VZCZCXRO8907
PP RUEHDBU RUEHLN RUEHSK RUEHVK RUEHYG
DE RUEHKV #1086/01 1761422
ZNR UUUUU ZZH
P 251422Z JUN 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 8029
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 0186
RUCNCIS/CIS COLLECTIVE

UNCLAS SECTION 01 OF 02 KYIV 001086 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA 
STATE PLEASE PASS TO USTR FOR PBURKHEAD AND DSHACKLEFORD 
COMMERCE FOR CLUCYK 
GENEVA FOR USTR (RROBERT) 
 
E.O.: 12958: N/A 
TAGS: ETRD ECON WTRO PGOV UP
SUBJECT: UKRAINE: COURT BRINGS BACK 13 PERCENT IMPORT 
TARIFF SURCHARGE 
 
REFS: A) KYIV 497 
      B) KYIV 349 
 
¶1. (SBU) Summary: Ukraine's Constitutional Court issued a 
ruling on June 24 that could reinstate a 13 percent 
tariff surcharge on a wide range of imports.  The Court 
struck down portions of a law that had given Ukraine's 
Cabinet of Ministers authority to tinker with the 13 
percent surcharge measure.  How the GOU will implement 
the ruling is not yet clear, however.  Although the 
government now opposes the import tariff surcharge, we 
suspect that it will have no choice but to re-impose the 
tariff surcharge, pending action by the parliament.  End 
Summary. 
 
Court Ruling 
------------ 
 
¶2. (U) The Constitutional Court of Ukraine rendered a 
decision on June 24 regarding Law No. 923-VI, "On 
Amending Some Laws of Ukraine to Improve the Balance of 
Payments of Ukraine in Response to the World Financial 
Crisis," which imposed a 13 percent, ad valorem increase 
in import duties for a wide range of goods (ref B). 
(Note: President Yushchenko signed the bill into law in 
February, but simultaneously sent an appeal to the 
Constitutional Court arguing that provisions of the law 
that allowed the Cabinet of Ministers to alter/extend the 
tariff surcharge measure were unconstitutional.  End 
note.)  The Constitutional Court ruled in President 
Yushchenko's favor, clarifying that, according to the 
Constitution, only the Rada (parliament) can set import 
tariffs.  The Court therefore struck down provisions of 
the law that provided the Cabinet of Ministers with 
authority to alter the tariff surcharge. 
 
¶3. (U) The practical impact of the Court's ruling is 
still not entirely clear.  Most news outlets -- including 
the trustworthy daily paper Kommersant Ukraine -- 
reported that the ruling will cause the 13 percent 
surcharge to return for all products originally listed in 
the law.  (Note: See ref B for the complete list.  The 
Cabinet of Ministers in late March had cancelled the 
surcharge for all products except some automobiles and 
refrigerators (ref A).  End note.)  Analysts seemed 
unsure as to whether the government would try to apply 
the surcharge retroactively, that is, demand additional 
customs duty from companies that imported goods on the 
list after the Cabinet of Ministers issued its resolution 
in March. 
 
No Explanation Yet from GOU 
--------------------------- 
 
¶4. (SBU) Lidiya Melnyk, deputy head of the Ministry of 
Economy's WTO Department, told us on June 25 that the 
Ministry (which is responsible for import/export tariff 
policy) did not yet have a clear understanding of the 
ruling.  She also noted that Deputy Minister Valeriy 
Pyatnytskiy was in Geneva and that no decision would 
likely be taken until his return.  The Legal Department 
of the State Customs Service told us that, immediately 
following the Court ruling, they sent a letter to the 
Cabinet of Ministers requesting an explanation.  As of 
the afternoon of June 25, however, Customs had not yet 
received updated instructions. 
 
¶5. (SBU) Ulrike Hauer, Head of Trade and Economic Section 
of the local delegation of the European Commission, told 
us on June 25 that they were also waiting for 
clarification.  Hauer said she hoped that the ruling 
would simply mean that the Cabinet of Ministers could not 
extend the measure beyond its scheduled September end- 
date, but recognized that it could bring the tariff 
surcharge back online for the complete list of products. 
 
Comment: Surcharge Likely Coming Back 
------------------------------------- 
 
¶6. (SBU) Although the GOU was moving in the right 
direction on lifting the 13 percent tariff surcharge, 
this Court ruling will likely be a step back.  The 
ruling, while unfortunate, seems in line with Ukrainian 
 
KYIV 00001086  002 OF 002 
 
 
law, as the Constitution does clearly state that only the 
Rada can set import tariffs.  High-level GOU officials 
have spoken out against the tariff measure; Minister of 
Economy Bohdan Danylyshyn did so in his meeting with 
AUSTR Chris Wilson on June 22 (septel).  Yet the GOU will 
now likely have to re-impose the 13 percent surcharge on 
the full list of imports in order to comply with the 
Court's ruling.  There is hope that the Rada will act 
quickly to pass new legislation to repeal the measure, 
and, indeed, the GOU was already pushing the Rada on this 
front.  Serious opposition in the Rada remains, however, 
and time is short -- the Rada is scheduled to go into 
summer recess on July 13.  In any case, the measure is 
scheduled to expire in September, and we do not expect 
Ukraine to extend it beyond then.  End comment. 
 
PETTIT