The European Union (EU) has requested consultations in the World Trade Organisation (WTO) against Russia’s vehicle ‘recycling fee’.

The consultations represent a formal dispute under the WTO dispute settlement understanding, and are hoped to bring about solutions ‘without the need for litigation’.

According to the EU, the ‘recycling fee’ amounts to a tax against the purchase of non-Russian vehicles, and as such breaks the WTO’s prohibition of import discrimination. Further, the EU said that it “strongly believes that the aim of Russia’s so-called ‘recycling fee’ is not to help the environment but discriminate arbitrarily and unjustifiably against imported vehicles”.

It added that the EU's measures to deal with end-of-life vehicles show that environmental objectives “can be achieved very effectively without applying the sort of high and discriminatory fees imposed by Russia”.

Recycling fee background

Introduced on 1 September 2012, the fee is levied on imported cars, trucks, buses and other motor vehicles. For cars, the levy ranges from €420 to €2,700 for a new vehicle and from €2,600 to €17,200 for a vehicle older than three years. The highest fee is for the purchase of mining trucks, which can reach €147,700. According to Russia’s estimates, the fee brings in around €1.3 billion annually in extra government revenues.

Vehicles produced in Russia, Kazakhstan and Belarus (which have a customs union with Russia) are exempt from the fee.

Fee has a ‘severe impact’ on EU exports

According to the EU, the fee has a ‘severe impact’ on EU vehicle exports to Russia that represent €10 billion annually. Indeed, around half of EU exports to Russia are mostly machinery and transport equipment, including vehicles.

The EU has said that the issue of fee has been raised in the past with Russian delegates, but has “not brought any concrete solution”. Indeed, Russia reportedly promised at the EU-Russia summit last year to remove the discrimination, but has not yet done so.

It is hoped the WTO consultations will result in a “satisfactory solution” but if no solution can be found within 60 days, the EU has said it “may ask the WTO to set up a panel to rule on the legality of Russia’s measures”.

Speaking of the challenge, EU Trade Commissioner Karel De Gucht, said: “The European Commission has pursued every diplomatic channel for almost one year now to find a solution with our Russian partners on this matter but to no avail. The fee is incompatible with the WTO's most basic rule prohibiting discrimination against and among imports.

“It is severely hampering trade in a sector which is key for the European economy. We expect Russia to engage in WTO consultations with us to find a solution to this problem quickly."

Read more about WTO dispute settlements.