Over the past year, the Ukrainian government has streamlined its legislation governing the production of unmanned aircraft systems (drones) and ammunition, eliminating many bureaucratic procedures. The government has also created certain benefits for domestic drone producers, including the cancellation of VAT and import duties for drone components required for production and repair by Ukrainian entities. These benefits are valid throughout the duration of martial law.
The Ukrainian government has also passed a series of “experimental projects,” which streamline procedures for the production, procurement and supply of drones and ammunition, including means of radio-electronic warfare and active countermeasures against technical intelligence of domestic production. One of the most recent experimental projects has now allowed domestic producers to produce, procure and supply ammunition for unmanned aircraft systems and combat units of unmanned systems during martial law. This novation will allow domestic drone producers to expand their production activity and create new local jobs and proceeds for the armed forces.
Last, but not least, Ukraine may soon lift its ban on drone exports in an effort to increase production and attract investment. Since the full-scale invasion in 2022, Ukraine has prohibited the export of military goods to ensure the army is supplied with necessary weaponry, but because of limited government resources, Ukrainian drone manufacturers want to export their products abroad to obtain income to expand their production. Importantly, lifting the export ban will not only attract investments but also support research and development in this crucial field.
Below we will provide a basic overview of licensing requirements for Ukrainian producers of drones and munitions (including joint ventures and foreign-owned subsidiaries).
1. Licensing Requirements for Military Drone Production
Classified as state aviation materials under the Aviation Code of Ukraine, combat/attack drones come in three classes, as per NATO standards: (i) up to 150 kilograms (tactical units and formations); (ii) up to 600 kilograms (tactical); and (iii) over 600 kilograms (strategical). The first class is the most popularly produced class by domestic manufacturers and, therefore, our focus will be on this class.
All combat/attack drones require state certification, which in turn requires extensive documentation for certification of the production process and the product. These drones must be registered into the register of state aircrafts, which also requires certification of the apparatus, an airworthiness certificate, and an operator’s certificate, if necessary. The required production documentation includes operational, repair and serial documentation required by the Ministry of Defense.
Furthermore, in order to produce combat/attack drones for supply to the Ukrainian armed forces, the manufacturer must include the proper economic code into its business activity (“Manufacture of air and space aircraft and related equipment”). Combat/attack drones, and their components, are included into the general category of “weapons, military and special equipment, weapons and ammunition, special components for their manufacture and operation, materials and equipment specially designed for their development, manufacture or use, special technical means, technical means of intelligence,” for security and defense needs. Depending on the manufacturer’s scope of production, other codes may need to be included, such as “wholesale trade of other machines and equipment” and “repair and servicing of air and space crafts”.
2. Licensing and Permit Requirements for Munitions Production
In addition to obtaining licenses for its drone production activities, the producer should also consider obtaining a permit for the production of drone ammunition or other ammunitions, if applicable. The permit system is operated by the National Police (aka Ministry of Internal Affairs) of Ukraine in conjunction with the State Service for Labor Issues, which can issue permits for the purchase, storage and transportation of explosives.
For the acquisition of explosive materials, the drone or ammunitions manufacturer must firstly apply for a certificate from the State Service for Labor Issues (under the auspices of the Ministry of Economy). The applicant should be prepared to submit documents regarding the suitability of their production premises and employees’ qualifications, especially with respect to the applicant’s director. A commission consisting of representatives of the National Police, State Security Service, State Labor Service, and the applicant’s representative will assess the premises for compliance.
The State Service for Labor Issues also issues certificates for storage facilities of explosives. The applicant has to submit documents about the premises, including a diagram of the facility and a plan of the surrounding area within a radius corresponding to the safe distance calculated by the shock air wave from the largest explosives. An appointed individual must be responsible for storage and compliance issues and a list of individuals with access to or guarding of the facilities must be submitted.
The ammunition producer also has to receive a permit to transport explosives throughout the territory of Ukraine. This procedure requires the submission extensive information about the carriers, reasons for transport, security arrangements, training certificate of authorized personnel (including drivers and their authorization documents), vehicle approvals, insurance policies, etc. Some exceptions apply if the producer is using “in-house” transportation between warehouses or within one city or region.
Moreover, special permits are required for the destruction of explosives from the Mine Action Center, which certifies mine operators and processes to determine compliance with Ukrainian legislation. This process entails the submission of information about staff, management, subcontractors and equipment.
