A European Union (EU) challenge to Russia’s so-called vehicle recycling fee may be put on ice by the State legislature as it has just broken for its summer recess.
The EU has launched its first ever World Trade Organisation (WTO) challenge against Russia since its recent accession to the global body, in a dispute it maintains is based on what amounts to an import tax on foreign vehicles.
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Russia is looking to introduce an end-of life car recycling policy and had been apparently due to consider applying it equally to domestic and overseas producers, but it appears the EU’s patience has snapped.
“The European Commission has pursued every diplomatic channel for almost one year now to find a solution with our Russian partners on this matter but to no avail,” said EU Trade Commissioner, Karel De Gucht. “The fee is incompatible with the WTO’s most basic rule prohibiting discrimination against and among imports.
“It is severely hampering trade in a sector which is key for the European economy. We expect Russia to engage in WTO consultations with us to find a solution to this problem quickly.”
The EU says Russia introduced the fee on 1 September, 2012, just days after joining the WTO. The fee is levied on cars, trucks, buses and other motor vehicles. For cars, it ranges from about EUR420 (US$539) to EUR2,700 for a new vehicle and from EUR2,600 to EUR17,200 for a vehicle older than three years.
Brussels maintains the fee is imposed on all imports from the EU, while vehicles produced in Russia are exempt. An exemption is also available, it claims, for vehicles imported from Kazakhstan and Belarus forming a customs union with Russia.
However, it appears the State Duma was due to discuss a harmonisation of the fee, but is now not due to return until late August, effectively putting the issue into limbo as the EU has asked the WTO for an opinion after a maximum of 60 days.
If no solution is found within 60 days, the EU may ask the WTO to set up a panel to rule on what it terms the “legality” of Russia’s measures.
“The point was to equalise the fees so there could not be a basis for a complaint,” Ernst & Young automotive sector leader, William King, told just-auto from Moscow.
“We understood the Duma was going to pass this before the summer holiday, but they did not pass it. That is why the EU held off because it was their understanding as well the legislation would be passed to equalise.
“The intent was to make sure all were on the same playing field.”
The analyst said it was not yet clear if the recycling legislation had an implementation date or the necessary infrastructure was yet in place in Russia to deal with potentially large numbers of vehicles in the country’s ageing car parc.
“If you look at the average age of the parc, it is 12 years and 38m vehicles in the market,” said King. “Russia is working to become more and more green and vehicles are generally 100% recyclable.
“It is an education process, cultural change. The concern for a lot of the Russian producers is they have to to be able to reserve for that utilisation [recycling] fee.
“The Duma is still working through the implementation rules of that.”
The EU claims the fee according to Russian estimates would generate an additional EUR1.3bn annual revenue.
Russia is the EU’s third largest trading partner and the EU is Russia’s biggest partner.
In 2012, the EU exported goods worth EUR123bn to Russia and imported goods worth EUR213bn.
