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FMCG in Ukraine

FMCG in Ukraine

Ukraine
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Ukraine continues to bring its legislation in line with EU legislation, fulfilling its obligations under the Association Agreement between the EU and Ukraine. One of the ways to improve the laws of Ukraine is to establish a relationship between the consumers, producers, and sellers of goods – especially of non-industrial use goods.

One of the regulations to be highlighted in that regard is Ukraine’s “On Consumer Information on Food Products” Law (the “Law”) that was passed in February and most of which came into force on August 7, 2019. 

The Law substantially tightens the requirements for providing information about food products on market operators, including requirements regarding labeling, composition, advertising, and positioning in the market.

Although there are a significant number of exceptions, as a general rule, the Law establishes a list of twelve items that must be displayed when selling packaged foods. In addition, the Law provides a detailed set of rules for how these items should be displayed on food packaging, including on the size and brightness of the font and to the approach of displaying a single item. For example, the Law establishes an extremely detailed framework for how the composition of a food product should be described, including the requirement that products containing more than 0.9% of genetically modified organisms or produced from an ingredient containing more than 0.9% of GMO should be labeled “with GMO.”

In addition, the Law includes a business-friendly transitional provision which permits the sale of foods produced under the previous law for three years from the day the Law entered into force (so, until August 7, 2020). 

The liability situation for violations and for non-compliance with the requirements for reporting the information on food products has significantly changed. Previously, the law provided only for fines for violations of the requirements for reporting information on food products (fixing five minimum wages as a fine) and only in cases where the violations could harm the life or health of a person or an animal (in accordance with Paragraph 5 Part 1 of Article 65 of the Law of Ukraine “On State Control over Compliance with Legislation on Food Products, Feed, By-Products of Animal Origin, Animal’s Health and Welfare”). Moreover, a penalty could be applied only in cases of repeated violations over the past three years (according to Part 2 of Article 65 of the same legislative act). 

However, the Law changes the situation dramatically. First, for the above violation, the fine is increased to the amount of 30 minimum wages for legal entities and to 25 minimum wages for individual entrepreneurs. Second, a new formulation of offenses, providing for extremely high fines, is introduced. For example, failure to provide the consumer with information about the ingredients that can cause allergies or intolerances can be fined in an amount of up to 30 minimum wages for legal entities and up to 25 minimum wages for individual entrepreneurs. 

The stipulations of Article 151 of the Law of Ukraine “On Protection of Economic Competition” which state that providing inaccurate, mistaken, or misleading information about any product can be interpreted as unfair competition should not be ignored. For the improper execution of the law, a penalty of up to 5% of the subject’s annual income of the year preceding the imposition of the fine is provided. It is also worth remembering the eventual problems that came with customs clearance when importing products which are marked inconsistently with the legal requirements. The introduction of a new special labeling law detailed the legal regulation of these issues. 

All of these requirements are closely related to the harmonization of the laws of Ukraine with EU legislation. For investors, on the one hand, the new rules will impose additional costs for changing the packaging of goods to comply with the Law’s requirements, but on the other hand, they will simplify the work in Ukraine for both Ukrainian and European food producers due to a unified approach to product labeling. This, in turn, will increase consumer awareness of products and, hopefully, will reduce the number of complaints.

By Dmytro Syrota, Managing Partner, SDM Partners

This Article was originally published in Issue 6.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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