Ukraine Duties on Car Imports Under Fire From WTO

The World Trade Organization comes down hard on Ukraine, telling it bluntly it should scrap safeguard duties it has imposed on car imports.

These have been challenged by Japan, and a panel of the WTO disputes settlement body has concluded Ukraine broke so many (10) global trading rules in establishing this protection, it should scrap the duties.

“A panel is not required to make such a suggestion,” it noted in its conclusions, but “in light of the nature and number of inconsistencies with (WTO rules)…we suggest that Ukraine revoke its safeguard measure on passenger cars.”

Ukraine can appeal against the ruling if it wishes. If it does not and refuses to follow the panel’s advice, Japan can request authorization from the WTO to impose retaliatory duties on Ukraine exports.

The Ukraine government’s Interdepartmental Commission on Foreign Trade in April 2012 imposed a range of safeguard duties. These ranged from 6.46% for cars with engines displacing 1.0L-1.5L and 12.95% for cars with 1.5L-2.2L engines.

Thirty developing countries with no automotive vehicle manufacturing industry, most in Africa, were exempt from these tariffs.

In February 2014, the Ukraine government cut these duties to between 4.31% and 2.15% for cars with 1.0L-1.5L engines and between 8.63% and 4.32% for those with 1.5L-2.2L engines. This followed a complaint from the Association of Ukrainian Vehicle Manufacturers about an alleged boom in imports.

Japan challenged the duties at the WTO, claiming they broke the trade organization’s agreement on safeguards and its general agreement on tariffs and trade (GATT). Tokyo claimed Ukraine made a series of procedural errors when imposing the duties, such as a lack of consultation and failures to prove their justification through documentation.

Japan also argued the safeguard duties were excessive in that they went over and above what they are required to do: give breathing space to an importing country’s manufacturing industry to adjust to compete against a new set of imports.

Duties were supposed to be levied “only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment,” Japan said in a note to the WTO.

The WTO agreed, with its panel saying Ukraine had not properly assessed the imports of cars into its country ahead of imposing the duties, had not effectively evaluated how imports might impact the health of the Ukraine auto sector, failed to keep the WTO committee on safeguards informed of its actions, and more.

Trade Spat Follows Drop in Japan Exports to Ukraine

Japan has had a robust trade in cars with Ukraine, exporting $269 million’s worth of cars between 1.5L and 3.0L in engine size to that country in 2011, and $212 million in 2012. However this figure fell sharply to $188 million in 2013, then tumbled further in the wake of the Maidan revolution of February 2014, which removed former President Viktor Yanukovych from power; Japan only exported $96 million of these cars to Ukraine in that year.

Japan’s ministry of economy, trade and industry welcomes the WTO panel’s decision, notably the recommendation that Ukraine rectify its measures. As well as being a victory for Japan’s auto industry in Ukraine, the Japan government has claimed the ruling will prevent similar levying of “arbitrary” taxes by other countries.

“The imposition of safeguard measures has been increasing recently in emerging countries,”

the ministry says in a statement. “Such clarification of WTO rules, however, is expected to lead to the curbing of arbitrary or non-transparent imposition of safeguard measures.”

The Japan Automobile Manufacturers Assn. declines to comment on details of the WTO’s decision, although a spokesman confirms “JAMA supports the actions of the ministry of economy, trade and industry.”

– with Julian Ryall in Tokyo