The automotive market of Ukraine

Notably, over the last two years, sales of new cars in Ukraine have been four-times greater than the sales of used cars.

The entry of Ukraine into the World Trade Organisation (WTO) on May 16 2008 has created many favourable conditions in the country's market for foreign importers. This also concerns the automotive industry: according to the agreements with the WTO, Ukraine has reduced import rates on transport vehicles from 25% to 10%, eliminated restriction on import cars older than eight years, abrogated the system on compulsory minimal import prices, and fixed equal excise duty rates on national and import transport vehicles.

Nevertheless the world economical crisis has not passed Ukraine by: sales of new passenger cars in Ukraine in February 2009 fell by 78.3% year-on-year.

In addition, the parliament on February 4 2009 adopted extra custom duty on imported cars for a term of six months, to fight the consequences of the world economical crisis and to restore the payment balance of Ukraine. Customs duty for import cars is now 23%. However, this additional custom duty can be abolished in the near future, as it contradicts the demands of the WTO.

Customs requirements for import of vehicles
The procedure for importing transport vehicles into Ukraine is stipulated in the Customs Code of Ukraine. Further disposal of transport vehicles being imported into Ukraine is allowed only after full performance of the custom clearance procedure. Otherwise, a fine will be imposed on the officials of the importer and/or the transport vehicle will be confiscated by the customs authorities.

Basically importer of transport vehicles should pay customs duty, excise and value added tax (VAT). According to the Law of Ukraine On Custom Duty, customs duty for import transport vehicles is set at 10 %, although extra duty of 13% has now been imposed.

The amount of excise for transport vehicles is established pursuant to the Law of Ukraine On Excise For Some Transport Vehicles and Bodies Thereto. The schedule sets the amount of excise depending on the type of engine, cubic capacity of a cylinder and period of vehicle use.

The tax basis for assessment of VAT is the customs value of the imported vehicle plus all customs fees and duties subject to payment.

All applicable taxes and duties are accrued by customs bodies under the rates effective on the date of customs declaration acceptance, and are subject to payment by the importing entity in Ukrainian currency.

Market access
The Ukrainian market has an estimated 60 official importers, although the key position belongs to five companies: UkrAvto group of companies, AutoInvestStroy group, UkrpromInvest Auto Holding group, Atoll Holding-Eurocar group and Niko Trade House. Together, they control 90% of sales of new cars in Ukraine.

Issuance of warranty and warranty repair of transport vehicle is specified in Procedure of Warranty Repair (service) or Warranty Exchange of Transport Vehicles adopted by the Ministry of Industrial Policy of Ukraine.

The Law of Ukraine On Consumer Protection Rights (as of May 12 1991) regulates the procedure of consumer rights protection in Ukraine. In case of defects detection in the warranty period, a consumer has the right to claim the following:

• proportional price reduction;

• honorary defects elimination of transport vehicles during reasonable terms; and

• cost reparation for defects elimination of transport vehicle.

Official importers of transport vehicles should also beware of the so-called grey import (or parallel import) market in Ukraine. Grey import vehicles are new or used motor vehicles and motorcycles legally imported from another country through channels other than the maker's official distribution system. Such vehicles usually have lower prices than officially distributed.

Ukrainian legislation protects producers and sellers of the transport vehicles from unfair use of its brands and trademarks, established by the Law of Ukraine On Protection Against Unfair Competition and On Economic Competition Protection. Breach of rights in the field of economic competition protection is subject of address to the Antimonopoly Committee of Ukraine.

Conclusion
In general, the situation in the Ukrainian auto market can be described as a wait-and-see period; from the moment of adoption of the 13% additional rate, import of new cars in Ukraine has stopped. It should be also noted that purchasing capacity of Ukrainian customers has fallen and most people have started saving in connection with the world economical crisis. For now, Ukrainians are in need of cars with low cost and cheap maintenance operation.