Distribution of Wine in Ukraine

The wine industry of Ukraine is represented by companies of both primary and secondary winemaking. The main types of grapes being grown in Ukraine are Aligote, Bastardo Magaratsky, Cabernet Sauvignon, Merlot, Muscat, Odessa Black, Pinot and Riesling. In the year 2020, approximately 14.4 million liters of wine were exported from Ukraine which is twice as much as in 2019.

Besides, wine imports have also increased significantly over the past few years. According to the State Customs Service, in 2020 Ukraine imported wine for USD 180 million which makes a 22% increase as compared with 2019. Positions as sparkling wines made even better increase USD 54.7 million in 2021 with 44% growth as compared to 2020.

Since 1 January 2021 Ukraine cancelled the customs duties on wines exported from the EU to Ukraine as a part of the country's Association Agreement.

In a nutshell, wine and wine products labelling rules for Ukrainian sales are defined by:

• law of Ukraine "On Information for Consumers on Food Products", which establishes requirements for both mandatory and voluntary information placed in the products labelling;
• special labelling requirements envisaged by the Law of Ukraine "On the State Regulation of Production and Circulation of Ethyl Alcohol, Cognac and Fruit Alcohol, Alcoholic Beverages, Tobacco Products, Liquids used in Electronic Cigarettes, and Fuel";
• law of Ukraine "On Protection against Unfair Competition" which is aimed at protection of business entities and consumers against unfair competition.

For instance, the labelling information should include a name of the country, product name, trademark, alcohol content (% vol.), sugar content (except for certain cases), the name and location of the food market operator responsible for providing information / the name and location of the importer. All of these are subject to visibility requirements and bar coding.

The advertising shall comply with both: i) general Ukrainian rules, which are applicable to all types of advertising of any products, ii) special requirements and restrictions applicable to the advertising of alcoholic beverages.

General requirements

The advertisement must not, inter alia:

• contain misleading information (meaning incomplete, inaccurate or false information);
• contain statements that are discriminatory, as well as such that discredit the products of other brands\manufacturers;
• use tools and technologies that have impact on the subconscious of consumers of advertising;
• use or imitate the image of national symbols of Ukraine.

Besides there are several requirements to:

• placing an image of a natural person or use his/her name in the advertising;
• intellectual property rights protection in advertising.

Comparative advertising is allowed in Ukraine if it meets a few criteria:

• no signs of unfair business practice (e.g. is not misleading and aggressive);
• objectively compares the characteristics/price of homogeneous products or products with the similar indication of origin;
• does not contain false information about the quality of similar products of other manufacturers or sellers;
• does not discredit the product or create any consumer confusion.

Any comparative advertising may attract attention of the Ukrainian antitrust & competition authority as a potential source of unfair competition.

Special requirements

1) Advertising of wine products is prohibited, inter alia:

• on radio and television from 6 a.m. to 11 p.m.;
• in all print media (except for specialized publications);
• with the help of promotional activities (except for special exhibition events of alcoholic beverages).

2) It is prohibited to use:

• persons under the age of 18 as photo models in the advertisements of alcoholic beverages;
• images of celebrities as well direct or indirect approval by celebrities of alcohol consumption;
• images of the process of consuming alcoholic beverages;
• images of doctors and other medical professional.

3) Advertising of wine shall not:

• form the opinion that alcohol consumption is an important factor in achieving success in life;
• make impression that the use of alcoholic beverages will help solve personal problems;
• imply that alcohol has medicinal properties, provides stimulative or sedative effects.

4) Advertising of alcoholic beverages shall be accompanied by a special warning. The Ukrainian legislation contains several requirements to both the content of such warning as well as the way of its placement (e.g., the size, colours of both the text of the warning and its background, the place where it shall be indicated etc.).

As a rule, import\export customs clearance is being done by the certified customs brokers.

Ukraine applies special import duties which amounts are heavily dependent on a country of origin\export. For example, the EU-produced wine will be subject to a preferential zero Ukrainian import duty, albeit an average generally applied rate is EUR 0,4\l.

Ukraine also uses a broad range of excise (per unit) tax (from EUR 0,001\l for ABV 15 less percent wines to EUR 4\l for ABV 22 more beverages).

Both wholesale or retail wine distribution in Ukraine will be subject to the general ad valorem taxes - CIT (up to 18 percent) and VAT (up to 20 percent).

Import of wine into Ukraine may be carried out by companies (including foreign entities operating through their registered permanent establishments) and without a license.

Wholesale alcoholic beverage trade in Ukraine requires a license. This general rule has some exceptions:

• licensed grape\fruit wine producer with its own raw materials;
• primary winemaking companies if they supply wine materials to the secondary producers.

Retail trade in alcoholic beverages (except for table wines) requires a retail license.

Discounts, compensations, and bonuses are not prohibited under the Ukrainian law. However, business relations between manufacturers, distributors, and retailers (including motivation mechanisms) are subject to a specific scrutiny of the Ukrainian tax and antitrust authorities.

This area of business requires special attention as fines and other criminal\administrative penalties are high.

Unfair competition on the wine market may appear, inter alia, in the form of:

• dissemination of misleading information in labelling and / or advertising of products;
• use improper comparative advertising which does not comply with a number of requirements envisaged by the Ukrainian legislation;
• unlawful use of designations (others' names, trademarks, advertising materials and packaging);
• unlawful use other manufacturers’ products;
• copying products' outward appearance;
• discreditation acts.

The fines at stake may go up to 5% of the annual revenue of a company.

The most common violation is misleading information in advertising and/or labelling. The concept of misleading information is not restricted by manifestly false information. Any inaccurate, incomplete, out-of-context information as well as exaggeration or omission of certain facts influencing the consumer behaviour might be a violation of antitrust & competition legislation.

The brand protection strategies may include a complex of various legal measures, which may be used either individually or combined with each other depending on the case. Such measures may include:

• border measures: registration of brand in the customs register of intellectual property rights, that helps to monitor the transportation of goods across the customs border and take immediate actions to prevent importation of counterfeit products;
• administrative/criminal actions: infringement of intellectual property rights is sanctionable and may be prosecuted under the administrative or criminal procedure (depending on the scale of the infringement). These enforcement proceedings help to investigate into the distribution chain of the counterfeit products and claim damages (as the civil plaintiff in the criminal proceedings);
• combating unfair competition: some conflicting products cannot be the fakes, but lookalike products which imitate the original goods and causing the trademark confusion. Initiation of the unfair competition proceedings before the Antimonopoly Committee of Ukraine provides for the possibility to establish the fact of unfair competition, to get the injunction and to impose fines on the infringing company;
• regulatory: the local surveillance authority may conduct inspections and take actions to sweep the counterfeit products off the market.