Ukraine loses GSP benefits and trade sanctions loom for failure to tackle piracy

August 8, 2001 - The international recording industry fully supports the US Government Trade Representative's (USTR) decision, taken yesterday, to remove GSP benefits from Ukraine and issue a list of potential trade sanctions, and calls on the Ukraine Government to take the tough action needed to deal with the problem of CD piracy in the country.

The decision to suspend the special duty-free status for a range of Ukrainian products and to issue a preliminary list of other products from Ukraine that could face sanctions, follows the country's designation in March this year as Priority Foreign Country under US trade law.

Despite ongoing pressure - and assistance - from the US government and the international recording industry, with the strong support of local artists and record companies, Ukraine has consistently failed to meet its key obligations under the Joint Action Plan, signed by former US President Clinton and Ukrainian President Kuchma in June 2000, and has continued to play host to some the world's leading pirate CD manufacturers and distributors.

Ukraine has Europe's worst music piracy record, with domestic piracy running at around 95%. The estimated annual production capacity of Ukraine's five known CD plants of around 70 million CDs is totally mismatched to the legitimate local demand of between one and five million CDs. IFPI, representing over 1400 record labels worldwide, estimates this fuels a pirate export business costing the global music industry more than US$300 million a year.

Jay Berman, chairman and CEO of IFPI said: "The international recording industry fully supports the U.S. decision to both remove GSP benefits from Ukraine and issue a list of potential trade sanctions for persistent violations of intellectual property rights and for its failure to abide by the agreement it concluded with the United States last year. The decision, however, represents the failure of industry and government efforts to negotiate an improved legal framework and effective enforcement. As an industry, we will continue to work with Ukrainian government officials in an effort to secure the necessary reforms and to assist in the development of a local industry free of piracy."

For further information contact:

Stefan Krawczyk, IFPI Regional Office for Eastern Europe, tel: +32 2 509 0050
Fiona Harley, IFPI Communications, tel: +44 20 7878 7900

BACKGROUND

Ukraine is the largest manufacturer and distributor of pirated optical media products in Europe. It has five known CD replication plants with a total estimated production capacity of over 70 million CDs. Millions of pirate CDs are exported to Europe and internationally. Pirate CDs from Ukraine have been found in more than 30 countries, including Bulgaria, Finland, Germany, Greece, Italy, Israel, New Zealand, Paraguay, Peru, South Africa, the UK and the USA.

The US-Ukraine Joint Action Plan, agreed by former US President Clinton and Ukrainian President Kuchma on 6 June 2000, obliges Ukraine to:

Close down and prosecute CD plants that have been involved in large-scale pirate production (Despite overwhelming forensic evidence of illegal production, all five CD plants in Ukraine are still operational)
Seize and destroy all pirate materials (Pirate CDs from Ukraine, including new releases, kept flooding local and overseas markets after June 2000)
Carry out regular and unannounced inspections of CD plants (Plant inspections have been carried out, but most were announced far in advance, thus undermining any element of surprise)
Introduce and enforce strict optical disc production control regulations, including the compulsory use of identification codes in the CD replication machinery and control of trade in equipment and optical grade polycarbonates (Despite the availability of a draft optical disc control regulation supported by the US Government and the local and international recording industry since late July 2000, the Ukrainian Government and Parliament have failed to adopt such a regulation)
Introduce necessary legislative changes to improve protection of foreign artists and phonogram producers and introduce appropriate criminal penalties for infringement of copyright and related rights (The Ukrainian Parliament has recently adopted amendments to the copyright and related rights law that bring Ukrainian legislation up to international standards. Appropriate criminal penalties for copyright and related rights infringement have also been introduced)