Business urges parliament to set deadlines for payments for food delivered to retail chains

KYIV. Nov 9 (Interfax-Ukraine) – Owners of companies and food manufacturers are asking the Verkhovna Rada to support a bill that sets the deadline for payments by retail chains for purchased food products of 10-60 days, since the existing 120-160-day payment delays leave producers without working capital.

The results of a meeting of food producers and economists aimed at discussing bill No. 6155 on the basic principles of food trade is stated in a joint press release of its participants, published on Tuesday. They include MPs, representatives of the Ukrainian Agrarian Council, the Association of Pig Breeders of Ukraine, the Association of Milk Producers, the Association of producers of confectionery, food concentrates, starch products and coffee in Ukraine (Ukrkondprom), the Ukrainian Bakers Association and the Business100 community.

"In Europe, the deferral of payments for products depends on the timing of their sale, and this is a normal practice. Rhetorical questions arise – is it fair for producers to receive money for a product in six months, while during this time its raw materials can rise in price by a third? How fair is the price of products in large chains, which sometimes can be twice as high as in the same stores of the manufacturer’s chain?" Dmytro Solomchuk (Servant of the People) is cited in a press release.

According to the press release, in Ukraine the terms of deferred payments by retail chains for delivered products reach 120 days, with an average selling period of 14 days, and payment can go to the manufacturers’ accounts on the 160th day, which deprives them of working capital.

According to the text of the bill, it is proposed to oblige the subjects of trading activities to make settlements with suppliers for food products with a shelf life of less than ten days within ten days from the date of their receipt, with a shelf life of 10-30 days – no later than 30 days, and with a shelf life of more than 30 days – no later than 60 days.

For violation of the terms of settlements, a penalty is charged in favor of the food supplier in the amount of 1% of the debt for each day of delay, and in case of delay for more than 30 calendar days, an additional penalty of 20% of the debt is charged, the document said.

According to the press release, due to payment delays, Ukrainian producers become uncompetitive in relation to foreign suppliers who have access to cheap foreign financial resources. Such working conditions negate the possibility of business development, do not promote payment discipline and do not protect the competitive environment.

"Our task is to create a legislative balance between the entire business. We must not have a situation in which, due to deficiencies in legislation, Ukrainian manufacturers lose the competition of foreign products in large retail chains," Solomchuk said.

According to the MP, under such conditions, all manufacturers – suppliers of chains in the country annually lose about $5 billion, which remain in working capital of retail, therefore it is cheaper for a Ukrainian manufacturer to produce food abroad, and sell it through chains in Ukraine.

Bill No. 6155 also prohibits prescribing conditions in the contract that may change the range of products of a trading entity, apply offsetting in settlements for delivered products, and return them to the supplier, except in special cases.

"We hope that MPs will finally listen to the Ukrainian manufacturer. The document, now awaiting consideration in the parliament, can really become the basis for the formation of fair market relations in the sale of food products, when neither side can abuse its prevailing market power," deputy head of the Ukrainian Agrarian Council Mykhailo Sokolov said.

He stressed that Ukrainian manufacturers have been waiting for years for an opportunity to invest their funds in the development of local production instead of lending to the purchase of imported goods by trade chains.

According to the explanatory note to the bill, the implementation of its provisions will ensure the development of trade activities in Ukraine in order to fully meet the needs of the population in goods, as well as create the basis for the formation of a market and non-discriminatory system for the sale of food products.