2.2.5. IMPOSING SPECIAL SANCTIONS

Efficiency of state regulation and foreign economic activities of business entities is defined by timely and full-scale inflows of currency earnings and tangibles from export/import operations.

One of the mechanisms of state regulation and control over foreign economic activities is imposing special sanctions in compliance with Article 37 of the Law of Ukraine “On foreign economic activities”.

It should be mentioned that the mechanism of special sanctions spelled in the Article 37 of the Law of Ukraine “On foreign economic activities” is the only method to influence on business entities of foreign economic activities, which violated effective legislation, and which face no objections from the side of international financial organizations and institutes.

Let us overview some statistics as to efficiency of imposing special sanctions.

Thus, last year, special sanctions were imposed in regard to 3,566 business entities of foreign economic activities (including, to 1,626 non-resident entities) for overdue debts in foreign trade operations totally worth some USD 552 mln.

For imposing special sanctions, in 2000 currency and tangibles worth USD 122,260,000 were returned to Ukraine. Illegal transference of currency abroad and conducting unprofitable export/import operations totally worth USD 12 mln. were cautioned.

Simultaneously to the aforementioned positive examples, while imposing (abolishing) special sanctions, there also arise cases, which negatively influence image of the state bodies involved in the field of imposing special sanctions.

Foremost, this origins from the ill-timed notification (or even failure to notify) of business entities of foreign economic activities of the orders of the Ministry of Economy on imposing (abolishing) special sanctions by the appropriate departments of regional state administrations. Thus, there arise cases, when the business entity of foreign economic relations finds out about imposing special sanctions directly from the customs bodies, when making customs registration of cargoes.

In compliance with the Article 37 of the Law of Ukraine “On foreign economic activities”, the Ministry of Economy of Ukraine, starting from April 2000, partially responsible for the functions of former Ministry for Foreign Economic Relations and Trade of Ukraine (hereinafter MFERT), in compliance with the decision of adjudicatory bodies of Ukraine or on submission of the bodies of state tax and supervisory services, customs, law-enforcement authorities and the National Bank of Ukraine, impose special sanctions in regard to business entities of foreign economic activities – individual licensing regime or temporary termination of foreign economic activities.

The sanctions are imposed by the Ministry of Economy of Ukraine in regard to business entities of foreign economic activities that violated the Law of Ukraine “On foreign economic activities” and related laws of Ukraine, in particular, in case business entities of foreign economic activities violate currency, customs, tax or any other legislation related to their foreign economic activities, and in case of actions that can damage interests of national economic safety.

The procedure for imposing (abolishing) special sanctions is spelled in the Regulation on the procedure of imposing to foreign business entities special sanctions spelled in the Article 37 of the Law of Ukraine “On foreign economic activities” approved by the Order of the Ministry of Economy of Ukraine No 52 of April 17 2000 and registered with the Ministry of Justice on May 05 2000, reg. No 260/4481.

In case of imposing individual licensing regime to the business entity of foreign trade activities, business entity of Ukraine has the right address to the Ministry of Economy or the authorized body to get single (individual) license. The procedure to grant single (individual) license is spelled in the Regulation on the procedure to grant single (individual) licenses, approved by the Order of Ministry of Economy No 47 of April 17 2000 and registered with the Ministry of Justice of Ukraine on May 05 2000, reg. No 259/4480.

 On approving the Regulation on the Procedure of Imposing Special Sanctions Spelled in
Article 37 of Ukraine's Law "On Foreign Economic Activities"
in Regard to Ukrainian Business Entities of Foreign Economic Activities and Foreign Business Entities.

The Order of the Ministry of Economy
No 52 of April 17 2000
Registered with the Ministry of Justice of Ukraine
as of May 5 2000, reg. No 260/4481

Changed and amended according to
the Order of the Ministry of Economy of Ukraine
No. 233 of November 1 2000

Due to approving of Ukraine’s Law No 1595-III of March 23 2000 "On making changes to selected Ukrainian Laws", I am ORDERING:

1. To invalidate the Regulation on the procedure of imposing special sanctions spelled in
Article 37 of Ukraine's Law "On Foreign Economic Activities" in regard to Ukrainian business entities of foreign economic activities and foreign business entities approved by the Order of the Ministry of Foreign Economic Relations and Trade of Ukraine No 754 of October 5 1999 and registered with the Ministry of Justice of Ukraine as of October 21, 1999, reg. No 718/4011.

2. To approve the Regulation on the procedure of imposing special sanctions spelled in Article 37 of Ukraine's Law "On Foreign Economic Activities" in regard to Ukrainian business entities of foreign economic activities and foreign business entities, which is attached.

3. To grant the right to sign Orders of the Ministry of Economy on imposing (abolishing, alteration of type, or suspension) of special sanctions spelled in the Article 37 of the Law of Ukraine "On Foreign Economic Activities”, besides to the Minister, to the First Deputy Minister V. Kalnik, Deputy Minister A. Goncharuk, Head of Department for Trade Restrictions and Control over Foreign Economic Activities V. Stetsenko.

4. To assign the Directorate for Control over Foreign Economic Activities, Department for Trade Restrictions and Control over Foreign Economic Activities (O. Zhyzhko) the following:

registration of this Order with the Ministry of Justice of Ukraine within the term established by law.

publication of this Order in “Uryadovy Kurjer” newspaper after state registration with the Ministry of Justice of Ukraine

to give notice of this Order to State Tax Administration of Ukraine, State Customs Service, Security Sevice of Ukraine, the Ministry of Internal Affairs, supervising authorities, the Council of Ministers of the Autonomous Republic of Crimea, and Regional, and Kiyv and Sevastopol city state administrations.

5. To assign Deputy Minister Andrey Goncharuk to ensure control over executing of this Order.

REGULATION
on the procedure of imposing special sanctions spelled in
Article 37 of Ukraine's Law "On Foreign Economic Activities"
in regard to Ukrainian business entities of foreign economic activities end foreign business entities

The Regulation on the procedure of imposing special sanctions spelled in Article 37 of Ukraine's Law "On Foreign Economic Activities" in regard to Ukrainian business entities of foreign economic activities end foreign business entities (hereinafter - Regulation), spells the procedure of imposing (abolishing, alteration of type or suspension) special sanctions (hereinafter – sanctions) by the Ministry of Economy of Ukraine, spelled in the Article 37 of the Law of Ukraine "On Foreign Economic Activities", in regard to Ukrainian business entities of foreign economic activities end foreign business entities (hereinafter - entities of foreign economic activities).

The force of this Order concerns all the business entities of foreign economic activities regardless of ownership type and place of registration.

1. General provisions

1.1. Special sanctions – individual regime of licensing or temporary suspension of foreign economic activities – are imposed to entities of foreign economic activities by the Ministry of Economy of Ukraine in accordance with the decision of judicial authorities of Ukraine or on the basis of claim filed by the state taxation and supervising authorities, customs, law-enforcement authorities, and by the National Bank of Ukraine.

(Clause 1.1 with changes made in accordance with the Order of the Ministry of Economy of Ukraine
No. 233 of November 11 2000)

1.2. Sanctions are imposed by the Ministry of Economy of Ukraine to the entities of foreign economic activities that violated the Law of Ukraine "On foreign economic activities" and related Laws of Ukraine, specifically, in case the entities of foreign economic activities violate currency, customs, tax or other legislation related to their foreign economic activities and in case these entities undertake actions that can cause damage to the interests of national economic safety.

1.3. Sanctions are imposed for the term until business entities of foreign economic activities introduce certain measures to liquidate violation of the effective legislation in the field of foreign economic relations and bring their foreign economic activities in compliance with requirements of effective legislative acts of Ukraine.

1.4. Ukrainian business entities of foreign economic activities subject to special sanctions – individual licensing regime or temporary suspension of foreign economic activities - do not have the right to sign any power of attorney; commission or agent agreements; agreements on joint activities and cooperation; consignment, dealer, distributor, leasing, hiring, safe custody and other agreements, which foresee carrying out foreign economic operations by other persons or in favor of other persons upon charge, or transference of property for temporary usage with aim of conducting foreign economic activities.

1.5. Ukrainian business entities of foreign economic activities do not have the right to sign with foreign business entities, which are subject to special sanctions – individual licensing regime or temporary suspension of foreign economic activities – any power of attorney; commission or agent agreements; agreements on joint activities and cooperation; consignment, dealer, distributor, lease, hiring, leasing, storage and other agreements, which foresee carrying out of foreign economic operations by other persons or in favor of other persons upon charge, or transferrance of property for temporary usage with aim of conducting foreign economic activities in Ukraine, or with commodities of Ukrainian origin.

1.6. Effect of special sanctions – temporary suspension of foreign economic activities or individual licensing regime – imposed in regard to business entities of foreign trade activities applies to all the types of foreign economic activities listed in Article 4 of the Law of Ukraine "On foreign economic activities", carried out by the Ukrainian business entities of foreign economic activities and foreign business entities.

1.7. Single foreign trade operation is a set of actions of the Ukrainian business entity of foreign economic activities and foreign business entity, which can be applied to any type of foreign economic activity listed in Article 4 of the Law of Ukraine "On foreign economic activities", and is a completed single transferrance of the commodities (services, works) and completed settlements (monetary, commodity and others) for this single transferrance of commodities (works, services).

2. Individual licensing regime

2.1. Individual licensing regime for foreign economic activities of Ukrainian and foreign business entities foresee introduction by the Ministry of Economy of Ukraine of an individual licensing for every foreign economic operation of certain type of foreign economic activities from those listed in Article 4 of the Law of Ukraine "On foreign econoic activities".

2.2. To make control over foreign economic activities of foreign business entities, which made infringement in this field, a single (individual) license is granted by the Ministry of Economy of Ukraine or its authorized bodies. Single (individual) license empowers to carry out foreign economic operations by business entities of foreign economic activities, which are subject to sanctions. Single (individual) license should be processed in accordance to procedure developed by the Ministry of Economy of Ukraine.

3. Temporary suspension of foreign economic activities

3.1. Temporary suspension of foreign economic activities in regard to Ukrainian business entities of foreign economic activities and foreign business entities is considered as striking off the right to carry out any foreign economic activities envisaged in Article 4 of the Law of Ukraine "On foreign economic activities", except for:

completion of settlements for foreign economic operations, in case Ukrainian business entities of foreign economic activities or foreign business entities transferred fees before the sanction was imposed;

completion of settlements for foreign economic operations for products destined outside Ukraine by the Ukrainian business entities of foreign economic activities or imported in Ukraine by foreign business entities before this sanction was imposed.

To complete such operations, Ukrainian business entities of foreign economic activities are to get a single (individual) license issued by the Ministry of Economy of Ukraine through the procedure established by law.

3.2. The sanction of temporary suspension of foreign economic activities can be imposed by the Ministry of Economy of Ukraine in regard to business entities of foreign economic activities, in case these take the following actions in the field of foreign trade:

those capable of causing damage to the interests of the national economic safety;

those resulting in offencing Ukraine’s international obligations;

in case if within a year term after imposition of an individual licensing regime there were no taken measures to bring its activities in conformity with the requirements of the effective legislation in the field of foreign economic relations.

4. Procedure to impose (abolish, alter or suspend) special sanctions by the Ministry of Economy of Ukraine

4.1. Processing of applications for imposition (abolishing, alteration or suspension) of sanctions in regard to business entities of foreign economic activities submitted by the bodies of taxation and supervisory services, customs, law-enforcement bodies, and the National Bank of Ukraine was assigned to the Directorate for Trade Restrictions, Control over Foreign Economic Activities and Chief Directorate for Legal Support of the Ministry of Economy.

(Clause 4.1 with changes, made in compliance with the Order of the Ministry of Economy
No 233 of November 01 2000)

4.2. Applications for imposition of special sanctions in regard to business entities of foreign economic activities – individual regime of licensing of foreign economic activities or temporary suspension of foreign economic activities - are to contain the following data:

full requisites of business entities of foreign economic activities;

supporting documentation reflecting certain offence of the effective legislation of Ukraine by business entity of foreign economic activities of Ukraine or foreign business entity in regard to the Law of Ukraine "On foreign economic activities"; or any other legislative document related to this Law.

(paragraph three of Clause 4.2, the Order edited by the Ministry of Economy
as of November 01 2000, No 233)

proposals as to the type of sanctions recommended for imposition.

Should submitted applications be incomplete, the Ministry of Economy of Ukraine can make an inquiry to the initiator of application or to the other bodies of state regulation and currency control, legal entities in regard to rectifying information on business entities of foreign economic activities.

(paragraph five of Clause 4.2, the Order edited by the Ministry of Economy of Ukraine
as of November 01 2000, No 233)

4.3. Responsibility on authenticity of the information specified in applications in regard to imposition (abolishing, alteration or suspension) of sanction, which are the grounds for issuing respective orders by the Ministry of Economy of Ukraine is beared by the initiator of application through the procedure established by the effective legislation of Ukraine.

4.4. Should the Ministry have additional paperwork (information) available on business entities of foreign economic activities, in regard to which it is advisable to impose (abolish, alter or suspend) sanctions, these data are added to materials as to imposition (abolishing, alteration or suspension) of sanctions and considered along with the application while taking the final decision.

4.5. To expand survey of business entities of foreign economic activities, the Directorate for Control over Foreign Economic Activities can attract specialists and use materials of other structural departments with the Ministry, the Council of Ministers of the AR of Crimea, and Regional, Kiev and Sevastopol municipal state administrations (if agreed).

4.6. After all the documents (information) are processed, the Directorate for Control over Foreign Economic Activities works out draft-order and submits it to the Minister or other authorized official of the Ministry of Economy of Ukraine through the procedure established by law.

4.7. Imposition of sanctions in regard to business entities of foreign economic activities can be forwarded by the official notice of the Ministry of Economy of Ukraine on the potential imposition of sanctions.

4.8. The Ministry of Economy of Ukraine issues the Order on imposition of sanctions envisaged in Article 37 of the Law of Ukraine "On foreign economic activities”, which spells violated provisions of the effective legislation, materials certifying backgrounds for issuing of the Order, requisites of business entities subject to certain sanctions, along with the type of sanction, data, and the period sanction comes into force within.

(paragraph one of Clause 4.8 with changes made in accordance with the Ministry of Economy of Ukraine
No 233 of November 01 2000)

Respective orders of the Ministry of Economy of Ukraine are issued in case of abolishing, alteration, or suspension of sanctions imposed in regard to business entities of foreign economic activities.

4.9. Order of the Ministry of Economy of Ukraine in regard to imposition (revocation, alteration or suspension) of sanctions within the 30-day term is forwarded to:

the body, which submitted the application;

the State Taxation Administration of Ukraine;

the State Customs Committee of Ukraine;

the National Bank of Ukraine;

respective body of the AR of Crimea, structural departments of Regional, Kiev and Sevastopol city state administrations, where Ukrainian business entity of foreign economic activity was registered, which give notice of this to the Ukrainian business entities of foreign economic activities.

4.10. With aim of notification of entities of foreign economic activities, information in regard to imposition (abolishing, alteration or suspension) of sanction in regard to Ukrainian business entities of foreign economic activities and foreign business entities is forwarded to National Research and Information Center for Monitoring International Commodity Markets. The latter places these data on the Internet, in its WEB-page at WWW.UKRDZI.COM

4.11. Directorate for Control over Foreign Economic Activities ensures functioning of data base on imposition (abolishing, alteration or suspension) of sanctions in regard to business entities of foreign economic activities.

4.12. Business entities of foreign economic activities, which are subject to sanctions, are entitled to submit to the Ministry of Economy of Ukraine documentation acknowledging taken measures to bring their foreign economic activities in compliance with norms of the effective legislation, and address to the Ministry of Economy of Ukraine petition on abolishing (alteration, suspension) of sanction’s validity.

The general term to consider specified petitions and issue replies to business entities of foreign economic activities on decision taken by the Ministry of Economy of Ukraine shall not exceed 30 calendar days.

4.13. In case of applying to the Ministry of Economy of Ukraine with petitions on abolishing (alteration, suspension) special sanction, business entity of foreign economic activity has to submit to the Ministry the following documents:

а) the letter-application spelling the reasons that initiated offence and taken measures that brought its activities in compliance with norms of the effective legislation of Ukraine;

б) Original materials (certificates) from the bodies of state control, which execute control over foreign economic activities or currency control, which certify actual measures taken by business entity of foreign economic activities to bring its activities in compliance with the effective legislation of Ukraine.

If necessary, the Ministry of Economy of Ukraine can address the local bodies, which execute control over foreign economic activities, bank institutions with inquiries as to getting of additional materials (information) on activities of business entities of foreign economic activities, which addressed the Ministry of Economy of Ukraine with petition on abolishing (alteration, suspension) of sanction.

The Ministry of Economy of Ukraine may apply for business entities of foreign economic activities with aim of obtaining materials and information in regard to conducted foreign economic operations.

4.14. Special sanctions can be invalidated, in case business entity of foreign economic activity takes actual measures to bring its foreign economic activities in compliance with norms of the effective legislation of Ukraine and if the Ministry of Economy of Ukraine do not have any materials certifying violation currency, customs, tax, or other legislation related to its foreign economic activities and actions undertaken by the business entity of foreign economic activities that can cause damage to the interests of national economic safety.

4.15. In certain cases (arising of Force Majeure, pleading to arbitrator or usual jurisdiction of the country of counter-agent, or to the Court (Arbitrage) of Ukraine on acknowledgement or alienation from foreign business entity indebtedness related to failure to fulfil contractual obligations), validity of special sanctions can be suspended for the term until Force Majeure expires or during consideration of case when submitting respective documents.

4.16. Business entities of foreign economic activities bear full responsibility for authenticity of the information submitted to the Ministry of Economy of Ukraine.