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A draft low that will support domestic dairy producers

The Verkhovna Rada registered the draft low №6155 "On the basic principles of trade in food products", the adoption of which will regulate relations between producers and suppliers of food products and retail chains.

The share of retail chains in total food sales, as of July 1, 2021, is over 70%. Undoubtedly, such a sales channel has a positive effect on the current state of trade in Ukraine. However, the conditions for cooperation with modern retail for food producers and suppliers are predatory.

Наnna Lavreniuk, Director General of the Association of Milk Producers, notes that the draft low №6155 is especially important for the dairy industry.

“Dairy producers and dairy farms have been emphasizing the acute problem of unfair market practices on the part of trade networks for more than a year now: delays in payment for dairy products, which usually have a short sales period, reach 120-180 days. In fact, there is interest-free lending to networks at the expense of suppliers, which leads to a constant shortage of working capital from producers, their debts to suppliers of raw materials. No less harmful to the survival of the domestic dairy industry are caused by other economic distortions in cooperation with networks - the so-called "services" of networks to suppliers, reaching 26-32% of the cost of goods supplied. In the context of the growing crisis in the dairy industry of Ukraine, the adoption of ROM 6155 will significantly support domestic producers and help eliminate unfair practices in the food supply chain", said Hanna Lavreniuk.

In addition to the already mentioned deferrals of payments and requirements for additional services, manufacturers are forced to bear the risks associated with the return of unsold products - the network obliges suppliers to pick up unsold goods at their own expense and impose penalties for violations.

Even in a liberal European Union, trade laws are being passed to protect food producers and suppliers from the abuse of retail chains. In particular, Directive 2019/633 of the European Parliament and of the Council (of 17 April 2019) on unfair trade practices between enterprises in the field of agriculture and food was adopted. The Directive provides for a minimum list of prohibited actions that may be considered unfair in the relationship between buyers and suppliers, establishes minimum rules for compliance with these prohibitions and arrangements for coordination between executive authorities in this area.

In view of the above, the adoption of draft low №6155 will improve the economic situation of food producers, establish a market-equitable distribution of added value in the producer-consumer-consumer chain, ensure food security and take into account changes in line with EU directives 2019/633.

At the same time, the draft low is balanced, equals and protects the interests not only of suppliers but also of buyers (retail chains), as most of the rules are aimed at equalizing their "market power".

Therefore, the implementation of the provisions of the draft law will help improve the level of payment discipline in the field of food trade, reduce the number of conflicts that have arisen between businesses, as well as allow businesses to more clearly forecast their activities.

We thank the experts of PU "UAC", AMP, the Union of Dairy Enterprises of Ukraine for participating in the development of the draft law.

Draft law on basic principles of food trade 6155 dated 08.10.2021

Press service of the Association of Milk Producers