Categories:Corporate

Russia joins the WTO: practical implications for the car industry

In theory, the move by russia to reduce trade restrictions such as import duties would give foreign businesses greater access to the Russian market. However,there are already concerns about how Russia intends to meet the requirements of WTO membership and the impact this will have on domestic sectors. The concern making current headlines relates to the automobile industry and in particular the disposal fee imposed on cars imported into Russia.

As a result of the recent accession to the WTO, Russia has to reduce import customs duties for many categories of pas-senger cars from 25% to 15% by 2019. In addition, from 1 July 2018 Russia will have to discontinue the application of zero or reduced customs duties for car components im-ported by local Semi Knocked Down (‘SKD’) manufacturers under so-called “industrial assembly agreements”. The Russian Ministry of Economy Development had entered into 31 such industrial assembly agreements with car makers and 62 with automotive component manufacturers. Under such agreements, car components intend-ed exclusively for industrial assembly are subject to zero or reduced customs duties. In return, automotive manufactur-ers are to invest in the industry and ensure the gradual substitution of imports with locally produced parts in accord-ance with a localisation schedule agreed with the Ministry.

Pursuant to Russia’s new obligations towards the WTO, the above-mentioned reduced customs duties for SKD car components may only be applied until 1 July 2018. SKD manufacturers which have performed their investment obliga-tions under the industrial assembly agreements are now wondering whether they would be able to keep certain benefits granted under these agreements beyond 1 July 2018. The Ministry has indicated that an alternative scheme would replace the privileges under the industrial assembly agreements…

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