Verkhovna Rada registered a draft law on removing the moratorium on round wood export

The government introduced a Draft Law on Amendments to the Law of Ukraine “On peculiarities of state regulation of business entities involved in the sale and export of wood products” to establish legal grounds of timber accounting and sale to comply with requirements of the EU-Ukraine Association Agreement, developed with the support of the Better Regulation Delivery Office (BRDO), for the Parliament’s consideration.

From November 1, 2015, there is the moratorium on export of all round wood species, except the pine, for ten years. This step faced with misunderstanding of our European partners as it contradicts COT and DCFTA rules.

The main reason of the moratorium introduction is unclear principles of allocation of forest resources by forestry enterprises leading to the situation when domestic manufacturers were provided with the raw materials by the leftover principle, and foreign customers paying bribes to the department heads were provided on a priority basis. That is why, there were almost no investments in the woodworking industry last years – state forestry enterprises were unreliable business partners.

According to the BRDO expert Igor Lavrynenko, to remove the moratorium on the timber export, carry out our obligations under the COT and provide domestic manufacturers with the raw material, the Government suggested the following regulatory mechanism for timber market proposed to be formalized in legislation:

  • Abolition of moratorium on rough timber export;
  • Introduction of a clear mechanism to sell rough timber by auction that will have two stages:
  1. For Ukrainian residents without the further export (as a result, this guarantees that the products will be available for Ukrainian producers)
  2. Unclaimed amount after the auction for residents is offered to non-residents of Ukraine – for export;

The Draft Law provides for the mandatory sale of all industrial timber amount only by auction without “direct” contracts, which are often accompanied with bribes.

  • Only permanent timber users (forestry enterprises) can be rough timber exporters – to remove the layer of middlemen-traders who lower the prices in forestry enterprises by using the corrupting contacts.
  • The Draft Law proposes to address a wood certification problem that will make it impossible to sale the stolen timber in order to solve domestic timber market problems and get the further support for this initiative.