On July 9, 2013, the European Union formally requested consultations with the Russian Federation at the World Trade Organization (WTO) regarding a Russian “recycling fee” on imported vehicles. Although Russia has been a third party in a handful of prior cases since joining the WTO in August of last year, this is the first dispute involving the Russian Federation as a central party to the dispute.

The measure at issue is a fee Russia imposed in September 2012, shortly after joining the WTO. The fee, which affects cars, trucks, and buses and other motor vehicles, is imposed only on imports. Motor vehicles from a few countries, such as Belarus and Kazakhstan, as well as domestic vehicles, are exempt from the tax. The fee ranges from hundreds of dollars for certain new cars to tens of thousands of dollars for motor vehicles older than three years. The EU claims that this measure is inconsistent with Russia’s obligations under the WTO because it treats all EU vehicles less favorably than domestic vehicles and select imports, and also, due to the higher fees on older vehicles, has an adverse effect on imported vehicles compared with relevant domestic vehicles.

Russia historically has had high tariffs on automobiles and other vehicles, but these tariffs, a subject of repeated negotiations during Russia’s 18-year effort to join the WTO, are to be phased out over time as part of Russia’s WTO membership. The fee allegedly provides additional protections to the Russian domestic motor vehicle industry.

According to a press release from the European Union, the EU brought the case after failing to convince Russia to lift the fee in earlier negotiations: “The European Commission has pursued every diplomatic channel for almost one year now to find a solution with our Russian partners on this matter but to no avail. The fee is incompatible with the WTO’s most basic rule prohibiting discrimination against and among imports,” said EU Trade Commissioner Karel De Gucht. “It is severely hampering trade in a sector which is key for the European economy. We expect Russia to engage in WTO consultations with us to find a solution to this problem quickly.”

The request for consultations is the first step in a dispute settlement case at the WTO. During the consultations phase, which lasts 60 days, the European Union and Russian delegations to the WTO discuss the matter. If consultations fail to resolve the dispute, the European Union may request that the matter go before a WTO dispute settlement panel. Russia’s Duma introduced legislation on May 30 that would apply the recycling fee to domestic and foreign automobile manufacturers, but the revised measure is unlikely to pass through the legislative process before the expiration of the 60-day consultation period. While it is too soon for other parties to join in the dispute, it is possible that the United States will join the side of the European Union as the United States has previously reported its strenuous objection to the fee.