G/TRIMS/Q/RUS/6  
 
27 April 2017 
(17-2320) Page: 1/2 
Committee on Trade -Related Investment Measures  Original: English  
 
RUSSIAN FEDERATION – MEASURES IMPLEMENTIN G  
RUSSIA'S  IMPORT SUBSTITUTION POLICY  
QUESTIONS FROM THE UNITED STATES  
The following communication, dated 26 April 2017 , is being circulated at the request of the 
Delegation of the United States . 
 
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Last year, the United States and other Members posed questions regarding a number of measures 
that could be understood to reflect local content requirement s imposed on purchases by 
state-owned enterprises (SOEs). See G/TRIMS/Q/RUS/4 (26  May 2016); G/TRIMS/ Q/RUS/5 
(27 Septemb er 2016). We remain concerned about a growing emphasis in the Russian Federation 
on local content requirements.  
 
Further to our earlier questions, we note that on 16 September 2016, the Russian Federation 
issued Decree No. 925 "On priori ty 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 " ("Decree No. 925 " or "the Decree "). This Decree implements 
Article 3(8) of Federal Law No. 223 "On purchases of goods and services by certain types of 
entities " ("Federal Law No. 223 ") by establishing a 15 percent price preference for goods of 
Russian origin and to "works and services " performed and rendered by Ru ssian entities.  
 
1. It is our understanding that Federal Law No. 223 applies to purchases by SOEs, business 
enterprises in which the Russian state, regional, or municip al government owns more than 
50 percent, and legal persons using State funding for cert ain investment projects. Is this 
description of the entities covered by Federal Law No. 223 correct? If not, please describe the 
types of entities covered by Federal Law No. 223.  
 
2.  It is our understanding that Government Decree No. 925 implements Artic le 3.8 of Federal 
Law No. 223 by establishing the terms under which SOEs and certain other legal persons must 
give priority to goods of Russian origin, and to works and services performed and rendered by 
Russian entities. Is our understanding of the purpos e of Decree No. 925 correct?  
 
3. According to our reading of paragraph 2 of Decree No. 925, if goods, works, or services are 
purchased through a tender process, in evaluating the tenders the price of a Russian offer (i.e., for 
Russian -made goods or Russia n-supplied works or service) w ill be putatively reduced by 
15 percent when compared against tenders involving foreign goods, works, or services. If the 
Russian tender is successful, however, the final contract will be for the full price. As a result, all 
else being equal, entities covered by Federal Law No. 223 must purchase Russian -produced goods 
unless those goods are more than 15% more expensive than imported goods. Is this a correct 
reading of paragraph 2? If not, could you please explain the mechanics of the process?  
 
4. Paragraph 3 of Decree No. 925, which applies to so -called "reverse auctions " (where firms 
bid to provide goods, works, or services for the lowest price), appears to provide that the final 
price paid to a foreign firm who wins a contract  to provide goods, works, or services will be 15% 
less than the contract price proposed in the winning proposal. Is this understanding correct? If not, 
could you please explain the mechanics of the process? Can you elaborate on the distinction 
between para graph 2 and  paragraph 3 of Decree No. 925?  G/TRIMS/Q/RUS/6  
 
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  5. Paragraph 4 of Decree No. 925 also appears to apply to reverse auctions, but applies when 
the winner of the auction has reduced the price to zero, but a contractual obligation remains. In 
such cases, the price to be paid will actually be 15 percent above the proposed price. Would you 
please explain how this process works? If the price of the contract has been bid down to zero, 
what is the calculation for determining 15 percent above that price?  
 
6. Subparagraph  6(d) appears to describe a situation in which a supply bid, submitted under 
the process described in paragraph 2, includes a mix of Russian and foreign goods, works, or 
services. Is our understanding correct that the 15 percent price preference desc ribed in 
paragraph  2 will not be applied to any such supply bid if the price of the Russian -originated goods, 
works, or services represents less than 50 percent of the total price of the contract?  
 
7. Subparagraph 6(e) appears to describe a situation in which a supply bid, submitted under 
the process described in paragraphs 3 or 4, includes a mix of Russian and foreign goods, works 
and/or services. It is our understanding that the 15 percent price preference described in 
paragraphs 3 or 4 will not be applied to a ny such supply bid in  which the price of the 
Russian -originated goods, works or services represents more than 50 percent of the total price of 
the contract. Please explain the difference between subparagraphs 6(d) and 6(e). What is the 
rationale for subpar agraph 6(e)?  
 
8.  Paragraph 8 of Decree No. 925 provides that the priority for tenders and auctions 
established by the Decree shall take into account the provisions of the General Agreement on 
Tariffs and Trade (GATT). How does the administration of the 1 5 percent price priority requirement 
for Russian goods take into account the national treatment provis ions of Article III of the 
GATT  1947 or the Agreement on Trade -Related Investment Measures ' prohibition on requiring or 
conditioning receipt of an advanta ge on the purchase or use of products of domestic origin?  
 
 
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