Summary

The Verkhovna Rada will consider Draft Law No. 13392, which aims to tighten localization requirements in an attempt to improve the effectiveness of this mechanism. 

The Ministry of Economy will be granted the authority to establish a commission responsible for verifying compliance with localization requirements, reviewing complaints, and conducting on-site inspections of manufacturers. The Ministry itself will also be authorized to carry out such inspections. This authority is uncharacteristic for the Ministry of Economy, and without proper regulation of the grounds, procedures, and outcomes of inspections, it may create risks of abuse. 

In addition, the Draft Law introduces a series of changes to the basic localization requirements, the procurement process, and the powers of the Ministry of Economy and oversight bodies. 

Information about violations of localization requirements is proposed as an additional ground for launching a procurement monitoring procedure, even though the State Audit Service already oversees this issue. The State Audit Service may also be granted the power to recommend that the Ministry of Economy remove a product from the list of localized items.

The Draft Law proposes to incorporate localization requirements into every stage of the procurement process — from planning to the reporting on contract performance. Failure to comply would result in fines for suppliers and the termination or nullity of contracts.

Localization requirements may also extend to defense procurement, where the relevant provisions currently appear inconsistent. Most of the text, especially in the defense section, requires substantial refinement.

Transparency International Ukraine calls on Members of Parliament not to vote in favor of this Draft Law. 

Basic requirements: products, thresholds, non-residents, and defense

First and foremost, a number of basic provisions are being revised. The list of products subject to localization will be expanded to include mechanized demining equipment (for humanitarian demining) and devices for detonating (neutralizing or destroying) explosive objects, including remotely operated ones.

The value threshold is also being revised and clarified: localization requirements will apply to products worth UAH million or more within the scope of a procurement item, unlike the current provision, which sets the minimum value of the procurement item at UAH 200,000. The provision regarding the procurement of works and services has also been clarified — the value threshold is now explicitly tied to the product that the procuring entity acquires into ownership. 

Localization requirements will remain in force until December 31, 2032, which is one year longer than currently prescribed by the Law.

The Draft Law also specifies the procurement methods to which localization applies. The requirements will cover competitive procedures, negotiated procedures, and procurements conducted without using the electronic system. In other words, simplified procurement will remain outside the scope. Discussions may also arise regarding the applicability of these requirements to procurement through the electronic catalogue — it would be reasonable to explicitly mention this method if the drafters intended to extend localization requirements to it in the future. 

Furthermore, the Draft Law proposes to introduce localization provisions into the Law of Ukraine on Defense Procurement. In this area, the degree of localization would essentially become a non-price criterion influencing the assessment of bids. Under certain provisions, the price of a localized product would be calculated with a coefficient of 0.75, effectively reducing it. A formula would apply to determine the price in cases where bids are submitted for both localized and non-localized products. Overall, the proposed amendments to the Law of Ukraine on Defense Procurement require the most revision and contain the highest number of inconsistencies. 

As for non-resident suppliers, issues related to international treaties are to be regulated in the same way as currently described in Cabinet of Ministers Resolution No. 1178. In other words, localization requirements should not hinder the supply of products from countries with which Ukraine has concluded international contracts on government procurement, free trade, and similar arrangements. However, this exemption would apply only if documents confirming the country of origin of the products are provided: a certificate of origin, a certified declaration of origin, a declaration of origin, or a certificate of local product name. If these documents are not provided during the acceptance and transfer of the products, a procuring entity must terminate the contract. This latter provision appears somewhat disconnected from the rest, as neither the current Law nor the Draft Law contains any requirement to provide such documents during the acceptance-transfer process, nor do they specify the procedure for verifying them or where exactly they must be available at that stage. 

How manufacturers will confirm localization

A prerequisite for the procurement of products subject to localization will be not only the required localization percentage but also the condition that the manufacturer has included the product in the list of products with a confirmed degree of production localization (the list of localized products).

The degree of localization will be confirmed based on the manufacturer’s performance of specific technological production operations. The Cabinet of Ministers will approve the procedure for defining such technological operations, as well as the costs that form part of the product’s production cost. The Cabinet will also approve the Procedure for the Formation and Maintenance of the List of Localized Products. Currently, it is only authorized to establish the procedure for confirming the degree of localization and the procedure for monitoring compliance.

 The documents on the basis of which products were included in the list of localized products must be retained for at least three years from the date of inclusion. However, the Draft Law does not specify who bears this obligation or which exact documents must be stored. 

Ministerial inspections 

A considerable part of the Draft Law focuses on monitoring compliance with localization requirements. The Ministry of Economy will establish a Commission on Ensuring the Formation and Maintenance of the List of Localized Products and the Accuracy of the Information Contained Therein (the Commission). The Cabinet of Ministers will define the Regulation on the Commission. The Commission will be granted a number of powers, including: 

• verifying the list of localized products and the documents based on which products were included, particularly whether the product was added by its manufacturer, whether the manufacturer actually performed the technological operations, and whether the required level of localization was achieved,
• considering complaints regarding non-compliance of products included in the list of localized products with the relevant requirements, including through on-site inspections of businesses to check the localization level of their products and the actual performance of production operations,
• involving representatives of control authorities and industry experts in on-site inspections, and
• submitting requests to the Ministry of Economy to exclude products from the list of localized products and providing it with recommendations on confirming the degree of product localization.

The Ministry of Economy itself will also conduct verification on-site inspections of business entities that have included their products in the list of localized products. The Cabinet of Ministers will determine the relevant procedure. 

These provisions raise numerous questions. The Law will not define what constitutes “verification on-site inspections,” the grounds and procedures for conducting them, or the legal consequences for businesses and contracting authorities. The powers of the Ministry and its Commission will overlap. Moreover, such functions are inherently uncharacteristic for the Ministry of Economy — an institution that develops and implements public policy but does not belong to the system of controlling authorities. 

Furthermore, the described powers bear clear features of state supervision (control) as defined in the Law of Ukraine on the Fundamental Principles of State Supervision (Control) in the Field of Economic Activity, while the mentioned inspections exhibit the characteristics of state supervision (control) measures. Article 4(4) of that Law stipulates that only by law may the methods and forms of state supervision (control) and sanctions for violations, as well as the list of violations that serve as grounds for issuing orders or instructions, be established. The Draft Law, however, does not define the business process for such inspections or specify sanctions for specific breaches of localization requirements. Collectively, this creates corruption risks.

The Draft Law also fails to clarify which supervisory authorities may participate in inspections and does not amend their sectoral legislation accordingly. 

Although the explanatory note claims that the Draft Law will not require budget expenditures, in practice, assigning new functions to the Ministry of Economy and establishing and maintaining the Commission are unlikely to be cost-free.

In addition to inspections, the Ministry will analyze compliance with localization requirements, develop methodological recommendations for including products in the list of localized products, and engage with manufacturers. In its annual report on the functioning of the sector, the Ministry will also cover compliance with localization requirements, including quantitative and value indicators, broken down by procedures and procurement items.

What will change in the State Audit Service’s monitoring

The Draft Law also attempts to strengthen control over compliance with localization requirements by introducing new grounds and outcomes for procurement monitoring by the State Audit Service and amendments to the Law of Ukraine on the Basic Principles of State Financial Control in Ukraine.

The Draft Law proposes adding to the grounds for initiating procurement monitoring — media reports and information from civil society organizations indicating possible violations of localization requirements. However, this provision adds no real value, as the current Law already allows monitoring based on information from the media or CSOs regarding any violations of public procurement legislation, including localization rules. The proposed and existing grounds therefore overlap as general and specific categories. 

Moreover, the provisions on monitoring results could even complicate the State Audit Service’s response to violations and limit its discretion in applying effective remedies. Under the Draft Law, if the financial control body identifies a respective violation of localization requirements, it must send a recommendation to the Ministry of Economy to exclude the relevant Product from the list of localized products. 

However, this would apply only in cases where a product is present both in the list and in the tender proposal but fails to meet localization requirements — for instance, due to an insufficient localization percentage or inclusion by a non-manufacturer. In practice, other types of violations may occur, such as when a procuring entity procures a product that is not included in the list at all. For such cases, the Draft Law provides no response mechanism, effectively reducing the Service’s role to issuing recommendations for exclusion. From a legal standpoint, it would be far more effective to explicitly prescribe remedies for each type of violation. 

It is worth noting that compliance with localization requirements is already part of the State Audit Service’s monitoring practice. For example, between 2023 and the first half of 2025, localization issues were mentioned in 815 procurement monitoring reports. Therefore, strengthening control is unlikely to be achieved merely by adding monitoring grounds. 

The drafters also propose including compliance with localization requirements among the main tasks of the State Audit Service under the Law of Ukraine on the Basic Principles of State Financial Control in Ukraine. A corresponding clarification is also proposed regarding its right to review documents. However, these amendments appear unnecessary, as localization requirements already fall within the scope of public procurement legislation, and compliance is therefore already subject to the Service’s oversight and control measures.

Localization at every step: how the procurement process will change

Localization requirements for the procurement item and the method for confirming compliance will need to be defined both in procedures and in procurements conducted without using the Prozorro system. The announcement will have to specify that the procurement concerns a product included in the list of localized products, while the tender documentation must contain requirements regarding the degree of localization and obliges participants to submit the relevant information and supporting documents. 

In practice, the obligation to include localization requirements in tender documentation already stems from existing law, as such provisions are legally mandated, and any procurement carried out without compliance would constitute a violation. However, the Draft Law does not specify which supporting documents must be required. Mentioning this additionally in the announcement seems unnecessary, except perhaps for the purpose of automated analysis. This may require the creation of additional fields in the Prozorro system. 

The drafters propose adding several new grounds for rejecting tender proposals, including non-compliance with the required degree of localization; failure by the participant to provide information and supporting documents for a product from the list of localized products; inclusion of a product in the list by an entity other than its manufacturer. The latter ground would evidently require the procuring entity, during the review of tender proposals, to also examine the documents uploaded to the list of localized products. It is worth noting that if a localization requirement is already included in the tender documentation, non-compliance is already covered by the existing rejection ground — “non-compliance with the requirements established in Article 22(2)(1) of the Law regarding the participant’s compliance with legislation.” 

Violations of localization requirements will constitute grounds for declaring a procurement contract, or a contract concluded outside the Prozorro system, null and void. Essential terms of the contract will include a clause on a fine for a supplier amounting to at least 25% of the contract price, payable to the procuring entity if the delivered product does not meet the required degree of localization and/or the list of production technological operations or was included in the list of localized products by a non-manufacturer.

In our view, it would be more logical first to include as an essential term a basic requirement stipulating that the product must comply with localization requirements, since no such clause currently exists in the contract itself. Moreover, it is unclear how the procuring entity could verify whether the product complies with the “list of production technological operations” without having the necessary supervisory powers or resources. 

Reports on procurement transactions conducted without using the electronic system, as well as reports on contract performance, will also be required to include information and supporting documents regarding the degree of production localization. While this may facilitate oversight in the first case, it appears redundant for the second, as the contract will already have been executed (or terminated, or expired). Consequently, even if such documents are missing from the performance report, it will be impossible to conduct procurement monitoring at that stage. Duplicating requirements at early and late stages of the procurement process will likely only result in procuring entities re-attaching the same documents previously submitted with the tender proposal (assuming the system technically allows it). 

Conclusions

Transparency International Ukraine calls on MPs not to vote for this Draft Law. Above all, they should reject the idea of on-site inspections by the Ministry of Economy and the commission it establishes. 

Such powers are unnatural for the Ministry, which is not a supervisory authority. Moreover, it appears that the Ministry’s inspection powers will overlap with those of the Commission. The Law will not define what “verification on-site inspections” are, on what grounds and in what order they will be conducted, or what legal consequences and sanctions for businesses and procuring entities they may entail. Together, these factors create a high risk of abuse and corruption. The proposed approach may also contradict other laws, including the Law of Ukraine on the Fundamental Principles of State Supervision (Control) in the Field of Economic Activity.”

In all other aspects, the Draft Law requires substantial revision: 

• The provisions on defense procurement demand special attention — in some places, they are almost unintelligible due to the way they are written. Implementers will also need a clear understanding of when the localization indicator should be treated as a non-price criterion and when its absence should result in bid rejection. 
• Certain provisions may be impossible or extremely difficult for procuring entities to implement due to a lack of powers and resources. For example, verifying at delivery whether a product complies with the list of technological operations. Additional difficulties may arise from missing procedures: the Draft Law requires terminating a contract if documents confirming the country of origin are missing, but it does not specify who must provide them, when, to whom, or where they must be available. 
• Some provisions could hinder the ability of oversight bodies to respond effectively to violations — for example, the rule requiring the State Audit Service to merely issue recommendations to the Ministry of Economy to exclude a product from the list of localized products, even though other types of violations might require different corrective measures. From a legal standpoint, it would be far more effective to define remedies for each type of violation explicitly.
• Some parts of the text add no normative value or duplicate existing regulation, such as the additional grounds for procurement monitoring or the amendments to financial control legislation. Other provisions lack practical sense while requiring technical changes to the Prozorro system (for example, adding localization information to contract performance reports).
• It would also be advisable to close existing gaps by explicitly defining the procurement methods to which localization requirements will apply — including those used during martial law — and by clarifying who must keep documents for three years and which specific documents this obligation covers. 

This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

The localization “functioned” this way for two years

Localization did not function immediately after the adoption of the law. For another six months, the Cabinet of Ministers was developing a procedure for how it should work. It turned out to be quite formal: producers of goods must fill out an electronic form with localization calculations, and the Ministry of Economy must check the mathematical correctness of these calculations. Entrepreneurs are not required to provide any other confirmation of a sufficient level of the Ukrainian component in the goods. All products in which the formula converges fall into a special list. Participation in tenders subject to localization is possible only with the goods of producers from this list.

We warned that this formula would not work. Firstly, this scheme does not provide for real verification of the reliability of the data provided by producers. Producers themselves calculate their share of localization and enter it into the system. Secondly, real information about the share of goods of Ukrainian and foreign production is production details that are generally difficult to confirm. They are hardly unchanged throughout the year. A product may be added to the list in January, for example, a tractor. Its localization was calculated in one batch, containing Ukrainian bolts, nuts, and wheels. However, who can guarantee that the August batch will consist of the same parts and that the producers will not use, say, Chinese bolts?

What do we have in practice? 100% localized production of Mercedes-Benz Sprinter (Germany, but production can be implemented jointly with other countries) and Forte and Pezal generators (China).

There are not-so-obvious but suspicious stories. For example, the degree of localization of almost all products of Ukrtranssignal LLC included in the list in 2023 was 48.45%, while that of PJSC Svessa Pump Plant had 80% in all products. What is the probability that different products from the same producer have the same percentage of Ukrainian parts?

An attempt to enhance control

In late May of this year, the government introduced changes to the localization rules. Now, producers will be required to provide additional documents, including certificates. In addition, a procedure for appealing localization is planned to be launched. While it is unclear how this will function in practice, the government has yet to develop an appropriate procedure. However, it will most likely be an opportunity for a business to complain about a competitor if the latter has potentially miscalculated the localization of its products. These complaints will be considered by the Prozorro System Activity Commission, which, by the way, I am a member of.

Even Dmytro Kysylevskyi, one of the main initiators of localization and Deputy Chair of the Parliamentary Committee on Economic Development, admitted that it had not functioned these years. He blames business representatives for not showing integrity when entering foreign goods into the list of localized ones and calls them frauds. In his opinion, control and liability will solve the problem.

However, the lack of control is only the first, most superficial problem. Underneath is the issue of who calculates the percentage of localization and how. Producers themselves provide such information once a year.

Control over localization is to be assigned to the commission, which was created primarily to consider the functioning of electronic platforms and determine what sensitive information should be hidden from Prozorro in wartime. As its member, so far, I have little idea of how I will rummage through the documents of some company to understand whether it indicated the real percentage of localization in the system. Do my colleagues and I have the competence to do this? Will we be responsible for the fairness and truthfulness of the register of localized goods? By the way, the decisions of this commission are advisory in nature.

I am still inclined to think that, first of all, it is necessary to reconsider the very idea of localization as the best way to support domestic producers. After all, the entire economic argumentation of this initiative is based on calculations of the share of imported goods in public procurement based on cross-sectoral balances made by experts of the Economic Committee of the Verkhovna Rada when adopting the law on localization. We are told that imports account for 40%, but we have not seen these calculations and do not know their methodology. We can easily calculate the share of foreign companies that win tenders on Prozorro through the BI Prozorro public analytics module. However, of course, Ukrainian business does not always sell domestic goods on Prozorro. Therefore, the issue of prompt calculation of imports in public procurement is almost an impossible task.

Now, we do not see whether localization has somehow helped Ukrainian companies. I may be mistaken, but I have not seen such statistics provided by MPs or the government. However, the business now has more paperwork. The Ministry of Economy also has more work, as well as procuring entities conducting procurement with localization. Now, even more work will be assigned to the commission on the activities of the Prozorro system. The Antimonopoly Committee and the State Audit Service are also to be engaged in monitoring and ensuring liability for compliance with localization rules.

How rational is this resource expenditure during a full-scale war? Shouldn’t we focus more on control over reconstruction and admit at some point that localization in public procurement does not function? It’s not because business representatives are frauds. Not because the Ministry of Economy is doing something wrong. But because it was basically a bad idea from the start.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

Briefly about localization

Localization requirements are a mandatory condition for a minimum percentage of the local component in the cost price of the goods that are the procurement item. On July 14, 2022, Law No. 1977-IX entered into force, which introduced localization requirements in the field of public procurement. Procuring entities have the right to buy some goods with a value starting from UAH 200,000 or more only if their degree of localization complies with the law. These are mainly goods in the field of mechanical engineering.

Since 2022, an increasingly higher minimum degree of localization has been in effect every year. In 2024, it will be 20%. This level will continue to increase each year until it reaches 40%. The exception is procurement that is subject to international agreements of Ukraine and its value thresholds.

According to Procedure No. 861, in order to include a product in the list of localized products, the manufacturer must submit a corresponding application, a cost-price calculation on the electronic platform, and also confirm that at least one of the product’s elements is produced in Ukraine and/or domestic elements are used. This application was relatively formal: product manufacturers filled out an electronic form with localization calculations, and the administrator checked the mathematical correctness of these calculations. All products that met the formula were included in a special list. The automatic check of the correctness of calculations according to the formula has remained, but new documents have been introduced.

One of the main ideologists of localization, Dmytro Kysylevskyi, Deputy Chair of the Verkhovna Rada Committee on Economic Development, admitted in his blog that the previous rules had functioned ineffectively. According to him, manufacturers often “cheated” and listed goods that did not actually have the required share of localization. Transparency International Ukraine warned about this, even when localization was only planned to be implemented. So, the innovations should help clean up the list and strengthen localization control.

New documents to be submitted by the manufacturer

Now, the list of documents to be submitted by the manufacturer along with the application has been structured and supplemented. In addition to calculating the cost price of the product and confirming that at least one of the product elements is produced on the territory of Ukraine and/or domestic components, aggregates, parts, and component items are used, starting May 28, the manufacturer must submit copies of the following documents with the application:

• certificate of compliance of the quality management system in production with the requirements of the state standardISO 9001:2015 or the state standard EN ISO 9001:2018, or national standards that will replace them, issued by an accredited compliance assessment body;
• for manufacturers of wheeled vehicles—several options for certificates were provided: a certificate of type of equipment or vehicle, or a certificate of compliance of vehicle or equipment, or a certificate of compliance regarding individual approval (in it, the location of the manufacturer must be specified in Ukraine), or a certificate of assigning the World Manufacturer Identifier Code (WMI);
• filled-out form of state statistical observation No. 1P-NPP (annual) “Report on the production and sale of industrial products,” determined by the State Statistics Service, with information for the previous reporting year.

It was also clarified that the cost-price calculation refers to the data of the current year. The submission format has remained unchanged: the manufacturer submits an application with documents online free of charge, fills out electronic forms, and uses the qualified electronic signature.

New powers and a new appeal process

The exclusion of goods from the list of localized products was added to administrator rights (SE Prozorro). Now, the administrator will do it not based on a letter from the Ministry of Economy, but its order, approved and submitted based on the results of processing not only the decisions of the authorized bodies and the court, but also the commission regarding the consideration of issues of the Prozorro system or an appeal of the person who submitted the application or the manufacturer of the product.

Accordingly, the powers of the Prozorro System Review Commission (hereinafter referred to as the commission) have also been expanded. The main tasks of the commission include decision-making regarding the non-compliance of the manufacturer of the goods included in the list with the requirements specified in the procedure, or the inclusion of goods not of the manufacturer’s production in the list. At the same time, the decisions of the commission are advisory in nature.

In addition, there will be a new appeal process—now in the field of localization. So far, the process has not been regulated, and the procedure for considering such appeals will be determined by the Ministry of Economy. However, the consideration of complaints about non-compliance of the manufacturer of the goods included in the list with the requirements specified in the procedure. Such non-compliance may be because the manufacturer did not submit the necessary documents together with the application, does not meet the requirements of the procedure, or entered goods not of its production into the list.

The commission was also given the right to receive documents and information from central and local bodies of executive power, business entities, necessary for the performance of the tasks assigned to it. The business entity submits documents and information at the request of the commission within 10 working days from the date of receipt of the request.

Now it is difficult to say who will be able to use this right of appeal, probably the business that will participate in the procurement. However, we should wait for the procedure for reviewing appeals from the Ministry of Economy.

Rejecting an application and excluding a product from the list of localized goods

The rules on the results of submitting an application have undergone changes. Now the application will be rejected automatically: “in case of errors in the application submitted by the manufacturer of the product or in case of the non-compliance of the product with the degree of localization of the current year, defined in section X, clause 6-1, subclause 1 of the Final and Transitional Provisions of the Law, or provided for by the additional list of goods approved by the Cabinet of Ministers of Ukraine in accordance with section X, clause 6-1, subclause 3 of the Final and Transitional Provisions of the Law.

The rejection of the application at an early stage on the listed grounds is logical, since the system will be able to immediately assess the compliance of the product with the degree of localization based on the information specified by the applicant. But the wording of the grounds raises questions. First of all, detecting which errors in the submitted application will lead to its automatic rejection? What if it will be formal, in particular grammatical errors? The resolution does not specify which errors are meant, but probably those that are available for automatic processing by the system. There are also errors in the wording of the provision itself, it needs editorial revision.

Resolution No. 597 clearly defines that the product will be excluded from the list of localized goods based on the decision of the Ministry of Economy. The Ministry of Economy can make such a decision both on the old grounds (decisions of the court, authorized bodies for supervision and control), and on new grounds:

1)    The decision of the commission according to the results of the review of the complaint. It can be a complaint:

–       Regarding the non-compliance of the manufacturer of the goods included in the list with the requirements specified in the procedure, in connection with the non-submission of the documents that should have been submitted together with the application.

–       Regarding the non-compliance of the manufacturer with the requirements of the procedure. These are requirements for design and technological documentation, registration of intellectual property rights, production of at least one of the elements in Ukraine or use of such an element, warranty and post-warranty service, ISO certificates, and special certificates for vehicle manufacturers. The commission may make a decision on such a non-compliance after reviewing the documents submitted at its request, or it may make a decision in the event of their non-submission.

–       Regarding the inclusion in the list of products of other manufacturer’s production.

2)    At the request of the person who submitted the application or the manufacturer of the product.

Summing up, we see that the commission will be entrusted with an additional workload. It is difficult to imagine how, in practice, based on the available documents, it will consider some complaints and, in particular, determine whether someone is registering a product of their own production or not.

In addition, a month later—after June 28—the product will be excluded from the list if there are no documents required for inclusion in it, especially the new documents that have been requested since May 28. This provision, however, does not specify who exactly will exclude the goods under it and who will check this.

There is also the question of whether this provision applies to all products that will be included in the list of localized goods after June 28—as of today, there are more than 2,800 of them—or only to those for which manufacturers will apply after May 28. If so, within a month, manufacturers must urgently add ISO certificates and form No. 1P-NPP to their applications so that all documents according to clause 4 of the procedure are available, although Resolution No. 597 does not specify where exactly the documents might be missing so that the goods get excluded from the list.

However, if this provision is interpreted as such that can be applied only to legal relations that arose after its entry into force, then exclusion from the list will not affect all goods.

Resolution No. 597 provided for another case when the manufacturer will not be able to localize the product if its product is repeatedly excluded during the year due to the decision of the authorized bodies, the court, or the commission based on the results of reviewing the complaint. In this case, SE PROZORRO will block the possibility of this manufacturer submitting applications. In fact, this is an increase in the manufacturer’s responsibility for the authenticity and completeness of the documents it provides.

Conclusions

The government admitted that localization had not worked as intended. Due to the lack of control, products that did not meet the localization requirements were included in the list. The government seeks to remedy this through changes:

–       expanding the list of documents to localize the product;

–       giving the commission on the issues of the Prozorro system the authority to consider complaints regarding the compliance with localization requirements, and giving the Ministry of Economy the powers to make a decision on the exclusion of a product from the list of localized goods, in particular based on the commission’s decision;

–       blocking the ability of the manufacturer to localize the product for 1 year if the product of this manufacturer was repeatedly excluded during the year due to the decision of the authorized bodies, the court, or the commission based on the complaint.

The approach under which only the manufacturer can include a product in the list of localized goods is being increasingly used because cases of localization of goods produced by other manufacturers can be appealed.

There is also a question about the possibility of localizing the goods for non-residents or their separate units if the requirement regarding the percentage of the Ukrainian component is met. For example, the manufacturer’s location in Ukraine must be specified in the certificate of compliance regarding the individual approval of a wheeled vehicle, which will be submitted with the application.

The outlined innovations are only part of the changes that await the field in the future: at very least, the Ministry of Economy will determine the procedure for appeals in localization issues. Currently, we believe that a large volume of work on the consideration of complaints will be assigned to the commission for consideration of issues of the Prozorro system. So far, it is difficult to imagine how it will consider some issues in practice, for example, whether the manufacturer indeed included a product of its own production in the list. The main challenge is checking the reliability of the manufacturer’s calculations. Now it calculates localization independently by the share of the cost of Ukrainian components in the cost price of the product. Several certificates, which will now be required additionally, will not help to check whether the calculations made are correct. However, the commission will make a decision based exclusively on the documents provided.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.