FEDERATION TO THE WORLD TRADE ORGANIZATION 40 страница

1074. In response to a question from a Member of the Working Party regarding Resolution No. 166, the representative of the Russian Federation stated that Resolution No. 166 provided for development by authorised government bodies of a procedure for defining the term "industrial assembly" and establishing rules for its application to imports of parts and components for "industrial assembly" of motor vehicles (tariff positions 8701 - 8705) and parts and components thereof.

1075. Pursuant to Resolution No. 166, the MED, the MIT, and the MOF issued Order No. 73/81/58n. Order No. 73/81/58n (as last amended on 17 December 2009) established an investment regime (hereinafter referred to as the "Auto Investment Program No. 1"), according to which the "industrial assembly" of motor vehicles was defined as a system of batch production on the basis of technological processes, achieving a production capacity of no less than 25,000 units per year in double-shift operation. Under Order No. 73/81/58n, an investment agreement concluded by a Russian legal entity with the MED under Auto Investment Program No. 1 was the basis for importation of parts and components at preferential tariff rates for "industrial assembly" of motor vehicles and parts and components thereof. Such an investment agreement also established specific commitments for the reduction over time of the importation of the above-mentioned parts and components at preferential tariff rates for "industrial assembly". Most-favoured nation tariffs were levied on all imports above the agreed-upon level of imports qualifying for preferential tariffs or tariff exemptions. The agreement established other rights and obligations of the parties, i.e., liability for failure to meet obligations under the agreement, validity of the agreement (seven years - for enterprises already in operation and eight years - for newly established enterprises that produce motor vehicles; seven years - for production of engines, gearboxes and drive axles; and five years - for production of any other car part and component for motor vehicles), and the basis for its change and cancellation.

1076. The representative of the Russian Federation explained that under Auto Investment Program No. 1, Russian producers of motor vehicles classified under HS 8701 - 8705, engaged in assembly of motor vehicles and parts and components thereof, qualified for preferential tariffs or tariff exemptions for imports of parts and components used in the production of those motor vehicles or parts and components thereof, provided they met requirements that include the following: a planned production capacity of not less than 25,000 units per year and, certain production activities taking place in Russia (e.g., stamping and painting) not later than 18 months (for Russian legal entities modernising existing production capacities) or 30 months (for Russian legal entities establishing new production capacities) after the entry into force of the agreement, and imported parts and components not to exceed 70 per cent of the value (excluding the value of bodies for motor vehicles classified under HS 8707) of parts and components used in a year not later than 54 months after meeting the above-mentioned requirement on performing certain production activities.

1077. The representative of the Russian Federation noted that as of 23 June 2011, 31 agreements on the assembly of motor vehicles and 44 agreements on the assembly of parts and components of motor vehicles negotiated under the system of "industrial assembly" were signed under Auto Investment Program No. 1. Table 44 provided for an exhaustive list of agreements concluded under Auto Investment Program No. 1. In response to a question from a Member, the representative of the Russian Federation clarified that there was no legal linkage between agreements on investments in "industrial assembly" of motor vehicles and agreements on investments in "industrial assembly" of parts and components thereof. In response to another question, the representative of the Russian Federation informed the Members that the last agreement under Auto Investment Program No. 1 was signed on 22 June 2011 pursuant to the special provisions set-out in Article 3.1 of Order No. 73/81/58n. He also confirmed that no other agreement under Auto Investment Program No. 1, including pursuant to the special provisions set-out in Article 3.1 of Order No. 73/81/58n, would be signed after 23 June 2011.

1078. The representative of the Russian Federation noted that under Auto Investment Program No. 1, the majority of the agreements on investments in "industrial assembly" of motor vehicles or parts and components thereof had been signed before 2008, and that no new agreements under Auto Investment Program No. 1 could be concluded after 23 June 2011. He noted that, as with many WTO Members, in 2009, the global financial crisis had caused a significant decline in the production and sales of motor vehicles in the Russian Federation, which made it difficult for enterprises to meet their obligations under their respective agreements and to take advantage of the preferential tariffs or tariff exemptions. Therefore, the Russian Federation was considering extending for two years the duration of the tariff exemption provided to enterprises that had concluded investment agreements under Auto Investment Program No. 1 to manufacture motor vehicles or parts and components thereof in Russia before 1 January 2009.

1079. Responding to a Member's question, the representative of the Russian Federation explained, that an investor's enforceable obligations under agreements concluded pursuant to Auto Investment Program No. 1, were limited to using parts and components imported under preferential tariff treatment only for the purpose of "industrial assembly"; providing documents reporting on, among other things, capital investments and the use of imports of parts and components for "industrial assembly", at regular intervals; and setting-up at its plant the serial performance of operations as agreed (e.g. welding, painting, etc.). If the investor failed to implement one or several of these obligations, the investor was given a transitional period in order to come into compliance with the relevant provisions of the agreement. If the investor failed to come into compliance during the transitional period, the investor had to pay MFN tariff rates on imports of parts and components of motor vehicles and/or parts and components thereof from the date the violations were revealed. In case of early termination of the agreement, MFN rates were applied from the date of such termination.

1080. The representative of the Russian Federation explained that Order No. 73/81/58n had been amended by Joint Order No. 678/1289/184n of 24 December 2010 "On Amendments to the Order Defining the Term "Industrial Assembly" of Motor Vehicles and Establishing Conditions for its Application to Imports to the Territory of the Russian Federation of Parts and Components for the Manufacture of Motor Vehicles (Tariff Positions 8701 - 8705) and Parts and Components Thereof" (hereinafter referred to as "Order No. 678/1289/184n"). Order No. 678/1289/184n provided for agreements with manufacturers of motor vehicles and manufacturers of parts and components of motor vehicles aimed at establishing the conditions for those manufacturers to import parts and components of motor vehicles and parts and components thereof at a preferential tariff rate (hereinafter referred to as "Auto Investment Program No. 2"). With regard to agreements to manufacture motor vehicles (concluded and implemented in accordance with Annex 1 of Order No. 73/81/58n, as amended by Order No. 678/1289/184n), in order to have preferential tariffs apply to imported parts and components under Auto Investment Program No. 2, the manufacturer had to meet the requirements that include, the following: (1) to gradually establish an annual production capacity of 300,000 units (for Russian legal entities establishing new production capacities for motor vehicles other than trucks) or 350,000 units (for Russian legal entities modernizing existing production capacities for motor vehicles other than trucks) or 30,000 units (for Russian legal entities either establishing new or modernizing existing production capacities for trucks); (2) to engage in certain manufacturing operations in the Russian Federation (e.g., stamping operations); (3) to establish and/or modernise Research and Development centres in the Russian Federation; (4) to install domestically produced engines and/or gear boxes into at least 30 per cent of the motor vehicles produced by this manufacturer in Russia (or into at least 200,000 motor vehicles if production volume exceeded 1 million units a year); and (5) to gradually reach a specified minimum average annual level of production localization in the Russian Federation. The requirement to ensure a minimum average annual level of production localization was phased-in over time until the final level of 60 per cent was required starting from the sixth year from the date of entry into force of the investment agreement. During the five preceding years, the average annual level of production localization required was 35 per cent, 40 per cent, 45 per cent, 50 per cent and 55 per cent respectively (for a Russian legal entity modernizing existing production capacity), or 30 per cent for the fourth year and 40 per cent for the fifth year (for a Russian legal entity establishing new production capacities). Order No. 73/81/58n, as amended by Order No. 678/1289/184n, set-out time periods for achieving each of the above-mentioned requirements.

1081. With respect to investment for the assembly of parts and components of motor vehicles in the Russian Federation (concluded and implemented in accordance with Annex 2 of Order No. 73/81/58n, as amended by Order No. 678/1289/184n), the representative of the Russian Federation explained that under investment agreements concluded under Auto Investment Program No. 2, manufacturers of parts and components for motor vehicles had to meet requirements that include the following: for each type of part or component, to perform certain operations in the Russian Federation (e.g., mechanical processing), to reach a minimum required level of average annual production localization, and, for certain parts and components, to use certain Russian products (e.g., for engines, to use Russian crankshaft, cylinder blocks and cylinder heads).

1082. The representative of the Russian Federation explained that all agreements to manufacture motor vehicles under Auto Investment Program No. 2 had to be concluded and signed by 1 June 2011. Twelve such investment agreements had been concluded under Auto Investment Program No. 2 (see list in Table 42) and no additional agreements with manufacturers of motor vehicles were authorised under Order No. 73/81/58n, as amended by Order No. 678/1289/184n. He further explained that investors who signed an investment agreement for the same investment project, as indicated in Table 42, in order to benefit from the preferential tariff treatment for imports of parts and components used in "industrial assembly", could meet the requirements set-out in paragraph 1.2, Annex 1 of Order No. 73/81/58n, as amended by Order No. 678/1289/184n, collectively, i.e., despite their individual agreements with MED, these investors would not be required to meet each of those requirements individually but as a de facto "consortium" as long as these investors were in such consortium under the same investment project. With respect to manufacturers of parts and components of motor vehicles, companies with agreements under Auto Investment Program No. 1 had the right to conclude agreements under Auto Investment Program No. 2 until 31 December 2011. Companies manufacturing parts and components of motor vehicles that did not have an agreement under Auto Investment Program No. 1, had the right to conclude an agreement under Auto Investment Program No. 2 until 31 December 2013. To conclude such an agreement, a company manufacturing parts and components of motor vehicles had to have concluded in advance, but no later than by 28 February 2011, a memorandum of understanding with the MED concerning its intention to conclude an agreement under Auto Investment Program No. 2, otherwise, this company could not conclude such an agreement. The list of signed agreements to produce parts and components of motor vehicles under Auto Investment Program No. 2 as well as the list of companies manufacturing parts and components of motor vehicles having concluded the above-mentioned memorandum of understanding were included in Table 43.

1083. In response to a question from some Members, the representative of the Russian Federation explained that an important difference between Auto Investment Program No. 1 and Auto Investment Program No. 2, was that Auto Investment Program No. 2 was based on the amount of value added in the Russian Federation rather than the percentage of imported parts and components of motor vehicles that could be used. Auto Investment Program No. 1 effectively limited the volume of parts and components of motor vehicles (goods) that could be imported and used in the assembly of an automobile to 70 per cent of all parts and components (excluding the value of bodies for motor vehicles classified under HS 8707), thus imposing a 30 per cent local content requirement. Auto Investment Program No. 2, took another approach. Instead of limiting the percentage of parts and components of motor vehicles that could be imported, Auto Investment Program No. 2 was based on an added value criterion that took into account all of the various factors that went into the production of a motor vehicle. This criterion was based on the percentage of the actual selling price of the automobile excluding VAT and excise tax. While there was a requirement to produce certain components in the Russian Federation, a manufacturer could meet the value added criterion based on a wide range of inputs, including services, factory operation, and other overhead expenses. Although Auto Investment Program No. 2 required manufacturers at the end of a transition period to meet a 60 per cent added value requirement, the broad base for calculating value-added provided more flexibility to manufactures in their selection of parts and components and helped mitigate the TRIMs-inconsistent aspects of this programme. In response to a question from a Member regarding how much of the ex-factory price of an automobile consisted of the value of parts and components, the representative of the Russian Federation stated that, based on studies conducted in Russia and the United States, it was estimated that parts and components accounted for approximately 50 per cent of the ex-factory price of an automobile. He noted that the ex-factory price was a price of the automobile located at the warehouse of the manufacturer that included VAT and other taxes and profit of the manufacturer.

1084. One Member expressed concern that the conditions of the Auto Investment Program No. 2 were significantly more prescriptive and stringent as compared to the Auto Investment Program No. 1. In this Member's view, the Auto Investment Program No. 2 would cause important displacement of third countries traditional suppliers to the Russian automotive market. This Member requested the Russian Federation to undertake a commitment that WTO-incompatible elements of the Auto Investment Program No. 1 and Auto Investment Program No. 2 would be phased-out and no new WTO-incompatible Trade-Related Investment Measures would be introduced in the Russian Federation.

1085. In response to a question, the representative of the Russian Federation explained that under Auto Investment Program No. 2, the manufacturer was required to submit a report to the MED and the MIT confirming that imported parts and components of motor vehicles and parts and components thereof were properly used and that the manufacturer met the other requirements of its investment agreement. If a manufacturer failed to meet the requirements set-out in the investment agreement, he lost the right to import parts and components under preferential tariffs until the relevant manufacturing process was brought into compliance with the investment agreement. If the manufacturer used parts and/or components imported under preferential tariffs for purposes other than those specified in the investment agreement, the agreement could be terminated and the most-favoured nation tariff rates would be assessed on such parts and/or components.

1086. In response to a question from a Member of the Working Party about the "Concept of the Development of the Russian Car-Making Industry by 2020" (approved by the Order of the Ministry of Industry and Trade of the Russian Federation No. 319 of 23 April 2010, hereinafter referred to as "Order No. 319"), the representative of the Russian Federation noted that Order No. 319, which was being implemented at present, did not confer any benefits in exchange for investment commitments.

(c) Aircraft area

1087. In response to Members' concerns regarding the aircraft sector, the representative of the Russian Federation noted that Government Resolution No. 574 of 2 August 2001 "On Certain Issues of Regulation of Temporary Imports of Foreign Made Aircraft" had superseded Government Resolution No. 716 of 7 July 1998 "On Additional Measures of State Support for Civil Aviation in Russia" and had terminated the full exemption from customs duties and taxes for temporary import for aircraft, aircraft parts and engines and simulators which were imported under investment agreements. No investment agreements had been concluded since the adoption of Government Resolution No. 574 of 2 August 2001 "On Certain Issues of Regulation of Temporary Imports of Foreign Made Aircraft". He clarified that Russian legislation did not impose local content requirements for the production of aircraft engines. The Russian Federation confirmed that Government Resolution No. 574 of 2 August 2001 "On Certain Issues of Regulation of Temporary Imports of Foreign Made Aircraft" was in full conformity with the provisions in the WTO TRIMs Agreement. In response to a further question from a Member, the representative of the Russian Federation further explained that Resolution No. 839 lowered the rate of customs tariff in respect of components and raw materials imported for the purposes of airplane engines production irrespective of an investment agreement scheme. Thus, in his view, this was simply a reduction in applied tariffs and not a measure covered under the WTO TRIMs Agreement.

(d) Diamonds

1088. In the response to a question from a Member, the representative of the Russian Federation stated that his Government did not consider measures related to the trade in diamonds to be Trade-Related Investment Measures. Information on special conditions for trade in diamonds was presented in the relevant sections of this Report.

(e) Conclusion

1089. The representative of the Russian Federation confirmed that the use of goods produced in the Russian Federation accounting for 35 per cent of the total ex-factory value of all components used under the Auto Investment Program No. 2 was considered as equivalent to the 60 per cent average annual level of production localization required in paragraph 1.2 (d) of Annex 1 of Order No. 73/81/58n, which was calculated according to paragraph 1.6 of the same Annex. Given that the 60 per cent requirement did not apply until the sixth year of the investment agreement, each year, the requirement to use goods produced in the Russian Federation would apply proportionally until that maximum level of local content was required. The representative of the Russian Federation confirmed that this equivalence would be recognized when assessing the fulfilment by an investor of the requirements under paragraph 1.2 (d) of Annex 1 of Order No. 73/81/58n. However, this equivalence would not exempt investors from the obligation to implement other requirements of Order No. 73/81/58n, including but not limited to ensuring a minimum annual production capacity, or creating or modernising Research and Development centres, or fulfilling specific local content requirements such as for engines. The Working party took note of these commitments.

1090. The representative of the Russian Federation confirmed that, from the date of the accession of the Russian Federation to the WTO, the Russian Federation would ensure that all laws, regulations and other measures applied in the Russian Federation that are related to issues covered by this section, whether adopted by the Russian Federation or the competent bodies of the CU, would be consistent with the provisions of the WTO Agreement, including the WTO Agreement on Trade-Related Investment Measures, except for measures applied under Auto Investment Program No. 1 and Auto Investment Program No. 2 and investment agreements concluded under these programmes - as described and defined in paragraphs 1072 through 1086. With regard to Auto Investment Program No. 2, the representative of the Russian Federation confirmed that the amount of any requirement to purchase or use domestically produced parts and components, would not exceed 25 per cent of the ex-factory price of the automobiles annually. With regard to manufacture of components under Auto Investment Program No. 2, the amount of any requirement to purchase or use domestically produced parts and components would not exceed 25 per cent of the total aggregate value of inputs of the manufacturer of car components annually. The representative of the Russian Federation confirmed that the Russian Federation would engage in consultations with interested WTO Members, no later than 1 July 2016, regarding WTO-consistent measures that could be applied in connection with its Auto Investment Program No. 1 and Auto Investment Program No. 2 and would notify WTO Members of any measures planned to replace the WTO-inconsistent measures applied under these programmes at least six months prior to the adoption of such new measures. The representative of the Russian Federation confirmed that all WTO-inconsistent measures, including preferential tariffs or tariff exemptions, applied pursuant to Auto Investment Program No. 1 and Auto Investment Program No. 2 and agreements concluded under these programmes would be eliminated by 1 July 2018. The representative of the Russian Federation also confirmed that the Russian Federation would not conclude any new agreements with investors in any sector that contained provisions contrary to the WTO Agreement, including the WTO Agreement on Trade-Related Investment Measures. The Working Party took note of these commitments.

Special economic zones

1091. The representative of the Russian Federation stated that the establishment of special economic zones (SEZs) was aimed primarily at fostering high technology industries; expanding sources of investments; and, promoting the development of tourism and transportation infrastructure. In the Russian Federation, Federal Law No. 116-FZ of 22 July 2005 "On Special Economic Zones in the Russian Federation" (as last amended on 25 December 2009) was the basic law on SEZs, with two exceptions for zones established before its enactment in the Kaliningrad and Magadan regions. These two SEZs had continued to operate on the basis of two other laws pending expiration of the contracts established under the provisions of the relevant law. Once the contracts expired, Federal Law No. 116-FZ would apply in the Kaliningrad or Magadan as the case may be. The two specific laws were Federal Law No. 16-FZ of 10 January 2006 "On the Special Economic Zone of the Kaliningrad Region and on Amending some Legislative Acts of the Russian Federation" (as last amended on 30 October 2007), (which replaced Federal Law No. 13-FZ of 22 January 1996 "On the Special Economic Zone in the Kaliningrad Region"); and, Federal Law No. 104-FZ of 31 May 1999 "On the Special Economic Zone in the Magadan Region" (as last amended on 24 November 2008). Thus, currently, each of these three Laws continued to be the relevant legislation governing the operation of SEZs in the Russian Federation.

1092. Members requested further information on the establishment and operation of the SEZs, as well as information to help them assess whether the zones that could be established under Federal Law No. 116-FZ "On Special Economic Zone", and in Kaliningrad and Magadan, were consistent with WTO requirements. They asked how the WTO obligations of the Russian Federation would be enforced in the SEZs after accession, and in particular, whether Articles I and III of the GATT 1994 would be applied, and whether incentives granted to firms, which were established in the SEZs were or would be based on export performance or local content requirements. Other issues raised by Members in this connection concerned the need to restore any tariffs or taxes from imported goods or inputs used in the manufacturing process to goods eventually exported to the rest of the Russian Federation or the territory of other CU Parties. One Member sought information about the provisions of the law of the Russian Federation which provided that goods manufactured in Kaliningrad and Magadan from inputs eligible for tariff and/or tax exemptions were considered to have transformed imported inputs sufficiently to eliminate the need to pay the duties and taxes originally exempted when the inputs were imported. Another Member noted that no level of transformation would be sufficient to eliminate the need to restore exempted duties and taxes, as rules of origin operated between countries, not parts of countries. These Members noted that Federal Law No. 116-FZ required the payment of exempted duties and taxes when the manufactured product was sold to the rest of the customs territory of the Russian Federation. Other Members sought information on what other benefits, if any, in terms of tax exemptions or otherwise, were available to firms that located in the SEZs. A description of the provisions for firms located in Kaliningrad and Magadan SEZ was also requested.

(a) Basic Law on SEZs

1093. In response, the representative of the Russian Federation explained that Federal Law No. 116-FZ "On Special Economic Zones" had been the legal basis for establishing SEZs on the customs territory of the Russian Federation since 2005. As last amended on 25 December 2009, it provided for four types of SEZs: manufacturing zones, technological parks, recreation zones, and port zones.

(a) Manufacturing SEZs were aimed at production and reprocessing of finished products. It was assumed that according to respective contracts, the investments within the first year would not be less than 1 million EUR and total investment would amount to at least 3 million EUR.

(b) SEZs of engineering and innovation type (technological parks) were aimed at creation of incentives for inventions and realization of new technologies. No minimum investment funding was required for this type of SEZ.

(c) Recreation zones were created in order to foster development of tourism and sanatorium-resort activity (construction, reconstruction, and operation of travel industry facilities, facilities for sanatorium-resort therapy, medical rehabilitation and recreation, as well as tourist activity and activity related to exploitation and utilization of waters, peloids and other natural remedial resources, including sanatorium-resort therapy, disease prevention, medical rehabilitation, recreation and industrial bottling of mineral waters). No minimum investment funding was required for this type of SEZ.

(d) Creation of port SEZs was aimed at enhancing conditions for construction and modernization of the infrastructure of sea ports, airports and river ports to stimulate port economic activity and port services, as well as the development and expansion of port facilities by means of foreign and national direct investments.

1094. He added that once a port SEZ was established, investors could apply for residency, i.e., to be registered as a legal entity or individual entrepreneur as provided for in Federal Law No. 116-FZ eligible for a special tax regime and other conditions more favourable than those available to firms and entrepreneurs in the rest of the customs territory, and conclude contracts that specified the terms of their participation as "residents" in the zones. According to the respective contracts, a resident of such an SEZ, the legal entities or individual entrepreneurs eligible for the special tax regime and other conditions more favourable than those available to firms and entrepreneurs in the rest of the customs territory, undertook to invest at least 10 million EUR when constructing the infrastructure units of a new sea port, and at least 3 million EUR when reconstructing the infrastructure units of sea, river or airport. Residents of port SEZs also had to provide to the customs authorities guarantees for payments of duties and taxes. The security for such payments of duties and taxes could not be less than:

- RUB 30 million when conducting the port-related activity associated with the warehousing of any goods along with storage of, wholesale or stock-exchange trading in them, including excise goods or mineral raw material;