Russia looks to increase vehicle import duties

As the Automotive Logistics reports, Russia is preparing to renegotiate some of the commitments it made when it joined the World Trade Organization (WTO), including those governing the duties applied to vehicles imported to the country. According to deputy minister of industry, Viktor Evtukhov, Russia aims to preserve or even increase the import duties, which previously it had promised to reduce.

Negotiations are expected to focus on duties applied to products from the automotive, engineering and metals industries, according to the Ministry of Industry, though there is currently no published list of the products on which the revised duties will be applied.

The decision has support from political leaders, and last week the country’s minister of industry and trade, Denis Manturov, is reported to have discussed the issue with president Vladimir Putin.

Immediately after Russia’s accession to the WTO, import duties for new cars were decreased from 30% to 25%. The original agreement called for further decreases until import duties reached 15% in 2018. When Russia joined the WTO in 2012, it also committed to a recycling tax designed to remove older, more polluting vehicles from the road. According to some commentators those recycling fees were specifically designed to replace import duties and protect the domestic market.

The next decrease is scheduled for January 1, 2015.

For certain types of vehicles the reduction in duties was scheduled to be even greater. For cars with engine capacity exceeding 2.8-litres, the duty was planned to drop to 12.5%, while SUVs with 3.5-4.2-litre engines were to incur no more than a 10% duty.

He added that the Russian government has now committed itself to supporting the automobile market through various measures, and that it was clear that the further reduction of duties would be counterproductive.

Earlier this year, a report by the leading German consulting group Roland Berger has warned Russia should think twice before introducing any sanctions against the Western automotive industry. It suggested that declines in the Russian market where liable to lead some OEMs to close smaller factories in Russia, potentially leading to a higher share of imports relative to locally produced vehicles. However, the reported efforts to reverse lower duties demonstrates the extent to which the Russian government is willing to protect local vehicle assembly.

It is not yet clear what impact Russia’s reversal of its commitment to the WTO would have on its membership in the organisation.

Russian light vehicle sales have fallen 12% in the first eight months of this year compared to 2013, including sharp declines since the fallout of the crisis in the Ukraine.

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