RESTRICTED  
  
G/TRIMS/M/41  
 
22 December 2016  
(16-7010) Page: 1/13 
Committee on Trade -Related Invest ment Measures    
 
MINUTES OF THE MEETI NG HELD ON 1 7 OCTOBER  2016  
CHAIR: MS MARINE WIL LEMETZ (SWITZERLAND)  
1.  The Chair referred to the proposed agenda circulated in document WTO/AIR/TRIMS/4 dated 
7 October 2016. The Committee adopted  the following agenda:  
1   CHINA – PROVISIONS ON INSURA NCE SYSTEM INFORMATI ZATION  ...........................  1 
2   INDONESIA – LOCAL CONTENT REQUIR EMENTS FOR 4G LTE MO BILE DEVICES ...........  3 
3   INDONESIA - CERTAIN LOCAL CONTEN T PROVISIONS IN THE ENERGY 
SECTOR (MINING, OIL AND GAS)  ................................ ................................ .....................  6 
4   INDONESIA – NEWLY ADOPTED INDUST RY LAW AND TRADE LAW  .............................  7 
5   INDONESIA – MINIMUM LOCAL PRODUC T REQUIREMENT FOR MO DERN 
RETAIL SECTOR  ................................ ................................ ................................ ................  8 
6   INDONESIA – CERTAIN MEASURES ADD RESSING LOCA L CONTENT IN 
INVESTMENT IN THE TE LECOMMUNICATIONS SEC TOR ................................ ....................  9 
7   RUSSIAN FEDERATION – MEASURES IMPLEMENTIN G RUSSIA'S IMPORT 
SUBSTITUTION POLICY  ................................ ................................ ................................ .. 10 
8   ARGENTINA – ACT 27,263 ON THE DE VELOPMENT AND STRENG THENING 
REGIME OF  THE ARGENTINE AUTOPA RTISM, PUBLISHED IN THE OFFICIAL 
JOURNAL OF 1  AUGUST  2016  ................................ ................................ .........................  11 
9   NOTIFICATIONS UN DER ARTICLE 6.2 OF T HE TRIMS AGREEMENT  ............................  12 
10   OTHER BUSINESS  ................................ ................................ ................................ .... 12 
11   DATE OF THE NEXT MEE TING  ................................ ................................ ..................  13 
12   ANNUAL REPORT (2016)  ................................ ................................ .........................  13 
 
 
1   CHINA – PROVISIONS ON INSURA NCE SYSTEM INFORMATI ZATION  
2.  The Chair recalled that t his item was first discussed  at the Committee's June meeting and was 
on the a genda at the request of the United States. Questions had been  posed by the United States 
in document G/TRIMS/Q/CHN/1. To date no written replies ha d been submitted.  
3.  The United States  expressed concern about draft regulations published by the China Insuran ce 
Regulatory Commission (CIRC) in 2015 addressing the use of technology by companies in the 
insurance industry. These regulations had been notified to the Committee on Technical Barriers to 
Trade and t he United States had provided comments in th at Committ ee in June 2016. However, 
these draft regulations raise d issues of concern to this Committee as well. The United States had 
presented written questions in June, and had discussed th e issue in this Committee 's 
June meeting . The Draft Regulations w ould impos e severe rest rictions on a wide range of 
ICT products and services , and raised broader concerns about China's investment and commercial 
environment for industries not directly affected by the measures. While the United States  
respect ed China's  desire to im prove the integrity of informatio n and communications 
technology  (ICT) products in its insurance sector, such policies should not prohibit insurance G/TRIMS/M/41  
 
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  institutions in China from choosing secure and reliable ICT hardware and software from vendors 
anywhere in the world.  
4.  In its questions , the United States had highlighted several provisions that cause d it concern in 
relation to the TRIM s Agreement.  First, Article 53 state d that " Insurance institutions shall give first 
priority to the procurement of secure and co ntrollable hardware equipment and software products, 
steadily introduce the application of secure and controllable products , actively create conditions to 
raise the indigenous research and development level, and continuously enhance insurance 
institutions ' strength in security and controllability of informatization ". The phrase "secure and 
controllable " technology, in conjunction with the reference to "conditions to raise the indigenous 
research and development level ", could be read as a reference to indige nous or local technology. 
Should this phrase be understood as a requirement to use indigenous or local hardware equipment 
and software products ? 
5.  This was not the first time the United States had raised such concerns. In April 2015 the 
United  States had raised concerns about draft measures pertaining to use of technology by the  
banking sector. The measures were the  Guidelines for Promoting the Application of Secure and 
Controllable Information Technology in Banking Sector ("Guidelines") and the accompanying 
Classification Catalogue of Banking Information Technology Assets and Indexes of Security and 
Controllability , issued by the China Banking Regulatory Commission on 26  December  2014. The 
United States had expressed concern that the phrase "secure and contro llable" technology seemed 
to focus on indigenous technology. The phrase ha d now come up again in a draft measure, and 
once again appear ed to be linked to the use of indigenous technology.  
6.  The United States  was also concerned that provisions in Articles 25( 2) and 54 would require 
purchase of indigenous encryption technology, and that such technology m ight be incompatible 
with the systems used by international insurance companies. Article 25  stated that "[an]  insurance 
institution shall establish and perfect security management mechanisms including information 
system backup, antivirus, encryption management, intrusion detection and system logs in 
accordance with the following requirements:  … (2) strengthen cryptographic equipment and user 
management, employing  technologies and products that are in compliance with State standards 
and encryption requirements.  Article 54 provided that "[i] nsurance institutions shall gradually 
achieve full application of encryption technology in electronic policies and the insuranc e sector in 
strict accordance with the State work program for encryption application in the financial sector.  
The United States asked when China w ould be able to provide a response to its written questions.   
7.  The European Union  echoed the concerns expressed  by the United States. It reiterated its 
concerns on Article 20 and Article 56 and the mandatory requirement to classify information 
systems in accordance with the multilevel protection scheme (MLPS). A possible mandating of 
MLPS level 3 and above required  the use of products with domestic intellectual property and hence 
would amount to a ban on procuring foreign ICT products for use in such core systems. This 
seemed to discriminate against foreign companies. China should focus on genuine security 
concerns within a narrowly defined category of critical information infrastructure. Could China 
clarify which security level within their MLPS was referred to in this provision?  
8.  Japan  share d the concerns raised . Articles 25, 53 and 56 could be inconsistent with Art icle III:4 
of GATT and Article 2 of the TRIMs Agreement  because, depending on the manner in which they 
were implemented, the y could constitute a de facto  requirement to use Chinese products.  
Accordingly , Japan asked  China to expla in the implementation of t hose Articles, especially the 
specific requirements. Furthermore, if detailed regulations and requirements were prescribed, or 
were to be prescribed in other subordinate rules or guidelines, Japan asked China to provide 
information on such regulations and requirements.  
9.  Australia's  industry and businesses were interested in any potential regulations that could 
impact their a bility to operate in the Chinese market. ICT and cybersecurity were global issues 
which required globally consistent and interoperable s olutions. Australia encouraged the use of 
internationally accepted approaches to encryption and ICT security to minimise conflicts across 
systems in different countries and ensure security systems that incorporate best practices from 
around the world. Aust ralia shared concerns about the measures and their potential to 
unnecessarily restrict trade, and would welcome further information about the provisions, including 
their objectives, definitions of key terms and certification and testing requirements. Austr alia G/TRIMS/M/41  
 
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  would welcome further opportunities to consult and suggested a delay in implementation of the 
regulation until there were further consultations and greater clarity around implementation.  
10.  Canada  was closely following China's implementation of cybersecu rity regulations across a 
number of sectors including its draft supervision rules on insurance institutions. Canada shared the 
concerns raised. Canada understood China's desire to minimize stress to its ICT infrastructure, but 
excluding innovative and cutt ing edge foreign -made ICT products from a firm's procurement 
options would decrease not increase cybersecurity for Ch ina's network and insurance 
ICT infrastructure. Article 53 provided guidelines on the type of equipment and software that 
insurance institu tions should consider purchasing, i.e. secure and controllable products. Would 
foreign -made software and equipment qualify as secure and controllable under these draft 
regulations? If not, why was it necessary to impose such limitations? Articles 20, 23 an d 56 
specified that insurance providers must classify the security level of their information systems in 
accordance with the multilevel protection scheme which in turn required that domestically -
produced ICT products be used in any information system class ified at level 3 or above. Why were 
domestically -produced ICT products considered more secure than foreign -produced products?  
11.  China  thanked delegations for their interest in its insurance re gulation. As stated at the 
June meeting, China had already notifie d the draft regulations to the TBT Committee. The issues 
raised by the United States and other Members were not relevant to TRIMs Committee.  
12.  The Committee took note  of the statements made.  
2  INDONESIA – LOCAL CONTENT REQUIR EMENTS FOR 4G LTE MO BILE DEVICES  
13.  The Chair stated that t his item, which ha d been considered at prior meetings, was on the 
agenda at the request of Canada, the European Union, Japan and the United States. Previously, 
questions to Indonesia had been circulated in document G/TRIMS/W/148, and replies were 
circulated in document G/TRIMS/W/162.  
14.  The United States  remain ed deeply concerned about Indonesia 's adoption and implementation 
of local content requirements for 4G LTE mobile devices and base stations. Indonesia 's responses 
to questions and interventions in this Committee ha d not resolved the United States' underlying 
concerns and had added to its questions about how these measures were being implemented. 
Indonesia ha d previously stated that "the policy is not an investment measure as it only  regulates 
the technical standards and minimum local content requirements for 4G LTE base stations and 
subscriber stations being sold in Indonesia without any provisions mentioning investment 
measures ". While technical requirements were not investment meas ures, the United States 
disagree d that local content requirements were not investment measures. The United States did 
not see how it was possible to meet the local content requirement without investing in Indonesia,  
nor how it was possible to invest in Ind onesia as a distributor of these products without meeting 
the local content requirements. Thus, in order to obtain the advantage of being permitted to invest 
in Indonesia as a distributor, investors had to meet the local content requirement: i.e. they had to 
purchase or use products of domestic origin.   
15.  The United States als o disagree d that foreign products were not treated less favourably , as 
products that d id not meet the local content requirement, i.e. contain at least a minimum amount 
of domestic produ cts, c ould not legally be sold in Indonesia. The United States had questions 
about the verification process to obtain a certificate or statement from the Minister "in charge of 
governmental affairs in the industrial sector " to demonstrate that they ha d fulfilled the local 
content requirement. What was the procedure by which such a certificate or statement was 
obtained? What were the differences between a certificate and statement?  Was the certificate or 
statement a prerequisite for other documents , such as other technical requirements or import 
licensing requirements? What were the consequences if a company was unable to fulfil the local 
content requirement and therefore c ould not  obtain the certificate or statement?  While t he Ministry 
of Industry ha d now is sued Regulation 65 /2016 broaden ing local content to include local 
manufacturing, development, software applications, such as apps, and investment plans , this 
Regulation seem ed to require investment of some sort, whether through local manufacturing, 
develop ment, software applications or investment plans.  Further, new import licensing regulations 
did not allow importation of finished 4G -enabled phones, handheld laptops and tablets even if they 
met the local content requirement at an earlier stage in the manuf acturing process. While the G/TRIMS/M/41  
 
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  United States was raising this in the Import Licensing Committee, taken together all these 
regulations appear ed to force investment and disadvantage foreign products.  
16.  The United States was  fundamentally concerned with the use o f local content requirements. 
These measures illustrat ed the dangers of local content requirements to the ICT manufacturing 
base of all Members. It should be of great concern for this Committee and its Members if Indonesia 
was successful in driving manufac turing into its market. Such an outcome would be a boon to 
Indonesia, but w ould come at the expense of the countries where these products were currently 
manufactured. This was a pathway by which large developing countries c ould take investment 
away from sm aller ones. Over the long term, th is was not in the interest of any Member . The 
United States was  concerned that these requirements result ed in favourable treatment for 
domestic products over imported products and that investors could be penalized if they did not 
comply.   
17.  Finally, the United States underst ood that Indonesia ha d begun a process aimed at removing 
counterproductive measures, and that all of these measures m ight be dropped in the very near 
future. If so this was a step the United States would g reatly welcome. C ould Indonesia provide 
further information about the review process, and about plans to curtail the various local content 
requirements it ha d adopted in in recent years?  
18.  Canada  was following the development of Indonesia's regulations conce rning 4G LTE mobile 
phone sector and had taken note of Ministry of Industry Regulation No. 65/2016 which outlined 
the formula to calculate local content. Local content requirements could artificially distort trade, 
restrict market access and hamper the eff iciency of investments. The negative impacts of these 
requirements were exacerbated by the uncertainty around them, which had affected 
manufacturers' ability to introduce new products in Indonesia. Canada sought an update from 
Indonesia regarding next step s in implementation of the regulations.  
19.  Japan  share d the concern s raised. Japan consider ed that the  local content requirements 
for 4G LTE mobile devices went against Article III:4 of GATT and Article 2 of the TRIMs Agreement.  
First, there appear ed to be an inconsistency between Regulation No. 27/2015 issued by 
Indonesia' s Ministry of Communication and Information in 2015 and the TBT notification issued by 
the Government of Indonesia in February. Could Indonesia provide accurate information, including 
the translation of Regulation No. 27/2015 ?  
20.  Second, Regulation 65/2016 issued last July provide d for the calculation  of the local content 
rates (TKDN in Indonesian). Many of the provisions were not clear. For example, Article 4 
stipulate d that the local content  rates of electronic devices were set as a percentage of three 
elements, manufacture, development and application; however, it was not clear how these rates 
are calculated. Were the rates based on costs of the three elements or on other criteria? How was 
each element calculated and why ? Japan asked Indonesia to expla in the implementation  of the 
Regulation, including on the above -mentioned points.  
21.  Third, Indonesia had explained that the regulations were technical standards for 4G LTE 
mobile devices, not investment measures. However, regardless of the intention of a Member, a 
measure was an investment measure under the TRIM s Agreement if it related to investment. 
Japan was not  convinced by Indonesia's explanation  that the purpose of the measures was to 
assure  consumers of device safety, because there was no reasonable relation ship between the 
requirement to use domestic products and product safety. While Japan welcome d Indonesia' s 
explanation that the certification requirements related to 4G LTE mobile devices were administered 
in a transparent manner, it asked  Indonesia to ensure transparency not only in the certification 
process but also in other steps related to the establishment or implementation of regulations. 
Lastly, with regard to Indonesia' s explanation  that the measures were applied to local and foreign 
manufacturers equally, local content requirement s were by nature discriminatory and inconsistent 
with GATT Article III:4, regardless of  how the y were applied.  
22.  The European Union  shared the concerns rais ed. At the last meeting Indonesia had stated that 
the policies within its regulations did not relate to investment but only applied to technical 
standards. However, Regulation No. 65/2016 contained technical guidelines for the calculation of 
local content and a certificate verifying the fulfilment of the local content requirements was issued 
by the Ministry of Industry after receiving the report of local content verification conducted by G/TRIMS/M/41  
 
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  surveyors. Taking into account new Regulation No. 65, the European Uni on asked Indonesia to 
further justify its claim that the measures did not require any local content requirement to be 
fulfilled for an investment. Furthermore, it requested a copy of Regulation No. 65/2016 in English.  
23.  Korea  share d previous speakers' concer ns, and was carefully monitoring these regulations. 
Indonesia 's regulations were not justified by the TRIMs Agreement, which ban ned local content 
requirements. Th ese measures were related to investment . They could forc e foreign corporat ions 
doing business based on global value chains to invest in Indonesia to meet the local content 
requirements.  
24.  Australia  was monitoring implementation of the reg ulations including in other 
WTO committees. Indonesia's Ministry of Industry had issued Regulation 65/2016 imposi ng new 
local content requirements to both physical hardware and software and applications. Australia was 
concerned that this new measure as well as Regulation 69 had local content requirements that 
were inconsistent with the TRIMs Agreement.  
25.  Chinese Taipei  shared the concerns raised . It encourage d Indonesia to compl y with its 
WTO commitments and would continue monitoring the relevant policies and measures.  
26.  Indonesia  recalled that this item had been discussed in this Committee for some time and 
Indonesia's comments and responses had been  circulated in G/TRIMS/W/162. The Regulation was 
a set of technical standards and administration for 4G frequency line for operators. It did not relate 
to investment and w as established to support the operability and compatibi lity of mobile devices 
with the 4G network and system. At the moment, Indonesia was building a network and system 
for 4G services, which was funded with a national budget/fund , to support national demand for 
better information and communication technology.  Indonesia need ed to ensure that the system 
worked properly, in line with international standards, and fulfil led security aspects.  
27.  At the last meeting, some Members asked questions about certification . The certification 
requirement was only being applied t o the 4G/LTE system and not to other system s, such as 3G or 
lower. The content requirement was based on economic value of the development. Acquisition of 
the Certificate of Tingkat Kandungan Dalam Negeri (TKDN , or local content ) started when 
producers appl ied or request ed the Public Service Unit within the Ministry of Industry to calculat e 
the TKDN. Producers had to fill in certain documents related to the TKDN calculation to show their 
good will. The Public Service Unit w ould invite an independent surveyor  to calculat e the TKDN. The 
calculation w ould be forwarded to the Ministry of Industry for verification and report. Detailed 
information on the calculation methodology was provided in Regulation 65 /2016.  
28.  In addition, a conformity test was administered by the Ministry of Communication s 
and Information  to ensure that the technology used in mobile devices was safe and 
compatible  with the local system. The conformity test cover ed areas such as national security, 
human safety, health and environmental protectio n. The test was conducted i n accordance 
with international  standard such as:  (i) European Telecommunications Standard Institute (ETSI) 
TS 136 104 v. 11.7.0 (2014 -01) Technical specification LTE;  (ii) Evolved Universal Terrestrial 
Radio Access (E -UTRA); and  (iii) Base Station (BS) Radio Transm ission and Reception (SS) 
(3GPP  TS 36.1 04 version 11.7.0 Release 11). The  certification requirements and pr ocedure s were 
administered in a transparent manner , were  flexible , allowed producers to resubmit application s, 
and applied to  both local a nd foreign device manufacturers equally in a non -discriminatory basis.  
29.  Japan  did not dispute Ind onesia 's right to take industrial development measures but believe d 
that such measures should be consistent with the TRIMs Agreement. The Indonesian explanation 
that this measure d id not relate to investment , that it involved only technical standards , and that it 
applied to local and foreign manufactures equally and in a non -discriminatory manner  did not 
convince Japan.  
30.  The Committee took note  of the statements made . G/TRIMS/M/41  
 
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  3  INDONESIA - CERTAIN LOCAL CONTEN T PROVISIONS IN THE ENERGY SECTOR 
(MINING, OIL AND GAS )  
31.  The Chair recall ed that this item ha d been under consideration since October 2009. Questions 
to Indonesia ha d been circulated in G/TRIM S/W/70, 88, 108 and 128; to which Indonesia has 
replied in G/TRIMS/W/74,  79, 100, 123, 128, 137 and 137/ Corr.1. This item ha d been placed on 
the agenda at the request of Canada, the European Union, Japan and the United States.  
32.  Japan  reiterated that restri ctions, including prohibition s, on the exportation of raw materials 
based on the Mining Law violat ed GATT Article XI, which prohibited  quantitative restrictions on 
imports and exports. It was regrettable that there ha d been no improvement despite the fact that 
Japan and other Members ha d repeatedly raised this issue in this Committee and in the C ouncil for 
Trade in Goods . It was also highly regrettable that Indonesia ha d not explained why it consider ed 
the prohibition to be GATT -consistent. Japan ha d urged Indonesia to review the measures 
concerned at various levels, including at the highest level and intend ed to try to solve this issue 
through dialogue. Indonesia had explained that its relevant laws were under review by Parliament ; 
Japan request ed Indonesia  to share the current status of this review process. If the measures, 
including the export prohibition o n nickel ore, were not improved or eliminated, Japan w ould be 
obliged to consider taking the steps available under the DSU.  
33.  Canada  recalled its comments  at previous meetings. It was closely following developments in 
this area and shared Japan's desire to have an update on the status of the regulations.  
34.  The European Union  had repeatedly conveyed its concerns with regard to the prioritization of 
local cont ent in Indonesian legislation covering mining products in the mineral and coal sectors. 
Several Members had already shared strong doubts regarding the compatibility of the measures 
with the TRIMs Agreement. At the last meeting Indonesia had informed Member s that the 
amendment of relevant laws were still in process by the Indo nesian parliament. The 
European  Union sought an update on the ongoing process and encouraged Indonesia to take into 
account the concerns expressed.  
35.  The United States  continue d to have concerns with investment restrictions in Indonesia's 
energy sector , questions about the requirement to "prioritize" the use of domestic goods and 
services in the sector, and how that requirement was being enforced. The responses provided by 
Indonesia appea red to confirm that "prioritize" m ight be a polite way of saying "require" . The 
United States u nderst ood that Indonesia's parliament was considering revisions to both the Mining 
Law and the Oil and Gas Law , and sought  an update of those discussions  and information on 
timing for passage of the draft bill. The United States was also concerned that policies in the fossil 
fuel sector were being replicated in the renewable energy sector. Indonesia was targeting the 
development of 35,000 MW of power system capaci ty within the next few years with a similar 
requirement to "prioritize" the use of domestic content. Such policies adversely hamper ed 
Indonesia's power sector development goals by driving up costs and hampering access to the most 
innovative technologies an d companies.   
36.  Australia  welcome d the opportunity to discuss implementation of Indonesia's mining  sector 
regulations and the planned revision to the 2009 Mining Law. Indonesia had not formally consulted 
stakeholders on the drafts of the revised Mining Law t hat were in circulation but from those early 
drafts Australia was particularly concerned about the proposal to force all contract of work holders 
to move to a licence within one year of the law coming into force. It remained concerned about 
ownership dives tment requirements, pressure to renegotiate contracts of work and restrictions on 
obtaining approvals for expatriate employees. These regulations created uncertainty for foreign 
and Indonesian mining ventures, and affected investor confidence more broadly.  Large foreign 
players were leaving the market. Companies should be treated fairly during these negotiations. 
Australia looked forward to further clarification on implementation of the regulations and the 
content of proposed revisions to the Mining Law.  
37.  Indonesia  had submitted written responses on this issue in G/TRIMS/W/100, G/TRIMS/W/123, 
G/TRIMS/W/128, G/TRIMS/W/131, G/TRIMS/W/137 and G/TRIMS/W/137/Corr.1. The preference 
for the use of domestic goods and services was not mandatory. The phrase "the use of  domestic 
goods and/or services" in the regulations referr ed to goods and services available in the 
Indonesian market, imported or domestically produced, which could  be used by companies. The G/TRIMS/M/41  
 
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  purpose of the phrase was only to encourage the use of available  domestic goods and services 
including increasing domestic expenditure. Investors could  always import the required product in 
accordance with Regulation 23 /2010. With respect to ownership of investment, there was flexibility 
on foreign ownership with a not ion that gradual divestment of shares w ould be conducted in the 
future. For General Contract s of Work (Kontrak Karya) and Contract s of Work for Coal (Perjanjian 
Karya Pengusahaan Batu Bara), the divestment requirement should be regulated in the contract. 
This was to show that such matter s fell under private law. For the Mining Business License (IUP), 
the divestment requirement was regulated by Regulation 77 /2014. The Special Mining Business 
License (IUPK) for processing and/or refining allowed foreign owner ship. There was no pressure to 
renegotiate General Contract s of Work as mentioned by Australia, considering th at renegotiation 
was a process that ha d been agreed by companies (which are the legitimate contract holders) and 
the government. In relation to th e use of foreign workers or expatriate employees, there was no 
prohibition. Regulation 23 7/2010 allowed  companies to use foreign workers, as long as the y met 
job qualifications. The procedure was allowed with approval of the Minister of Energy and Mineral 
Resources which coordinates with the Ministry of Manpower. Amendment of the mineral and coal 
as well as oil and gas law were still being discussed by Parliament. Indonesia was  not in the 
position to indicate the time frame for the  process , but would inform  interested Members on 
development s when available.  
38.  The Committee took note  of the statements made.  
4  INDONESIA – NEWLY ADOPTED INDUST RY LAW AND TRADE LAW  
39.  The Chair noted that t his item was first discussed at the Committee's meeting in June 2015 
and was on the agenda at the request of the European Union, Japan and the United States. 
Questions to Indonesia were circulated in G/TRIMS/W/138 and 140, to which Indonesia ha d 
responded in G/TRIMS/W/157 and 158.  
40.  Japan  had concerns about the consistency of the Law on  Trade and the Law on Industry with 
Article  III:4 and Article XI:1 of GATT, and Article 2 of the TRIMs Agreement. In particular, Japan 
had concerns about provisions such as import or export restrictions for the sake of  protecting 
certain industries (Articl es 26 and 54 of the Trade Law), the prohibition or restriction  of export of 
natural resources and the restriction of utilization of natural resources (Articles 32 and 33 of the 
Industry Law), and local content requirements (Article 87 of the Industry law).  Japan was closely 
monitoring how these provisions are to be addressed. At the  last meeting, Japan  requested 
Indonesia to provide up -dated information about implementing regulations. Japan look ed forward 
to hearing up -dated information, including the time schedule, from Indonesia.  
41.  The European Union  reiterate d its concern with respect to these laws as the legal framework 
they provide d leaned towards protectionism and was trade restrictive. Indonesia in its responses in 
G/TRIMS/W/157 and 158 had stated that the process for the adoption of implementing regulations 
would be completed within two years from entry into force of the laws. As the two -year period had 
now passed,  the European Union asked whether the announced nine government regulations, 
14 Presidenti al regulations and 20 Ministerial regulations ha d been adopted and were all in force. 
Also, could Indonesia give an overview of the contents of those regulations and submit an English 
version ? Finally could Indonesia clarify whether the trade and industry laws and the ir 
implementation ha d been affected by the reform packages announced by the government since 
September 2015 ?  
42.  The United States  share d the concerns about the Industry and Trade laws . It continue d to 
seek updates from Indonesia on the implementa tion of these laws, in particular any implementing 
regulations relate d to concerns raised in this Committee.  
43.  Australia  echoe d the concerns expressed about Indonesia's import -restricting policies in 
recent years, including the overarching industry and trad e laws. Indonesia indicated that it had 
passed these laws to promote economic development ; however, Australia remain ed concerned 
about the potential impact of eventual implementing regulations on trade and investment. 
Australia was particularly interested in what this mean t for Indonesia's use of trade remedy 
measures. Australia asked Indonesia to update how it intend ed to go forward in issuing its 
implementing regulations and to reassure Members that it was taking into account its 
WTO obligations in drafti ng such regulations.  G/TRIMS/M/41  
 
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  44.  Indonesia  referred to its previous responses in G/TRIMS/W/157 and 158. The two laws were 
development tools to support industry and to manage the contribution of trade to Indonesia's 
economy through, inter alia , job creation, improveme nt of competitiveness, and increasing 
production capacity. The y were created to support the advancement of the national economy, 
while respecting  Indonesia's WTO commitments. At the last meeting, some Members ha d asked 
about  certain articles of the Industr y Law, such as Article  31, 32, and 33 , which ha d been 
implemented through Regulation 41 /2015. The objective was to protect the environment from 
excessive use of natural resources , which were exhaust ible and should be preserved. In regard to 
the Trade Law, questions were raised about  Article  3, 35, and 54. Article 3 oblig ed the government 
to ensure that the welfare of Indonesians was achieved through trade. This Article serve d as a 
legal basis for the government to conduct trade with companies and countries.  Article  35 regulate d 
the classification of goods which could  be traded or sold in Indonesia. This article created 
4 classifications – goods which may be traded or sold freely, goods which may be traded or sold 
under specific circumstances, goods which may  be traded or sold under supervision, and prohibited 
goods. The classification was still being discussed by various ministries and agencies. Article  54 
dealt with special conditions which may be used to activate measures related to anti -dumping, 
safeguard s, and other temporary measures allowed by the WTO . The Trade Law also serve d as a 
legal basis for the government to release deregulation packages. 26 Ministry of Trade Regulations 
were part of the deregulation package and derived from the Trade Law. The two laws were created 
to support Indonesia's development in accordance with its WTO commitment s.  
45.  The Committee took note  of the statements made.  
5  INDONESIA – MINIMUM LOCAL PRODUC T REQUIREMENT FOR MO DERN RETAIL 
SECTOR  
46.  The Chair recalled that this item was fir st discussed at the meeting of June 2014 and was on 
the agenda at the request of the European Union, Japan and the United States. Questions to 
Indonesia from the United States and the European Union were circulated in G/TRIMS/W/139 
and 41 respectively, and  responses were provided in G/TRIMS/W/159 and 161.  
47.   Japan  had concerns about the consistency of the Trade Ministry Regulations 50/2012, 
68/2012, 7/2013 and 70/2013 with Article III:4 of GATT and Article 2 of the TRIMs Agreement , 
and urged Indonesia to expe ditiously bring the regulations into conformity with these provisions.  
In addition, Article 22 of the Regulation 56/2014 provide d that several kinds of products such as 
"premium products " were exempted from the local content requirements but this provision  was 
vaguely worded and the scope of the exemption was not clear. Japan asked Indonesia to share the 
English translation of the Decision No. 16/PDK/KEP/3/214.  Finally, Indonesia had explained at the 
last meeting that it would conduct a review to ensure the  applicability and function of the 
regulations ; Japan asked about  the current status of the review.  
48.  The European Union  reiterate d its concerns about the 80% local content requirement imposed 
by Regulation 70/2013. At the last meeting Indonesia had informed  Members that the time -frame 
for adoption of the relevant regulation was extended until September 2016. Could Indonesia clarify 
whether the relevant regulations on the retail sector h ad been adopted , and whether the y were 
already applied as of September 20 16? The European Union also reiterate d its request for an 
English copy of the Decision of Director -General of Domestic Trade No. 16/PDK/TEP/3/2014 
detailing the definition of certain conditions as well as the procedures to request the exemption.  
49.  The United States  noted that t hese regulations anticipate d that in order for a foreign investor 
to establish itself in Indonesia, it must acquire and sell local goods. The direct link between access 
to the Indonesian market and mandated support for domestic product s was the United States'  
fundamental concern. While Indonesia ha d pointed to certain narrow exceptions , these seem ed 
temporary since even companies with an exemption from the Minister of Trade should gradually 
increase the sale of goods produced in Indones ia, as well as submit an implementation report. 
While the exemptions provide d a stopgap measure for companies operating in Indonesia, the basic 
concern was unchanged. While s upporting SMEs was a shared goal, providing domestic goods 
better treatment in the  market was not an approach the United States could support. The 
United  States asked Indonesia to keep th e Committee apprised of developments concerning 
implementation of the regulations, including any further amendments , and asked whether the 
measures were under reconsideration, including through the Economic Policy Packages.  G/TRIMS/M/41  
 
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  50.  Australia  reiterate d its concerns about Indonesia's introduction of local content requirements 
in the retail sector. While some exemptions were provided in certain circumstances, the  
requirements w ould still distort trade across a range of goods in which Australia ha d an interest. 
Indonesia should en sure that these measures were implemented in a manner consistent with the 
TRIMs Agreement . 
51.  Indonesia  noted that the retail sector play ed an important role in its economic development. A 
big part of Indonesia's economy was supported by the retail market which was also part of the 
small and medium enterprises (SMEs). The government only encourage d modern retailers to have 
and/or display domes tic goods produced by SMEs in their store s as long as the products met 
standards and requirements of modern retailers. Such action w as settled through agreements 
between modern retailers and SMEs. Since the Indonesian delegation had not received any update  
from the DG of Domestic Trade it could not yet expla in recent developments of the regulation , but 
would provide written response s in the near future. At the moment discussion was still ongoing. 
The implementing regulations in question w ould also be review ed. Finally, Indonesia had 
conducted an independent survey to ensure the acceptance of such regulation s which showed that 
there was no significant objection from retail investor s, local or foreign , in Indonesia. Some foreign 
retail investors had applied for an extension.  
52.  The Committee took note  of the statements made.  
6  INDONESIA – CERTAIN MEASURES ADD RESSING LOCAL CONTEN T IN INVESTMENT IN 
THE TELECOMMUNICATIO NS SECTOR  
53.  The Chair noted that t his issue ha d been under consideration since May 2009. It was on th e 
agenda at the request of Japan and the United States. Questions ha d been posed to Indonesia in 
G/TRIMS/W/61, 71, 78, 86, 104 and 154. Responses c ould be found in G/TRIMS/W/63, 75, 80, 96, 
131, and 160.  
54.  Japan  still ha d significant concerns about the poss ibility that the local content requirement for 
Indonesia' s telecommunications sector was being implemented inconsistently with WTO rules. 
Indonesia's  responses to Japan's questions submitted in G/TRIMS/W/160 had not provide d 
answers to its questions.  Japan  was not convinced that the measures in question f ell under 
government procurement activities  regulated under GATT Article III:8(a) . Japan also continue d to 
have strong doubts about the consistency of the measures with GATT Article III:4 and Article 2 of 
the TRIMs Agreement.  Japan once again urge d Indonesia to provid e substantive responses to its 
questions in G/TRIMS/W/154.  
55.  The United States  continue d to be concerned by Indonesia's use of local content requirements 
in the telecommunications sector. Its specific concern was that the requirements result ed in 
favourable treatment for domestic versus imported products and that investors could be penalized 
if they do not comply. Moreover, instead of curtailing its use of local content requirements, 
Indonesia appe ared to be expanding their use to other sectors, as demonstrated by the ever 
growing list of concerns in this Committee. The United States  remain ed extremely concerned about 
this expansion because of the harmful disruption of global supply chains.  
56.  The European Union  shared the position of Japan and the United States . It asked Indonesia 
whether regulations on local content in its telecommunications sector ha d been affected by the 
reform packages announced by the government in September 2015 , and what other reforms were 
planned in this sector, if any.  
57.  Korea  echoed the concerns of other delegations. Local content requirements in the 
telecommunication s sector could further restrict foreign investment and trade, and ultimately 
undermine core WTO principles incl uding those in the TRIMs Agreement.  Korea encourage d 
Indonesia to consider the concerns raised today and carefully review the measures.  
58.  Indonesia  referred to its responses in G/TRIMS/W/63, G/TRIMS/W/75, G/TRIMS/W/80, 
G/TRIMS/W/96, G/TRIMS/W/131, G/TRIMS/W /160. It took  note of Members ' questions and w ould 
come  back to them at the future meetings.  
59.  The Committee took note  of the statements made.  G/TRIMS/M/41  
 
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  7  RUSSIAN FEDERATION – MEASURES IMPLEMENTIN G RUSSIA'S IMPORT 
SUBSTITUTION POLICY  
60.  The Chair noted that t his item was on the agenda at the request of the European Union and 
the United States. Questions had been circulated in G/TRIMS/Q/RUS/4 and G/TRIMS/Q/RUS/5 : to 
date, no written responses ha d been received.  
61.  The European Union  stated that the Russian Federation had opt ed for an import substitution 
policy over the past years while facing a severe economic crisis. The European Union was 
concerned about the growing use of requirements to source domestic goods and services. It had 
already pointed to several cases over the p ast months without seeing any improvement. To the 
contrary, it seemed that the trend had been extending. Measures in place were maintained over 
time, sometimes broadened and extended to additional sectors, while new measures also 
appeared. The European Uni on had submitted questions to the Russian Federation regarding the 
new rules providing for the control by a government commission on import substitution of 
procurement by state owned enterprises (SOEs) and of purchases made by any legal person using 
State funding for the implementation of certain investment projects. Such controls might result in 
import substitution as a consequence of less favourable treatment granted to imported goods 
inconsistently with WTO rules. The European Union looked forward to rec eiving formal replies to its 
questions. Finally the European Union was concerned about a recent measure, Decree 925, 
adopted in September 2016, which introduced a 15% price preference for suppliers of goods of 
Russian origin carried out or rendered by Russ ian companies. The measure would enter into force 
as of January next year and would give Russian suppliers a competitive edge to the detriment of 
imported goods.  
62.  The United States  regret ted the need to intervene again regarding  Russia 's import substitutio n 
polices. At the last meeting it had provided Russia with questions about a number of measures 
that could implicate its TRIM s obligations. D id Russia have further information about when it w ould 
be able to respon d to its questions?  It echoed concerns rais ed by the European Union concerning 
Law No. 223, which govern ed purchases by SOEs, and look ed forward to Russia 's responses to 
those questions as well. As noted in Russia 's recent TPR, SOEs account ed for nearly half of 
Russia 's GDP. Thus their purchasing p ractices were of great significance to Russia 's trading 
partners. In addition to questions posed at the last meeting, the United States highlight ed two 
additional concerns . 
63.  The first regarded the implementation of Article 3(8) of Law 223 -FZ. Decree No. 925 , entitled 
"On priority of commodities of Russian origin and work done and services provided by Russian 
persons over commodities originating from a foreign state and work done and services provided by 
foreign persons" dated 16  September 2016 , implement ed Article 3(8). The Decree establishe d a 
15% preference to "commodities, work or services" provided by Rus sian suppliers for purchases 
by SOEs. Article III:8(a) of the GATT and Art icle XIII:1 of GATS exempt ed from the national 
treatment obligation procurement  by government agencies of goods and services if procured for a 
government purpose. As ha d been observed frequently in this Committee, SOEs were not, simply 
by virtue of being state -owned, exempt from the national treatment requirement. What 
procedures d id Russia have in place to ensure that the 15% price preference was applied only to 
goods, works and services procured for government purposes? Although the penultimate 
paragraph of the Decree direct ed that SOEs "take into account" the "GATT" when applying t he 
15% price priority, the text of the Decree itself provide d no guidance on how Russia would  ensure 
consistency with WTO obligations. The United States was  concerned that SOEs were instructed 
merely to take Russia 's WTO obligations "into account", rather than "to follow" those obligations. 
Did this language give SOEs flexibility on whether to adhere to WTO obligations?  
64.  Second, the United States was  concern ed about another method of implementing Russia 's 
import substitution policy. Order No. 1588 -r (adopted  26 June 2016), establishe d a plan to switch 
all Federal agencies and funds to use domestic software. Of concern to the United States was the 
"recommendation" in the Order that regional and municipal authorities and SOEs switch to 
domestic software as well . Russian SOEs were highly likely to act upon "recommendations" from 
the Government that own ed them; indeed, they were likely to view them as commands. Such 
clearly compelling "recommendations" from the government to a company it own ed, signalling a 
course  of action that m ight not be consistent with WTO obligations, raise d very serious concerns.  
Could Russia explain why this "recommendation" was included in the Order?  G/TRIMS/M/41  
 
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  65.  Canada  reiterated its interest in receiving more information on the Russian measures and 
their potential impact on foreign suppliers and was looking forward to hearing Russia's responses 
to the questions from the United States and the European Union.  
66.  Japan  express ed its interest from a systemic point of view as explained at previous meetings. 
Japan w ould continue to closely monitor the situation surrounding these measures . 
67.  The Russian Federation  noted that its replies to written questions from the European Union 
and the United States were almost finalized and had not been submitted to the Commit tee due to 
minor technical issues only. Soon after this meeting it would submit the replies. Regarding 
substance, many questions concerning Russia's import substitution policy had been raised during 
its trade policy review. All arguments that WTO Members h ad provided in questions and 
statements at the sessions of the TPR regarding, inter alia , lack of clarity about the economic 
effects of the import substitution policy had been carefully examined. However, several Members 
of the WTO continued to discuss Rus sia's import substitution policy  in this Committee. The 
Russian  Federation believed that the debate on its import substitution policy had been 
overemphasized. In fact the import substitution policy meant development of domestic production 
rather than elimi nation of imported goods from the domestic market or local content requirements. 
The key objective of the policy was to create innovative, high technology, environmentally friendly 
production. It was a necessary response to external threats which limited a ccess to money and 
technologies and created uncertainty of security of import supplies. The measures did not require 
using domestic over imported goods and thus were in full compliance with WTO commitments. 
Some elements of this policy were not even measur es, they were proposals or ideas that might or 
might not be implemented, depending on numerous factors. Thus, the Russian Federation was of 
the view that import substitution policy did not fall under the mandate of the TRIMs Committee. It 
called on WTO Mem bers to discuss only measures covered by the TRIMs Agreement and subject to 
review by this Committee. With regard to new questions today it invited Members to provide them 
in writing.  
68.  The Committee took note  of the statements made . 
8  ARGENTINA – ACT 27,263 ON THE DEVELOPM ENT AND STRENGTHENIN G REGIME 
OF THE ARGENTINE AUTOPA RTISM, PUBLISH ED IN THE OFFICIAL J OURNAL OF 
1 AUGUST  2016  
69.  The Chair noted that this item was a new matter which has been placed on the agenda at the 
request of Mexico.  
70.  Mexico  noted that on 2 August entered  into force the Act 27,263 on the Regime for the 
Development and Strengthening of the Argentine Auto Parts Industry which created a regime for 
the development and strengthening of the Argentinian auto parts system grant ing fiscal support t o 
specific auto parts producers wh o comply with specific minimum local content requirements. Under 
Law 27,263 a transferable digital tax credit was awarded which c ould be used for the payment of 
domestic taxes for an equivalent percentage of the ex factory  value of domestic auto parts net of 
VAT, financial expenses, discounts and allowances. This credit varie d from 4 to 15 % depending on 
local content , as established under Article 13 of th e Law. The credit was awarded to legal persons 
producing auto parts fo r the production of vehicles and specif ic auto parts and th e benefit was also 
extended to the purchase of new machinery made in Argentina. The regime also establishe d 
percentages of local content specifically for each vehicle or part identified by th e Act. In order to 
earn these credits Argentinian companies were obliged to purchase products, inputs or raw 
materials made in Argentina with the aim of increasing the value of local content within the final 
product. The percentages var ied in line with the auto parts in question and were 25, 30 or 50%  
pursuant to  Articles 11 and 17 of this law. This law could run counter to the TRIMs Agreement 
because it provide d for the granting of a tax benefit to legal persons using inputs of local goods 
which  was not awarded to legal persons using imported inputs. Regarding transparency, Article 6 .2 
of the TRIMs Agreement required Members to notify the publications where TRIMs may be found , 
including those applied by governments or regional authorities within that territory . This law was 
published in the Official Journal of Argentina on 1  August  2016. Nevertheless no notification was 
made, in contravention of Argentina's obligations  on this matter .  G/TRIMS/M/41  
 
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  71.  The European Union  echoed Mexico's concerns about Law 27,263. It had already ra ised its 
concerns at a meeting  of the Committee on Market Access. The Law contravene d basic WTO 
principles of non -discrimination in GATT Article III and institute d an import substitution subsidy 
contrary to the Agreement on Subsidies and Countervailing Mea sures. In addition , it represent ed 
an investment measure with trade restrictive effects that violate d Article 2 of the 
TRIMs  Agreement as spelt out in the annexe d Illustrative List that explicitly prohibits local content. 
The European Union called on Argen tina to review its law to remove all local content requirements 
that discriminate d against imported car parts and remove the prohibited subsidies in the car 
sector.  
72.  Canada  was concerned by the systemic nature of this measure given what appear ed to be a 
proliferation of local content requirements aimed at the auto sector.  
73.  Japan  express ed its systemic interest  and would  closely monitor the situation surrounding this 
legislation . As Mexico had explained , appropriate notifications were essential to discuss ion in this 
Committee.  
74.  Chinese Taipei  had systemic interests and share d concerns raised  regarding Law 27,263 . It 
encourage d Argentina to notify as soon as possible for transparency purpose. It also invite d 
Argentina to comply with WTO obligations, in particul ar, the local content requirements, and w ould 
follow development s very carefully.  
75.  Korea  share d the systemic concern s raised and would  closely monitor this issue.  
76.  Argentina  took note of the comments made and would prese nt them to its authorities. 
Law 27,263  establishe d a regime to strengthen the car part sector and was adopted by the Senate 
on 13 July and published in the Official Bulletin on 1  August. Among the objectives of this law were 
promoting greater development of the car part sector and generating f avourable conditions for 
that sector. However, th e law at the present time was not being implemented because there ha d 
been no regulatory legislation had yet established. Argentina was prepared to bilaterally make 
progress with all those interested to clar ify any aspect that might be deemed appropriate.  
77.  The Committee took note  of the statements made.  
78.  The Chair request ed Members that had posed oral questions, or that had provided oral 
responses to oral or written questions on any of the above agenda items, t o provide their 
questions and responses in writing to the Secretariat for circulation.  
9  NOTIFICATIONS  UNDER ARTICLE 6.2 OF  THE TRIMS AGREEMENT  
79.  The Chair recalled that Article 6.2 of the Agreement and the 1996 Committee Decision 
contained in G/TRIMS/5 requir ed Members to notify the names of publications in which TRIMs 
might be found, where such publications exist ed, including those applied by regional and local 
governments and authorities within their territories, and the addresses from which copies could be 
obtained, without prejudice to the legal consistency of any TRIM which might be found in the 
publications notified. As agreed by the Committee, the Secretariat had circulated a reminder in this 
respect on 12 October in document G/TRIMS/W/165. Since the las t meeting of the Committee, no 
new notification ha d been submitted under Article 6.2. The Chair urged Members that ha d not yet 
notified to do so promptly.  
80.  The Committee took note  of the information provided . 
10  OTHER  BUSINESS  
81.  The Chair informed  Members that, mindful of paragraph 29 of the Nairobi Ministerial 
Declaration which refer red to Members ' agreement to reinvigorate the regular work of the 
Committees, she intend ed to consult with Members to get their views on whether there were ways 
to improve the opera tion of th e Committee. She would make herself available to any Member 
interested in participating. A fax w ould be sent to the Membership with more details shortly.  G/TRIMS/M/41  
 
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  11  DATE  OF THE NEXT MEETING  
82.  The Chair recalled  that Article  7.1 of the Agreement provide d that the Committee w ould meet 
not less than once a year, and otherwise at the request of any Member. For some years now, the 
Committee had regularly met twice a year, in the spring and fall, and some Members  had indicated 
that they would like to continue in thi s manner in 2017. Thus, the Chair proposed to schedule the 
next meeting for Friday , 12 May  2017.  
83.  The Committee so decided .   
84.  In order to provide Members with ample opportunity to prepare for this meeting, the 
Secretariat w ould issue the annotated draft age nda three weeks in  advance, i.e., Friday, 
21 April 2017. Requests to place items on the annotated draft agenda should be communicated in 
writing to the Secretariat at the latest by close of business on Thursday, 20  April 2017. The 
annotated draft agenda w ould be open to Members' comments until close of business on Friday, 
28 April 2017. In addition, Members wishing to circulate documents should do so by close of 
business on Friday, 28 April 2017 so that they c ould be reflected on the airgram. The airgram 
convening the meeting w ould be issued on Friday, 2  May 2017.  
12  ANNUAL  REPORT (2016)  
85.  The Chair recalled that Article  7.3 of the Agreement require d the Committee to report 
annually to the Council for Trade in Goods. As a basis for the Committee's consideration o f this 
matter, the Secretariat has circulated to Members the draft annual report for 2016, via the 
Documents for Meetings link on the Members' website as RD/TRIMS/11. The report w ould be 
updated, if necessary, to take account of today's meeting. The Chair propose d that the Committee 
adopt the annual report ad referendum , request the Secretariat to complete and update it if 
necessary, and forward it to the Council for Trade in Goods.  
86.  The Committee so decided . 
87.  This meeting was adjourned . 
 
 
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