Disposal Fee Impacts Import Volume in Russia

You may recall that this fee is imposed on all imports from the EC, whereas vehicle manufactures in Russia, Kazakhstan and Belarus are exempt. Hence, the disposal fee creates a preferential situation for auto manufacturers in the Customs Union, which violates the standards of the WTO. Based on Federal Treasury data, from the time of the introduction of the disposal fee in September 2012, related income to the federal budget was 55.4 billion rubles.

Bilateral discussions held on July 29 and 30 of this year did not lead to a settlement of the differences. On October 10, 2013, the EC turned to the WTO dispute resolution entity, requesting the selection of a panel of arbiters to review the issue of the legality of the fee. A meeting of the WTO committee for the resolution of disputes was held in Geneva on October 22, 2013, at which the Russian representative disputed the EC submission to the WTO to convoke a panel of arbiters to review the question of the existing disposal fee mechanism in Russia, as the possibilities for an amicable resolution of the dispute have not been exhausted.

 
If the issue is raised again at the next session of the European Union, Russia does not have the right to block proceedings a second time. Then a WTO arbitration group will be formed before the end of the year that will have half a year to determine whether the claims of the European Union are valid or the Russian actions do not violate WTO rules. After that Russia will have 30 days to advise whether they are committed to carrying out the decision of the arbitration group. If the claims are declared valid, but Russia does not remove the discriminatory measures, the EC will acquire the right to introduce compensatory measures with regard to Russian goods. The EC will be able to raise duties to compensate for the loss sustained by European manufacturers. The amount of the loss will be calculated by the arbitration group.

 

Combined with other factors, the disposal fee impacts the volume of imports to Russia. Hence, the number of trucks imported to Russia from January to August 2013 was 33.5% lower in physical terms than between January and August 2012. Importation of light vehicles also significantly decreased; imports for the first eight months of 2013 were lower than for the first eight months of 2012 by 21.6%. However, crediting the decrease in automobile imports from the EC specifically to the influence of the disposal tax is difficult, since the Russian automobile market is influenced by many factors.

 

The complaint filed by the European Union in 2013 forced the Russian authorities to reconsider their position. On October 21, 2013, RF president Vladimir Putin signed an amendment to the law Regarding Industrial and Consumer Waste, creating equal conditions for disposal payments for automobiles of both Russian and foreign manufacturers. Under the new law, which takes effect on January 1, 2014, the disposal fee will be imposed on all vehicles, not only those imported, but also on those manufactured within the Customs Union. The exceptions are items belonging to Russians returning to Russia on a permanent basis under a special program and diplomatic and consular representatives. Furthermore, rare automobiles produced at least 30 years ago are exempt from the fee.

 

Regardless of the fact that Russia has fulfilled the requirements of the European Union by equalizing the conditions for the payment of the disposal fee for both importers and domestic automobile manufacturers, in Brussels they are waiting for "additional information and clarification", just as before. The EC still has their claim filed regarding the method of calculation of the disposal fee. Specifically, the EC holds that the fee should not depend on vehicle engine size, and the calculation method allows for too large a difference in the fee for new and used vehicles.

 

N.P. Volovik - head, workshop on foreign economic activity