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Ukraine Curbs P&G Product Sales

March 5, 1998

KIEV, Ukraine (AP) _ Ukraine has canceled certificates covering about half the products Procter & Gamble markets here and ordered the U.S. company to suspend sales and advertising of the affected goods, government and company officials said Thursday.

The move came after a dispute about import and sales certification requirements _ the kind of problem that has prompted Americans to complain of the difficulties of doing business in Ukraine and kept foreign investment in the former Soviet republic to a trickle.

It also came shortly before a visit Friday by Secretary of State Madeleine Albright, who is expected to mix her message of strong support for Ukraine with warnings that the nation must improve its investment climate. She is to meet with Ukrainian officials and American business leaders.

The State Standards Committee on Tuesday revoked certificates covering such P&G brands as the detergents Tide and Ariel and shampoos Head & Shoulders and Pantene, said Qaisar Shareef, general manager in Ukraine for the Cincinnati-based household products maker.

The company’s main violation was its failure to conduct inspections of plants abroad where the products are made, the standards committee said in a statement.

Shareef said the cancellation came after weeks of discussions during which the company sought to answer the committee’s questions about what he called delays in the inspections, as well as other certification issues.

``I think the requirements here are more stringent than in many other countries,″ he said.

Business executives have described the licensing and certification system as a complicated one that frustrates their attempts to reach Ukraine’s 50 million potential consumers.

Procter & Gamble is applying for new certificates and hopes to receive them soon, Shareef said. In the meantime, it has moved to inform some 25,000 stores and kiosks not to sell the affected products and has ordered media companies to suspend advertising.

Shareef declined to put a figure on the financial implications. But he said, ``If we were not able to sell for more than a few days, it would be a significant financial loss _ not only to us but to our distributors and to thousands of entrepreneurs who sell the products.″

The affected brands are sold widely in stores and on the streets of the capital of Kiev and other cities. With factories idle or slow to pay salaries, many people feed their families by selling imported goods including those made by P&G, which Sharif said has been successful in Ukraine.

``We can just estimate that the total value of the products on the market will run into the millions of dollars,″ he said.

A manager at a Kiev shop said he had taken Tide off the shelves on Wednesday. At a street stand, saleswoman Natalya Yakovleva said she had not heard of the suspension and was selling Tide, Ariel and Head & Shoulders.

P&G has received a new certificate for individual shipments of laundry detergents, which Shareef said allowed the sales of some of the products and boded well for a resolution of the problem.

Under pressure to take steps to attract the investment needed to spark long-awaited economic growth, Ukrainian President Leonid Kuchma has recently signed decrees aiming to cut the red tape required to do business in Ukraine.

In Washington, members of Congress told Albright this week they would seek to limit aid to Ukraine _ now receiving $225 million a year _ unless progress is made in improving the business climate.

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