The industrial assembly rules, which provide for a customs rate of 0% for certain car components, were recently amended by a joint order of the Ministry of Economic Development, the Ministry of Trade and Industry and the Ministry of Finance (381/2046/91n) dated June 21 2016, which came into force on July 15 2016. In particular, the amendments reduced the required percentages of local production to:

  • 45% (previously 50%) for the fourth year after entering into an additional agreement extending an initial industrial assembly agreement; and
  • 50% (previously 55%) for the fifth year after entering into an additional agreement extending an initial industrial assembly agreement.

Further, the terms for achieving particular percentages of local production were extended slightly. In addition, new reporting and calculation rules were introduced and car bodies were added to the list of automotive components and units suitable for industrial assembly.

The amendments are relevant only to car manufacturers that previously entered into industrial assembly agreements with the Ministry of Trade and Industry and later entered into additional related agreements extending the terms of the initial agreement.

However, all industrial assembly agreements expire in 2019 or 2020 (December 31 2020 at the latest). At present, there is no legal basis for any further extension, as such an extension would contravene Russia's World Trade Organisation obligations. In order to meet the demands of western car manufacturers (eg, Volkswagen, Ford and Nissan), the Russian authorities are offering alternative beneficiary investment instruments as special investment contracts (for further details please see "Special investment contracts: opportunity in crisis").

For further information on this topic please contact Ekaterina Kalinina at Noerr by telephone (+7 495 799 56 96) or email (ekaterina.kalinina@noerr.com). The Noerr website can be accessed at www.noerr.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.