recognition and application in EU and Ukraine and third countries EU over 2,500 GIs: (2010 study showed GI products price 2.2x price comparable products) Cost Benefit – only where there is a reputation or potential reputation to protect

27. Geographic Indications • Protected for 10 Years • Champagne • Cognac • Madeira • Porto • Jerez /Xérès/ Sherry • Calvados • Grappa • AnisPortuguês • Armagnac • Marsala • Malaga • Tokaj • Protected for 7 Years • ParmigianoReggiano • Roquefort • Feta Article 208 Temporary measures (3) For a transitional period of 10 years from the entry into force of this Agreement, the protection pursuant to this Agreement of the following geographical indications of the EU Party shall not preclude these geographical indications from being used in order to designate and present certain comparable products originating in Ukraine

28. Sources of Information GI Database (Foods) http://ec.europa.eu/agriculture/quality/door/list.html GI Database (E-bacchus for wines) http://ec.europa.eu/agriculture/markets/wine/e-bacchus/index.cfm?event=searchPEccgis&language=EN GI Database (E-Spirit for spirits) http://ec.europa.eu/agriculture/spirits/index.cfm?event=searchIndication

29. QUESTIONS