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Posted On

12
January
2022

President signs law on local content in mechanical engineering

KYIV. Jan 12 (Interfax-Ukraine) – President of Ukraine Volodymyr Zelensky signed bill No. 3739, supported by the parliament, on amending the law of Ukraine on public procurement regarding the creation of prerequisites for sustainable development and modernization of domestic industry.

According to the information on the parliament’s website, the law was returned with the president’s signature on January 12 of this year.

According to the co-author of the law, MP Dmytro Kysylevsky, in the first year of the law, when purchasing engineering products, at least 10% of the Ukrainian content will be required, in each subsequent year this figure will increase by 5% until it reaches 40%.

“The creation of 64,000 jobs and GDP growth of 4.2% in the medium term is an extremely important effect that is expected after the local content law comes into force. But even more important is the reset of the state industrial policy. The support of the law in the Verkhovna Rada by the constitutional majority and the quick signing of the law by the president demonstrate that our industry still has a chance for adequate support from the state,” Kysylevsky said.

The MP also said that the Cabinet of Ministers now has to develop a regulatory framework for applying the local content requirement in public procurement. He assumed it would take several months.

As reported, Chairman of the Verkhovna Rada Ruslan Stefanchuk signed bill No. 3739 on December 24, 2021.

On July 21, the Verkhovna Rada passed at the first reading and on December 16 at second reading draft law No. 3739 on local content, aimed at the development of mechanical engineering. According to the document, temporary preferences (for ten years) apply to government procurements in the amount of UAH 200,000 or more, if the level of local content of production is 10% in 2022 with an annual increase of 5% – up to 40%, and this level of local content remains until the end of the ten-year term. By the second reading of the bill, the initial and final percentages of the required level of local content were reduced.

A degree of local content is determined by a manufacturer of goods and is confirmed by an authorized body in the manner established by the Cabinet of Ministers according to the proposed formula: the government, together with the relevant parliamentary committee, can annually (no later than October 31) change a degree of local content of production for the next year – reduce it to 5% or increase it by 10%, and can also reduce the level of local content for a separate procurement.

The list of goods subject to the law includes, inter alia, diesel generators, turbine generators, transformers, capacitors, pumps, ambulances, buses of various types, trams and trolleybuses, trucks and special vehicles, electric buses, vehicle bodies, trailers, locomotives, railway cars, helicopters, airplanes and spacecraft, steam turbines, and mining machines.

Local content requirements will not apply to companies from GPA member countries, in particular the EU and the United States.