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Cablegate: 13% Tariff Surcharge On Autos and Refrigerators

VZCZCXRO3463
RR RUEHDBU RUEHLN RUEHSK RUEHVK RUEHYG
DE RUEHKV #1547 2541304
ZNR UUUUU ZZH
R 111304Z SEP 09
FM AMEMBASSY KYIV
TO RUCNCIS/CIS COLLECTIVE
RUEHC/SECSTATE WASHDC 8388

UNCLAS KYIV 001547

SIPDIS

STATE FOR EB/IFD/OIA AND EUR/UMB

E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL UP XH
SUBJECT: 13% TARIFF SURCHARGE ON AUTOS AND REFRIGERATORS
EXPIRES

REF: KYIV 1495

1. (U) Summary. The tariff enacted by the GOU in February
2009, which applied a 13% surcharge on imports of cars and
refrigerators, has expired as scheduled on September 7th.
End Summary.

2. (U) Using Ukraine's trade deficit as a justification, the
GOU had enacted a 13% tariff measure in February 2009. This
tariff was originally intended to be applied to all imports,
but a resolution of the Cabinet of Ministers reduced its
scope to automobiles and refrigerators. A time limit on the
tariff was included in the enabling legislation, requiring
the tariff to expire on September 7th.
3. (U) As of September 7th, the measure has officially
expired and the tariff is no longer valid. The Ukrainian
Customs Bureau confirms that the tariff is no longer being
collected, and that the computer equipment that had been used
in its collection has been disconnected.
4. (SBU) Comment. In June, the Ukrainian automobile industry
appealed to the GOU to extend the tariff an additional six
months, and there were media reports that three of the
strongest blocs in the Rada (Litvyn, BYUT, and Regions) were
in support of such a measure. However, the language of the
original law did not permit any extensions. At present,
there is another draft law being considered in the Rada that
would apply a 15 percent tariff on imports of automobiles and
meat products from January 1st, 2010. Due to the improvement
in Ukraine's trade balance (Reftel KYIV 1495), it makes no
mention of Balance of Payments as a justification. Deputy
Ministry Piatnytskiy of the Ministry of Economy told EmbOffs
that the draft law would face presidential opposition and
that, if passed, it might only be applied to imports from
non-WTO members.
5. (SBU) The just-expired tariff was a failure as a
fund-raising tool, according to customs figures which
estimated that the loss of sales tax revenue caused by the
tariff exceeded UAH 500 million (USD 60 million) during its
effective duration. Rather than revenue enhancement,
measures such as the recently expired 13% tariff and the one
now in draft legislation appear to be serving protectionist
goals, especially as concerns the Ukrainian automotive
industry. With the presidential election looming in January
2010, the sponsors of the new tariff bill are likely hoping
it will help their parties generate populist support among
farmers and factory workers. End comment.
PETTIT

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