On July 9, 2013, the European Union formally requested consultations with the
Russian Federation at the World Trade Organization (WTO) regarding
a Russian "recycling fee" on imported vehicles.
Although Russia has been a third party in a handful of prior cases
since joining the WTO in August of last year, this is the first
dispute involving the Russian Federation as a central party to the
dispute.
The measure at issue is a fee Russia imposed in September 2012,
shortly after joining the WTO. The fee, which affects cars,
trucks, and buses and other motor vehicles, is imposed only on
imports. Motor vehicles from a few countries, such as Belarus
and Kazakhstan, as well as domestic vehicles, are exempt from the
tax. The fee ranges from hundreds of dollars for certain new
cars to tens of thousands of dollars for motor vehicles older than
three years. The EU claims that this measure is inconsistent
with Russia's obligations under the WTO because it treats all
EU vehicles less favorably than domestic vehicles and select
imports, and also, due to the higher fees on older vehicles, has an
adverse effect on imported vehicles compared with relevant domestic
vehicles.
Russia historically has had high tariffs on automobiles and other
vehicles, but these tariffs, a subject of repeated negotiations
during Russia's 18-year effort to join the WTO, are to be
phased out over time as part of Russia's WTO membership.
The fee allegedly provides additional protections to the Russian
domestic motor vehicle industry.
According to a press release from the European Union, the EU
brought the case after failing to convince Russia to lift the fee
in earlier negotiations: "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.
The fee is incompatible with the WTO's most basic rule
prohibiting discrimination against and among imports," said EU
Trade Commissioner Karel De Gucht. "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 request for consultations is the first step in a dispute
settlement case at the WTO. During the consultations phase,
which lasts 60 days, the European Union and Russian delegations to
the WTO discuss the matter. If consultations fail to resolve
the dispute, the European Union may request that the matter go
before a WTO dispute settlement panel. Russia's Duma
introduced legislation on May 30 that would apply the recycling fee
to domestic and foreign automobile manufacturers, but the revised
measure is unlikely to pass through the legislative process before
the expiration of the 60-day consultation period. While it is
too soon for other parties to join in the dispute, it is possible
that the United States will join the side of the European Union as
the United States has previously reported its strenuous objection to
the fee.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.