Ukraine 2018 Doing Business in Ukraine: 2018 Country Commercial Guide for U.S. Companies Table of Contents Doing Business in Ukraine _____________________________________________ 5 Market Overview ______________________________________________________________ 5 Market Challenges _____________________________________________________________ 5 Market Opportunities ___________________________________________________________ 6 Market Entry Strategy __________________________________________________________ 8 Political Environment ________________________________________________ 9 Selling US Products & Services ________________________________________ 10 Using an Agent to Sell US Products and Services _____________________________________ 10 Establishing an Office __________________________________________________________ 10 Franchising __________________________________________________________________ 11 Direct Marketing ______________________________________________________________ 12 Joint Ventures/Licensing _______________________________________________________ 13 Selling to the Government ______________________________________________________ 13 Distribution & Sales Channels ___________________________________________________ 14 Express Delivery ______________________________________________________________ 16 Selling Factors & Techniques ____________________________________________________ 17 eCommerce __________________________________________________________________ 17 Trade Promotion & Advertising __________________________________________________ 18 Pricing ______________________________________________________________________ 19 Sales Service/Customer Support _________________________________________________ 20 Protecting Intellectual Property _________________________________________________ 20 Due Diligence ________________________________________________________________ 21 Local Professional Services _____________________________________________________ 22 Principal Business Associations __________________________________________________ 23 Limitations on Selling U.S. Products and Services ____________________________________ 23 Web Resources _______________________________________________________________ 23 Leading Sectors for U.S. Exports & Investments ___________________________ 24 Agricultural Machinery ________________________________________________________ 24 Education ___________________________________________________________________ 28 Civil Nuclear _________________________________________________________________ 30 Defense Equipment ____________________________________________________________ 33 2 Food Processing and Packaging Equipment ________________________________________ 36 Medical Equipment ____________________________________________________________ 39 Oil & Gas ____________________________________________________________________ 42 Safety & Security ______________________________________________________________ 45 Infrastructure ________________________________________________________________ 48 Customs, Regulations & Standards _____________________________________ 51 Trade Barriers _______________________________________________________________ 51 Import Tariff _________________________________________________________________ 51 Import Requirements & Documentation ___________________________________________ 52 Labeling/Marking Requirements _________________________________________________ 56 U.S. Export Controls ___________________________________________________________ 57 Temporary Entry _____________________________________________________________ 57 Prohibited & Restricted Imports _________________________________________________ 57 Customs Regulations __________________________________________________________ 58 Standards for Trade ___________________________________________________________ 58 Trade Agreements ____________________________________________________________ 61 Licensing Requirements for Professional Services ___________________________________ 62 Web Resources _______________________________________________________________ 63 Investment Climate Statement ________________________________________ 64 Executive Summary ___________________________________________________________ 64 Openness To, and Restrictions Upon, Foreign Investment _____________________________ 65 Bilateral Investment Agreements and Taxation Treaties ______________________________ 66 Legal Regime _________________________________________________________________ 66 Industrial Policies _____________________________________________________________ 70 Protection of Property Rights____________________________________________________ 71 Financial Sector ______________________________________________________________ 72 State‐Owned Enterprises _______________________________________________________ 73 Responsible Business Conduct ___________________________________________________ 74 Corruption __________________________________________________________________ 75 Political and Security Environment _______________________________________________ 76 Labor Policies and Practices _____________________________________________________ 76 OPIC and Other Investment Insurance Programs ____________________________________ 77 Foreign Direct Investment and Foreign Portfolio Investment Statistics __________________ 77 Contact for More Information ___________________________________________________ 79 3 Trade & Project Financing ____________________________________________ 80 Methods of Payment ___________________________________________________________ 80 Banking Systems ______________________________________________________________ 80 Foreign Exchange Controls ______________________________________________________ 80 US Banks & Local Correspondent Banks ___________________________________________ 81 Project Financing _____________________________________________________________ 81 Financing Web Resources _______________________________________________________ 82 U.S. Export Import Bank EBRD World Bank IFCBusiness Travel ______________ 82 Business Customs _____________________________________________________________ 83 Travel Advisory ______________________________________________________________ 83 Visa Requirements ____________________________________________________________ 84 Currency ____________________________________________________________________ 84 Telecommunications/Electric ___________________________________________________ 84 Transportation _______________________________________________________________ 85 Language ____________________________________________________________________ 85 Health ______________________________________________________________________ 86 Local Time, Business Hours and Holidays __________________________________________ 86 Temporary Entry of Materials or Personal Belongings ________________________________ 87 Travel Related Web Resources ___________________________________________________ 87 INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2018. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES. 4 Doing Business in Ukraine Market Overview Ukraine’s economy is recovering from a deep slump. Following a political and economic crisis in 2014-2015 and cumulative economic decline of 16 percent, Ukraine’s economy began slowly growing in 2016 with two percent year-over-year growth. While the country’s turn-around was primarily attributable to reforms implemented by Ukraine’s first technocratic government, growth in 2016 was driven by a rebound in domestic investment activity and a modest recovery in household consumption. Going forward, analysts anticipate that domestic demand will continue to fuel economic growth of 2.5 percent in 2017 and 3.5 percent in 2018. The biggest reason that domestic demand will lead economic growth instead of exports is Russia’s continued trade bans against Ukraine. In addition to undergoing drastic changes in trade relations, Ukraine’s exports continue to fall year over year due to global commodity prices and challenges in the domestic supply chain. In March 2017, Ukraine’s government implemented new measures prohibiting trade with territories in the country’s east effectively controlled by Russian-backed separatists. This prevents coal from traveling from the east to west and stops mineral inputs for the steel industry from reaching the non-government-controlled territory. Against a backdrop of falling exports, Ukraine’s current account deficit increased from 0.1 percent of GDP in 2015 to 3.5 percent of GDP in 2016. All major Ukrainian exports dropped in 2016 except agricultural exports. Despite its low economic growth and falling exports, Ukraine’s economy has several bright spots, most notably agriculture, which grew 6.1 percent year-over-year in 2016. Last year Ukraine harvested 66 million tons of grain, which was the country’s record high. Ukraine ranks among the world’s top producers of grain crops including wheat, corn, and barley. In 2016, Ukraine’s sugar exports also reached a 15-year high. Barring weather issues, 2017 harvests will likely set new records, and agriculture will continue to support the economy. Stable agricultural growth presents significant opportunities for U.S. exporters of agricultural machinery, as well as other inputs like seeds and fertilizers. Ukraine’s recent economic recovery and macroeconomic stabilization are supported heavily by the International Monetary Fund (IMF). In March 2015, the