More goods to be subject to localization requirements in Ukraine
2 May 16:49
The Ministry of Economy, together with the Verkhovna Rada Committee on Economic Development, has for the first time applied the statutory procedure for expanding the list of goods subject to localization requirements. This was reported by the Government portal, "Komersant Ukrainian" informs.
The reason for this decision was an appeal from Ukrainian manufacturers who expressed a desire to have their products subject to the localization policy.
Currently, the localization requirement applies to 103 products from four areas of mechanical engineering: railway transport, urban transport, municipal equipment, and power equipment.
What products should be added to the list
Localization is to be expanded by 25 more products in the following categories
– machine building, including elevators, tractors, etc;
– light industry goods, including workwear and military uniforms
– lighting devices, cables, traffic lights;
– metal structures and large diameter pipes.
It is reported that the government and the parliamentary committee on economic development remain open to further initiatives by Ukrainian producers to expand the list of localized goods in public procurement. Interested producers can submit their proposals to the Ministry of Economy.
The localization requirement does not apply to goods produced in countries that are parties to the WTO Agreement on Government Procurement, including the EU, the US, Japan, South Korea, the UK and others.
What is the localization policy about?
Localization in public procurement is a requirement for a minimum share of the Ukrainian component in the cost of goods purchased for budgetary funds. This ensures that public investments are directed to support national production, job creation and industrial development.
The Ministry of Economy of Ukraine monitors compliance with localization requirements. Manufacturers independently calculate the degree of localization and confirm it in accordance with the approved formula.
As a reminder, in July 2022, amendments to the law on public procurement came into force, gradually increasing the localization requirement, i.e. the share of Ukrainian content in certain goods.
Over the next 10 years, it should increase from 10% to 40%. In 2025, the localization level should be at least 25%.
Long-term contracts for a high level of localization
Ukrainian manufacturers of unmanned aerial vehicles that increase the share of localized production will have advantages in public procurement.
In this regard, the Ministry of Defense reminds that at the end of last year, a government decree “Weapons of Victory” was adopted, which sets out clear requirements for Ukrainian weapons manufacturers, in particular, certain types of bomber drones and reconnaissance drones. It is stipulated that if the localization of more than 50% of the specific value of all components is achieved, manufacturers can receive guaranteed long-term contracts for three, five or ten years from the state.
The state will help finance its own production
In April, the Ministry of Economy and the Ministry of Strategic Industries launched a new grant program for manufacturers of components for weapons and military equipment. Its goal is to reduce dependence on foreign suppliers and ensure localization of production of key elements for weapons.
According to the Ministry of Strategic Industries, the localization of component production is part of Ukraine’s defense strategy, as for the Ukrainian defense ecosystem, localization of components is a matter of product quality and safety of Ukrainian production.
Grants are provided on a co-financing basis. In the standard case, the state covers 50% of the project cost. For companies located in frontline regions or producing aircraft and spacecraft, the state share can reach 80%. The maximum grant amount is UAH 8 million.
