INDONESIA - CERTAIN MEASURES AFFECTING THE AUTOMOBILE INDUSTRY
Document: Request for the Establishment of a Panel by Japan
Date: 18 April 1997
Document codes: WT/DS55/6; WT/DS64/4
Complainant: Japan
Respondent: Indonesia
Third parties: India, South Korea, U.S.
Dispute stage: Panel
Agreements cited: Art. X:1, X:3(a)  GATT 1994Art. 3.1(b), 28.2  Subsidies and Countervailing Measures (SCM)Art. I:1, III:2, III:4  GATT 1994Art. 2  Trade-Related Investment Measures (TRIMs)

INDONESIA - CERTAIN MEASURES AFFECTING THE
AUTOMOBILE INDUSTRY
Request for the Establishment of a Panel by Japan
The following communication, dated 17 April 1997, from the Permanent Mission of Japan
to the Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
On 4 October 1996, the Government of Japan ("GOJ") requested consultations with the
Government of Indonesia ("GOI") pursuant to Article 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs
and Trade 1994 ("GATT 1994") and Article 8 of the Agreement on Trade-Related Investment
Measures (the "TRIMs Agreement") regarding certain measures affecting the automotive industry
("the Measures") of Indonesia (i.e. so-called National Car Program). ()
On 29 November 1996, the GOJ requested additional consultations with the GOI regarding
the Measures under Articles 1 and 4 of the DSU, Article XXII:1 of GATT 1994 and Articles 7 and
30 of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement").

On 5 November and 3 December 1996, the GOJ and the GOI held in Geneva the consultations
requested on 4 October 1996. On 3 December 1996 at the same venue, both Governments held the
consultations requested on 29 November 1996. Unfortunately, the consultations failed to settle the
dispute on this matter.
The GOJ hereby requests that a panel be established at the next meeting of the Dispute
Settlement Body ("DSB") pursuant to Article XXIII:2 of GATT 1994, Articles 4.7 and 6.1 of the
DSU, Article 8 of the TRIMs Agreement and Article 30 of the SCM Agreement, with a standard
terms of reference provided for in Article 7.1 of the DSU.
Measures at Issue
The measures were introduced by the GOI on 19 February 1996 by promulgating its
Presidential Decree No. 2 and all of the implementing regulations and decrees (e.g. Government
Regulation No. 20/1996, Decree of the Minister of Industry and Trade No. 31/MPP/SK/2/1996,
Decree of the Minister of Finance No. 82/KMK.01/1996) and modified on 4 June through its
Presidential Decree No. 42 and all of the implementing regulations and decrees (e.g. Government
Regulation No. 36/1996, Decree of the Minister of Industry and Trade No. 142/MPP/KEP/6/1996
and Decree of the Minister of Finance No. 404/KMK.01/1996).

The thrust of the Measures and their administration is:
- to provide an Indonesian company with "Pioneer Status", where the designation is
conditional on compliance with certain requirements, including the usage of an
Indonesian original brand name (Decree No. 01/SK/1996 of 27 February 1996),
- to exempt the specific automobiles imported or produced by the company with
"Pioneer Status" (so-called "National Car") from the luxury sales tax on certain
conditions including compliance with local content requirements,
- to exempt the completed automobiles produced overseas and imported by the
company with "Pioneer Status" from customs tariff during the one year period
beginning on 1 July 1996, on condition that the overseas automobile producer
concerned purchases, in the framework of "counter purchase", a certain value of
automotive components produced in Indonesia, and
- to exempt the automotive components imported by the company with "Pioneer Status"
from customs tariff after the commencement of automobile assembly/production in
Indonesia on certain conditions including compliance with local content requirements.
In February 1996, the GOI designated "PT Timor Putra Nasional" ("TPN", an Indonesian
company supported by Kia Motor Corp. of the Republic of Korea) as the single Indonesian company
with "Pioneer Status". In August 1996, the GOI started granting customs tariff exemption solely to
the import of the "Timor" produced by Kia Motors and imported by the TPN. In October 1996, the
GOI started granting luxury sales tax exemption to the sale of the "Timor". As of early April 1997,
around 19,000 Timors had been imported and, among them, around 12,000 units had been distributed
to consumers. Reportedly, Kia Timor Motor Corp. (a TPN-related joint venture with the participation
of Kia Motor Corp.) has been preparing for the projected domestic production in west Java, which
will benefit from the customs tariff exemption for automotive components.
Legal Basis of the Complaint
In the view of the GOJ:
- the Measures implemented by the GOI are inconsistent with the WTO Agreement, in
that:
- the exemption from customs tariff and luxury sales tax granted solely to the
completed automobiles originating in the Republic of Korea is inconsistent
with Article I:1 of GATT 1994, since the exemption is not accorded to the
like product originating in other Members including Japan,
- the Measures were not promptly published and have not been administered
in a uniform, impartial and reasonable manner, thus being inconsistent with
Articles X:1 and X:3(a) of GATT 1994, and

- the GOI has extended the scope of existing subsidies1 inconsistent with the
SCM Agreement, thus being inconsistent with Articles 3.1(b) and 28.2 of the
SCM Agreement (see G/SCM/N/16/IDN);
- the Measures, other than the above, stipulated in the relevant degrees and regulations
are inconsistent with the WTO Agreement, in that:
- the customs tariff exemption with regard to the import of automotive
components pertaining to the Measures is inconsistent with Article I:1 of
GATT 1994, since the exemption is not accorded to the like product
originating in all other Members including Japan,
- the luxury sales tax exemption with regard to domestically produced National
Cars pertaining to the Measures is inconsistent with Article III:2 of GATT
1994, since imported automobiles are subject to luxury sales tax in excess of
that applied to the like domestic products (i.e. National Car),
- the local content requirements with regard to domestically produced National
Cars pertaining to the Measures are inconsistent with Article III:4 of GATT
1994, since the requirements accord to products imported from Japan
treatment less favourable than that accorded to like products of national
origin, and
- the local content requirements combined with the exemption of customs tariff
and luxury sales tax pertaining to the Measures correspond to the trade
related investment measures stipulated in paragraph 1(a) of the Illustrative
List annexed to the TRIMs Agreement, thus being inconsistent with Article
2 of the TRIMs Agreement.
The GOJ considers that the subsidies granted under the Measures cause serious prejudice to
the interests of Japan as provided for in Articles 5 and 6 of the SCM Agreement. In this regard, the
GOJ reserves the right to request the establishment of a Panel pursuant to Article 7.4 of the SCM
Agreement.
The GOJ asks that this request be placed on the agenda for the meeting of the Dispute
Settlement Body scheduled to be held on 30 April 1997.
1As already stated in document WT/DS64/1, the GOJ considers that the exemption from customs
tariff and luxury sales tax granted by the Measures constitutes subsidies and that these subsidies are
"prohibited subsidies" contingent upon the use of domestic over imported goods.