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Russia Moving Away from WTO Principles, USTR Report Finds

Wednesday, December 23, 2015
Sandler, Travis & Rosenberg Trade Report

Reaping the benefits of Russia’s World Trade Organization membership is becoming increasingly difficult as Russia continues to move away from the core WTO tenets of trade liberalization, transparency and rule of law in favor of inward-looking, import substitution economic policies. So says the Office of the U.S. Trade Representative in its annual assessment of Russia’s compliance with its WTO commitments, which this year and henceforth is being combined with an annual report on WTO enforcement actions with respect to Russia.

Highlights of the 2015 report’s findings include the following.

- Russia is pursuing an increasingly protectionist approach to economic development, instituting local content requirements and discriminating against imports, and continues to use unjustified and retaliatory trade measures against the U.S. and many of its neighbors based on political motivations.

- Russia has implemented final bound tariff rates for about 80 percent of its tariff lines, made most of the tariff reductions it committed to according to schedule, and reduced some tariffs to applied rates below their bound rates. However, changes in the duty type of some tariff lines have resulted in applied rates above the bound rates.

- Other border measures of concern include the lack of transparent regulations on customs valuation, the continued occasional use of reference prices, and burdensome import licensing requirements on encryption products and alcohol products that are not consistent with Russia’s WTO obligations.

- Russia has reduced some export duties but continues to show interest in them as a tool to protect domestic producers.

- Only a limited number of U.S. agricultural products currently enter the Russian market due to a ban on certain imported food products. Russia is also restricting the transit of some U.S. agricultural shipments through its territory to other markets.

- Russia’s regulation of its alcoholic beverage, toy, food labeling, medical device and satellite navigation sectors has raised a number of concerns about consistency with the substantive requirements of the WTO Agreement on Technical Barriers to Trade.

- Russia appears to have resolved certain concerns raised by its automotive recycling fee but industry sources report that Russia may extend the fee to off-road machinery and equipment.

- Russia continues to implement a levy on products that can be used to reproduce copyrighted material for personal use and to collect value-added tax on royalties for imported, but not domestic, cinema products.

- Russia has expanded its use of domestic content requirements that apply to purchases by state-owned and state-controlled enterprises as well as to preference programs for government purchases of domestically-produced products such as automobiles, satellite navigation systems, software, medical devices, and pharmaceutical goods.

- Russia appears to be complying with its services commitments for the most part but protectionist tendencies are beginning to appear. Notably, Russia’s data localization law appears to require that companies store personal data of Russian citizens on servers within Russia.

- Russia made significant improvements in its intellectual property rights protection regime as it negotiated to accede to the WTO but that momentum has been lost. For example, Russia amended certain IPR-related legislation but then failed to issue final regulations necessary to implement the law. While there has been some improvement in enforcement efforts against online piracy, in general IPR enforcement in Russia continues to remain a significant problem, and currently available information appears to indicate that overall IPR enforcement has decreased recently.

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