Commission Advises Hike in Auto Duties

A government commission chaired by First Deputy Prime Minister Viktor Zubkov on protective measures in trade dealing with customs and other duties has recommended a sharp increase on duties for imported used cars to protect domestic producers.

The government said in a statement that the new measures have yet to be approved by the Cabinet.

Under the rules, an import duty of 30 percent would be imposed on cars older than one year, and a duty of 2.5 euros to 5.7 euros per cubic centimeter of engine capacity for cars older than five years.

The current duties are set at 1 euro per cubic centimeter of engine capacity, not exceeding 2.5 liters, for cars aged three to seven years, 1.6 euros for cars with engine capacity of more than 2.5 liters and a duty of 2 to 3 euros for cars older than seven years, seen as prohibitive.

Some of the country's far eastern regions rely on imports of used cars from Japan, and previous government plans to impose prohibitive duties have led to major protests.

Russia was on course to become Europe's largest car market this year after a decade of an oil-fueled economic boom, but sales figures have dropped sharply in the past two months as the financial crisis has forced banks to reduce cheap retail lending.

Tougher credit terms, shrinking incomes and uncertainty over currency stability are pushing people away from the market for new foreign cars toward secondhand foreign cars or to AvtoVAZ's home-produced Lada models.

The government has a long history of protecting AvtoVAZ with prohibitive import duties, which analysts say have discouraged the Soviet manufacturer, located in the town of Tolyatti, on the Volga, from speedy modernization.

AvtoVAZ faces increasing competition from foreign carmakers, almost all of whom have opened, or are planning to open, plants in Russia in the near future.

The government encouraged expansion plans by companies including Ford and Toyota by imposing a zero import duty on car components.

It also promised to cut import duties gradually on brand new and used cars as part of its World Trade Organization accession plans.

The proposed rule changes would also take into account fuel standards. Buses not more than five years old that use Euro-4 standard fuel would not have an import duty, while those running on lower-grade gas would face a 25 percent tariff.

The measures would "optimize" the import tariffs on light and heavy automobiles, as well as foreign buses in accordance with "the current state of affairs on the world and domestic auto markets."

Reuters, MT