The move would likely lead to a decline in imports of cars from Belarus and Kazakhstan to the Russian Federation.
The existing recycling tax, or ‘Utilisation Fee’, has drawn complaints from trade representatives from a number of states included in the World Trade Organisation (WTO). Under the system, which came into effect in September last year, each foreign import is subject to an up-front fee equivalent to 5% of the sale price of the vehicle to cover the cost of recycling.
This charge effectively takes import charges back up to the 30% imposed before Russia’s accession to the WTO, when the government agreed to drop import fees on vehicles to 25%, with a further reduction to 15% scheduled on full compliance by 2018 (read more here).
Carmakers with local production in Russia, who commit to recycling the vehicles, can avoid the fee. This exemption has also been available to member states of the Customs Union, as well as the customs free zone in Kaliningrad. According to Wilhemina Shavshina, legal director and head of Foreign Trade Regulations at law firm DLA Piper, the Russian commerce ministry is now proposing to extend the fee across the Customs Union.
A number of WTO member states, including the EU, the US and Japan, have complained that the fee discriminates against imported products. They have said the ability of Russian-based manufacturers to avoid the charge represents an unfair advantage because foreign carmakers without a base in Russia will find it almost impossible to handle their own disposal.
Other observers have said that Russia’s claim to be recovering recycling costs is questionable. According to Dominik Buszta, senior consultant at Frost & Sullivan, Russia lacks the proper means to recycle its growing vehicle fleet. Buszta called Russia’s infrastructure for recycling cars a “myth”.
Back in February this year, European commissioner for trade, Karel De Gucht said the EU had “very grave concerns” about the fees levied on imported vehicles alone.
“This discriminates against European producers and clashes with the most basic WTO rules,” he stated. “It also means cars imported from Europe are paying higher duties to the Russian government than before WTO accession. This situation is clearly unacceptable.”
