KIEV, Aug. 5 – The European Union warned Ukraine on Monday that its recent law restricting imports of old vehicles may seriously undermine bilateral trade and should be lifted.

The reaction comes days after President Viktor Yanukovych signed into law a bill on recycling of vehicles that slaps a special environmental duty on old cars.

“Ukraine’s decision to introduce the measure seriously impacts our bilateral economic relationship,” the EU Delegation’s office in Kiev said in a statement, Interfax-Ukraine reported.

The EU exports about 250 million euros worth of vehicles annually to Ukraine and the measures may undermine the trade.

“The law is a further blow to EU car exports, which have already been hit by the introduction of unjustified increases in import duties since March,” the EU office said. “The EU repeats its call on Ukraine to withdraw both measures.”

“The introduction of the car utilization fee will hit EU car exporters more heavily than anything else, because the EU makes up the lion’s share of Ukrainian car imports.

The potential trade dispute emerges as a problem between Ukraine and the EU as the parties seek to sign a political association and free trade agreement at a summit in Lithuania in November.

Ukraine has to implement several economic and legal reforms in order to be able to sign the agreement, including the release of opposition leader Yulia Tymoshenko.

Tymoshenko was jailed to seven years in prison for abusing power while negotiating a disastrous natural gas agreement with Russia in January 2009.

She denied the wrongdoing and said the imprisonment was politically motivated to remove her from politics and make it easier for Yanukovych to win re-election in March 2015.

Brussels earlier expressed its concerns and expectation that Ukraine would do its best to avoid the implementation of this new law. The concerns were conveyed in a letter from EU Ambassador to Ukraine Jan Tombinski and during negotiations in the Business Climate Dialogue meeting on July 25 in Kiev.

“The EU has pointed out at several occasions that the law is not in line with Ukraine’s WTO commitments and that the WTO-incompatible elements should be removed by September 1,” the EU Delegation said.

“The European Union supports and encourages all countries to take appropriate environmental measures, including in relation to end-of life vehicles, and there is appropriate legislation in place in EU Member States.

However, the EU holds the view that it is important to avoid measures that may unduly discriminate between imports and locally manufactures vehicles.

In addition, in order to meet WTO rules, the structure of the fee should not lead to discrimination among various categories of vehicles and its level should be proportional to the actual costs of the recycling,” the EU Delegation said. (nr/if/ez)