EU Files New WTO Challenge Against Russian Duties

6 November 2014

The EU filed a new WTO challenge (DS485) against Russia last Friday, citing a series of alleged violations of Moscow’s tariff commitments at the global trade body. The move marks the fourth dispute that Brussels has lodged against Moscow in the two years since Russia joined the organisation, and comes as the two sides continue to suffer strained diplomatic ties over the Ukraine crisis.

At issue in the complaint is Russia’s tariff treatment of various agricultural and manufactured goods. The EU claims that Russia is applying duty rates on paper and paperboard above its bound rates, which are the maximum tariff ceilings that Moscow has agreed to respect. In its consultations request, Brussels cites five tariff lines where the applied duty is allegedly 15 or 10 percent – higher than the 5 percent bound rate.

Regarding other goods such as palm oil and its fractions, refrigerators, combined refrigerators, and freezers, the EU argues that the duties are set up in a way that does not comply with Russia’s concessions schedule. Namely, the “variations” in how these duties are set up have led to duties being levied above those in its schedule, specifically where the customs value of a good is under a certain level.

Brussels also claims that Russian authorities, when it comes to some products, do not use the actual value of the imported merchandise involved when making their valuation for customs purposes.

The EU claims that these measures amount to a violation of Article II of the WTO’s General Agreement on Tariffs and Trade (GATT), which deals specifically with a member’s schedule of concessions, along with Article VII of that same agreement, which involves customs valuations. Brussels has also cited alleged infractions of the WTO agreement on implementing the latter GATT article.

The EU has placed the estimated losses from these measures at approximately €600 million a year, and claims that the alleged “non-respect of tariff commitments” is particularly worrisome, as it raises “systemic concerns” by breaching one of the fundamental principles of the WTO. Russia is the EU’s third largest trading partner, with European exports to its Eastern neighbour amounting to €120 billion annually.

The EU was one of the final backers to Russia’s WTO entry a couple of years ago. However, since Moscow’s entry Brussels has been one of the country’s most vocal critics, warning that Russia is not taking its commitments to the global trade club seriously – a charge that the latter has denied.

As relations have continued their downward spiral, the two sides have lodged a series of trade disputes against each other in recent months, on topics ranging from vehicle trade to pork import bans.

Under WTO rules, the two sides must now hold consultations for a minimum of 60 days in an effort to find a mutually agreed solution to the disagreement. Should these efforts fail, the EU can request the establishment of a dispute panel to hear the case.

ICTSD reporting.

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