WORLD TRADE WT/DS54/1
G/L/111
G/TRIMS/D/4
G/SCM/D6/1
ORGANIZATION 14October 1996
(96-4115)
Original: English
INDONESIA -CERTAIN MEASURES AFFECTING THE AUTOMOBILE INDUSTRY
Request forConsultations bytheEuropean Communities
Thefollowing communication, dated 3October 1996, fromthePermanent Delegation ofthe
European Commission tothePermanent Mission ofIndonesia andtheDispute Settlement Body, is
circulated inaccordance withArticle 4.4oftheDSU.
_______________
Onbehalf oftheEuropean Community, Ihereby request consultations withIndonesia pursuant
toArticle 4oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes (DSU),
Article XXII:1 oftheGeneral Agreement onTariffs andTrade 1994 (GATT 1994), Article 8ofthe
Agreement onTrade-Related Investment Measures (TRIMs Agreement) andArticles 7and30ofthe
Agreement onSubsidies andCountervailing Measures (SCM Agreement) concerning thePresidential
Decree Number 42of1996 withregard toManufacturing ofNational Cars; Presidential Decree
Number 54of1993 concerning aListofSectors thatareClosed forCapital Investment; Decree of
theMinistry ofIndustry andTrade N.31/1996 concerning National Motor Vehicles; Decree ofthe
Minister ofIndustry Number 114of1993concerning determination oflocalcontent ratesofdomestically
made motor vehicles orcomponents; Decree oftheMinister ofFinance No645/1993 concerning the
Granting ofImport DutyRelief toCertain Parts andComponents ofMotor Vehicles fortheAssembly
and/or Manufacture ofMotor Vehicles; Regulation Number 36of1996Relating totheValue-Added
TaxonGoods andServices andSales TaxonLuxury Goods; andPresidential Instruction No2/1996
ontheDevelopment oftheNational Automobile Industry; other legislative provisions consolidated
therein; andanyimplementing measures taken thereunder.
TheEuropean Community wishes toexpress itsconcern withtheapparent lackofconformity
oftheabove measures withtheobligations ofIndonesia under GATT 1994andtheTRIMs Agreement.
Inparticular, theCommunity 'sconcerns relate tothefollowing:
- theexemption from customs duties andfrom theluxury taxprovided forinfavour
ofso-called "national vehicles" assembled outside Indonesia bytheso-called "pioneer
companies" amounts toconditional most-favoured-nation treatment anddiscriminates
against imports oflikeproducts originating intheEuropean Community thusinfringing
Article 1ofGATT 1994;
- theexemption fromtheluxury taxprovided forinrespect ofsalesof"national vehicles"
andofothervehicles assembled inIndonesia bymanufacturers which meetcertain local
contentrequirementsdiscriminatesbetweenthesevehiclesandthelikeproductsimported
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fromtheEuropean Community, thereby violating Article III:2ofGATT. Furthermore
thisexemption favours thepurchase ofdomestic overimported partsandcomponents
andistherefore contrary toArticle IIIofGATT aswellastoArticle 2ofTRIMs in
conjunction withItem1(a)oftheIllustrative ListAnnexed tothatAgreement.
- theexemption from customs duties onimports ofparts andcomponents made by
"pioneer companies" andbyother vehicle manufacturers which comply withcertain
localcontent requirements hasthesame effect offavouring thepurchase ofdomestic
parts andcomponents and,therefore, isalsocontrary toArticle III:4ofGATT 1994
aswellastoArticle 2ofTRIMs inconjunction withItem1(a)oftheIllustrative List
Annexed tothatAgreement.
- Inaddition, thislastexemption when granted tothe"pioneer companies" leads toa
defacto discrimination against imports ofparts andcomponents originating inthe
European Community thereby violating Article 1ofGATT 1994.
TheEuropean Community alsoconsiders thatthegranting ofanexemption fromcustoms duties
onimported parts andcomponents expressly conditional upon suchproducers meeting certain local
content requirements isaspecific subsidy within themeaning ofArticles 1and2oftheSCM Agreement.
Likewise theEuropean Community considers thattheexemption fromthesalesluxury taxexpressly
granted upon thevehicle meeting certain localcontent requirements isaspecific subsidy within the
meaning oftheabove-mentioned provisions oftheSCM Agreement, asitconsists ofafinancial
contribution bytheIndonesian Government (intheform oftaxrevenue foregone) which confers on
themanufacturers ofthosevehicles thebenefit ofalower pricetothefinalconsumer thanwhatispossible
formanufacturers ofother vehicles subject tothetax.
Indeed, boththese subsidy schemes would beprohibited altogether byArticle 3.1(b) ofthe
SCM Agreement andthussubject totheprovisions ofArticle 4ofsuchAgreement, were itnotfor
Indonesia'sstatusasadevelopingcountryMemberandtheconsequentpossibilitytoinvoketheprovision
ofArticle 27.3oftheSCM Agreement. Nevertheless, theEuropean Community considers thatsuch
subsidies areliable tocause serious prejudice toitsinterests within themeaning ofArticle 6ofthe
SCM Agreement byimpeding imports ofEuropean Community vehicles intotheIndonesian Market
displacing exports ofEuropean Community vehicles from other thirdcountry markets, andcreating
significant price undercutting intheIndonesian market which isliable tocause significant price
suppression, pricedepression andlossofsalesforEuropean Community vehicle manufacturers inthe
Indonesian market.
Furthermore, theEuropean Community wishes todiscuss whether theexemption fromcustoms
duties onimports of"national vehicles" assembled outside Indonesia bythe""Pioneer companies" also
constitutes asubsidy subject tothedisciplines oftheSCM Agreement.
Ilookforward toreceiving yourreply tothisrequest from theEuropean Community andto
setting amutually convenient dateforthese consultations.