The European Union requested on Thursday the establishment of a dispute settlement panel at the World Trade Organization (WTO) in Geneva to rule on the legality of the so-called 'recycling fee' which Russia imposes on imported vehicles.
"This is the next step under WTO litigation procedures, after the EU has held formal consultations with Russia in July this year. The fee, which the EU considers discriminatory towards imports, has a severe impact on EU vehicle exports to Russia, worth Euro 10 billion a year," said the EU mission to the WTO in Geneva in a press release.
"The EU has repeatedly raised the issue in bilateral talks with Russia, and then in formal WTO consultations. However, more than a year after the fee was introduced, the discrimination continues," said the EU.
"We've used all the possible avenues to find with Russia a mutually acceptable solution," said EU Trade Commissioner Karel De Gucht in the press communique.
"As the fee continues to severely hamper exports of a sector that is key for Europe's economy, we are left with no choice but to ask for a WTO ruling to ensure Russia complies with its international obligations," he added.
On 9 July, the EU requested formal consultations in the WTO hoping Russia would propose an alternative to its discriminatory measures. Japan made a similar request on 24 July. The EU consultations with Russia held on 29 and 30 July failed to resolve the dispute and Moscow continues to apply the fees.
The fee creates an additional burden for EU exports and offsets the reduction in import tariffs Russia accepted when joining the WTO. The fee, introduced on 1 September 2012, only days after Russia's WTO accession, is levied on imported cars, trucks, buses and other motor vehicles.
For cars, it ranges from about Euro 420 to Euro 2,700 for a new vehicle and from Euro 2,600 to Euro 17,200 for a vehicle older than three years. For some vehicles, such as certain mining trucks, the fee is as high as Euro 147,700. According to Russia's own estimates, the fee brings an additional Euro 1.3 billion a year into the country's coffers.
While the fee is imposed on all imports from the EU, the charges are not applied to vehicles produced in Russia and its Customs Union partners, Kazakhstan and Belarus.
The EU considers therefore that the fee is incompatible with the most basic WTO rules that prohibit treating domestic products better than imported ones and applying different conditions depending on the origin of a product.
The WTO Dispute Settlement Body (DSB) will discuss the EU's request for the establishment of a panel when it meets on 22 October 2013. At that meeting Russia has the right to object to the establishment of the panel.
If the EU raises the issue again at the following DSB meeting in November, Russia will be unable to block the request for a second time. Once the panel is formally established, the parties and/or the WTO Director-General will select the panelists in charge of the adjudication procedure.
Russia is the EU's third largest trading partner. In 2012, the EU exports to Russia were worth Euro 123 billion and imports Euro 213 billion. This makes also the EU Russia's biggest trading partner. While Russian exports to the EU are mainly raw materials (80 percent), EU exports to Russia are mostly machinery and transport equipment (50 percent), including vehicles.