Ukrainian arms manufacturers ask to reduce export fees: what the industry offers

Ukrainian arms manufacturers are calling for the cancellation or significant reduction of the fee for obtaining permits for arms exports. Currently, it is 20% of the cost of finished products and technologies and 30% of the cost of components. Industry representatives say that such rates may make the sale of Ukrainian products abroad economically unprofitable.

The Ukrainian Council of Arms Manufacturers, together with the League of Defense Enterprises of Ukraine, the Ukrainian Cluster of Dual Technologies (UADUT), the Federation of Employers of Ukraine, NAUDI and the Technological Forces of Ukraine, have prepared proposals for amendments to Government Resolution No. 875.

Industry representatives generally support the introduction of controlled arms exports. In their opinion, an effective mechanism can help Ukrainian manufacturers attract foreign financing and integrate into international supply chains.

Arms manufacturers propose reducing the rate to 0–5%

One of the main complaints of the business is the size of the permit fee. Currently, it is 20% of the cost of finished products and technologies and 30% of the cost of components and components.

According to the assessment of specialized associations, for some products such payments significantly worsen the competitiveness of Ukrainian manufacturers in foreign markets.

The industry proposes to completely cancel the payment or set it at a level of no more than 5% of the contract value.

Manufacturers also oppose advance payment. Currently, the enterprise must withdraw the corresponding amount from circulation even before receiving funds from a foreign customer, while the issued permit does not guarantee that the contract will be fulfilled.

Therefore, the business proposes to tie the payment to the actual execution of the contract or receipt of funds, guarantee the return of the paid amount if the deal did not take place through no fault of the manufacturer, and allow for phased payment under long-term contracts.

What other changes does the defense industry propose

Some comments concern the threshold contract amount of UAH 15 million, which, according to the manufacturers, does not take into account the specifics of test, demonstration and pilot deliveries.

The business also points to the lack of a transparent mechanism for informing about the classification of products as critical goods.

Manufacturers propose introducing a separate regime for test and demonstration deliveries, more clearly defining the concept of the state’s “intention” to purchase goods, and guaranteeing compliance with the 30-day deadline for considering applications.

The Rada did not support directing funds to the army

At the same time, on September 15, the Verkhovna Rada did not support in the first reading a bill amending the Budget Code, which proposed directing revenues from export permit fees to a special state budget fund.

According to the proposed model, 50% of the funds were to be used for the purchase, modernization, and repair of weapons, and another 50% for financial support for the servicemen of the Armed Forces of Ukraine.

Thus, the discussion on the mechanism for arms exports continues: representatives of the defense industry insist on reducing the financial burden, while the export permit fee was also considered a potential source of additional financing for defense needs.