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The food market in Ukraine: a sales market with investment opportunities for German companies

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published on 11 November 2020 | Reading time approx. 7 minutes
 

Ukraine is a very interesting European market for food manufacturers. Except for agricultural products such as grain and sunflower oil, the Ukrainian food industry initially did not develop very much for years after the country gained independence, which meant that most foodstuffs were imported. Since 2014, the situation has changed somewhat and more Ukrainian foodstuffs have been brought onto the domestic market. However, imported foodstuffs are still very popular in Ukraine and consumers tend to buy them mainly because of their better quality.

 

By signing the EU Association Agreement (“Deep and Comprehensive Free Trade Agreement” – DCFTA) in 2016, Ukraine committed itself to harmonise its legislation with EU standards. Thanks to the DCFTA, import duties have been partially removed or reduced, customs procedures simplified and further barriers to trade eliminated. As regards the food market, much has been done to improve food safety. New authorities have been established to ensure the monitoring of the food industry and food safety controls.

 

This article provides an overview of the latest regulatory developments in the food market in Ukraine, which may be useful for companies already operating or planning to gain a foothold in the Ukrainian market.

   

With a population of nearly 42 mio., Ukraine is a very interesting sales market for German food manufacturers and exporters. In addition, Ukraine has concluded an association agreement with the EU in 2014, which came into force on 1 January 2016 and has considerably facilitated market access. In return, Ukrainian manufacturers now have access to approx. 500 mio. consumers in the EU. This is very important as – due to the political conflict with Russia – Ukraine has lost the previously dominant Russian market for the sales of Ukrainian products.

 

Ukraine is one of the countries with the largest deposits of fertile black earth soil (chernozem) in the world (33 per cent of all soils worldwide). Therefore, agriculture is a very important economic sector for Ukraine, accounting for 12 per cent of its GDP. E.g., Ukraine is one of the largest exporters of sunflower oil and grain in the world.

 

After the crisis years 2014 till 2016, the Ukrainian economy grew continuously again at a rate of 3 to 4 per cent p.a., although, of course, the country is facing a downturn in 2020 due to the corona crisis. Wages and the standard of living have been improving continuously since 2016, and in addition, many migrant workers have been transferring money to their families in Ukraine (2019: approx. 5 bn. US-dollar from Poland). All this has also had a very big influence on the consumer behaviour in Ukraine. Sales of foodstuffs, especially imported ones, grew significantly from year to year. Although the Ukrainian economy came to a full stop during the coronavirus crisis, it is to be expected that it will continue to grow in the coming years, which in turn will bring new opportunities for German and European foodstuff manufacturers.
 


The Free Trade Agreement with the EU and the reform of Ukraine's food and commercial law

The Free Trade Agreement (Deep and Comprehensive Free Trade Agreement – DCFTA) came into force on 1 January 2016. Under the Agreement, a free trade area was established, which in practice led to the removal of barriers to trade, the harmonisation of Ukrainian legislation with EU standards and the mutual recognition of certification.

 

Reduction in import duties on goods (incl. foodstuffs)

Tariff quotas have been introduced by both sides for imports of certain product groups (e.g. chicken meat, pork, sugar). Transitional periods (of up to ten years) for tariff reduction or removal have been introduced, mainly for agricultural and food products.

   

Simplification of customs procedures

Ukraine is committed to achieving greater transparency and efficiency in the area of customs or customs legislation. Customs procedures concerning goods clearance should be simplified and less formalised. Customs declarations should take less time to process. Significant progress has been made in the fight against corruption in customs, notably through the establishment of the “One Window” electronic database system in 2016. In 2018, a simplified clearance procedure was introduced also for food products.

   

Copyright protection & free and fair competition

Ukraine has vowed to protect copyrights and in particular the indications of origin of food products. It is also necessary to introduce safety measures to monitor product safety and illegal competition practices.

   

Food safety and the establishment of food safety control authorities

As early as 2014, all foodstuff manufacturers are obliged to establish and maintain a modern HACCP safety control system (risk analysis and critical control points). They must take into account all criteria that could influence the safety of the end product and monitor them on a permanent basis.

In 2015 the “State Service of Ukraine on Food Safety and Consumer Protection” (SSUFSCP) was established. It is responsible for both Ukrainian and imported food products.

The main tasks of the authority include checking compliance with the relevant food laws and monitoring certain measures such as:

  • Consumer protection laws,
  • Advertising laws to protect consumers,
  • Requirements for the formation, setting and application of state-regulated food prices,
  • Veterinary health measures,
  • Application of phytosanitary measures,
  • Legal regulations on veterinary products,
  • Epidemiological evaluation of hygiene measures by state experts.


The Ministry of Health remains responsible for all matters relating to food safety in public food manufacturing companies, the epidemiological control of foodborne diseases and measures aimed at the prevention and elimination of foodborne diseases.

In 2018, an Act “On State Control of Compliance with Food Safety Regulations and Animal Welfare Control” came into force. This Act has implemented the relevant European standards into Ukrainian law, in particular the provisions of EU Regulations 854/2004, 882/2004, 669/2009 and Directive 97/78/EC. The Act introduces a number of amendments and regulates, e.g., the procedure for the inspection of food companies. It also introduces a number of sanctions for violation of food quality and safety laws.

   

Labelling requirements

Furthermore, Ukrainian laws on food information have been harmonised with the European standards for the provision of food information to consumers (LMIV Regulation (EU) No. 1169/2011). Accordingly, since 6 August 2019 the Law “On Food Information for Consumers” No. 2639-VIII (hereinafter referred to as the “Food Information Law”) has been in force. The requirements regulated there apply not only to labelling, but also to the information consumers receive about foodstuffs through advertising, as well as to their presentation. Thus, all information which could mislead the consumer is prohibited.

The definition of labelling has been revised in the Act and covers any words, particulars, trading or manufacturing marks, illustrations or signs relating to a food product and placed on any packaging, documents, plates, labels, seals of any kind which accompany or refer to that food product. Food information must be in Ukrainian and must be legible and clearly displayed in a visible place. The Food Information Law applies to food products intended for final consumers and mass caterers. Parties bound by the law are food importers and companies under whose name or business name the food is marketed.
 

In accordance with information required under the LIMV, the following information on packaged foods is also mandatory in Ukraine:

  • Designation of the food product;
  • List of ingredients;
  • All ingredients and processing aids listed in Annex I to the Food Information Act, as well as ingredients and processing aids that are derivatives of a substance or product listed in Annex I to the Food Information Act used in the manufacture or preparation of a food product, present – possibly in modified form – in the final product and triggering allergies and intolerances;
  • Quantity of certain ingredients or their classes;
  • Net quantity of the product;
  • “Best before” or “use by” date;
  • Any special storage instructions and/or instructions for use;
  • Name or business name and address of the food company responsible for food information and, in relation to imported food, name and address of the importer;
  • Country or place of origin, if required by law;
  • Instructions for use if it is difficult to use the food properly without such instructions;
  • For beverages with alcohol by volume (ABV) of more than 1.2 per cent, the indication of the actual alcohol by volume;
  • Nutrition information/nutrition facts label.


The specific labelling requirements for the provision of information on substances or products that cause allergies or intolerances also apply to loose products. This information must be labelled in a different colour or font and must be immediately legible for the consumer.
 
The Food Information Act also amended the requirements for indicating the best before date. In accordance with the LMIV, the new terms “best before date” and “use by date” have been introduced. In Ukraine, the principle that food may not be sold after the expiry of the “best before” or “use by” date also applies.
 
The Food Information Act also provides for penalties for providing false or inaccurate information about food products. Market operators are also liable for misleading consumers about substances that could cause allergic reactions. The law makes a major contribution to improving consumer protection in Ukraine and sets high standards for foodstuff manufacturers and distributors. 

 

Special features for the import of (specific) foodstuffs

Ukraine is a member of the WHO, WTO, OIE (World Organisation for Animal Health) and CODEX (Alimentarius Commission). Ukrainian laws adopted after the signature of the Free Trade Agreement with the EU are in line with international and European standards.

 

European and international certificates are recognised in Ukraine, but importers must obtain a “Certificate of Recognition” from the certification authorities in Ukraine for the relevant certificates. Some products such as baby food, sports food or dietary products are considered special food products in Ukraine. Importers of such foodstuffs must register these products with the Sanitary and Epidemiological Service of the Ministry of Health before importing them. Packaging materials that come into direct contact with the packaged product (food contact materials), such as foils, paper, etc., are subject to state inspection by the competent bodies of the Ministry of Health. Finally, since 2 August 2019, the Act “On the basic principles and requirements for organic production, handling and labelling of organic products” has been in force in Ukraine. The aim is to improve the legal framework for organic farming in Ukraine and to adapt it to the relevant EU legislation. Organic products must be certified as such by the SSUFSCP.

   

Conclusion

Ukraine has done a lot in recent years to improve and control food safety and information for consumers. By bringing most standards into line with European standards, a clear regulatory framework for the food market has created greater legal certainty for both consumers and companies. It is expected that the Ukrainian food market will continue to develop rapidly and positively. On the one hand, Ukrainian food manufacturers are looking for new sales markets, and on the other hand, imported food is highly sought-after among Ukrainian consumers. Thus, Ukrainian legislation in this area will continue to develop and be even more closely aligned with European norms and standards.

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