WORLD TRADE WT/DS55/6
WT/DS64/4
ORGANIZATION 18April 1997
(97-1708)
Original: English
INDONESIA -CERTAIN MEASURES AFFECTING THE
AUTOMOBILE INDUSTRY
Request fortheEstablishment ofaPanel byJapan
Thefollowing communication, dated 17April 1997, from thePermanent Mission ofJapan
totheChairman oftheDispute Settlement Body, iscirculated attherequest ofthatdelegation.
______________________
On4October 1996, theGovernment ofJapan ("GOJ") requested consultations withthe
Government ofIndonesia ("GOI") pursuant toArticle 4oftheUnderstanding onRules andProcedures
Governing theSettlement ofDisputes ("DSU"), Article XXII:1 oftheGeneral Agreement onTariffs
andTrade 1994 ("GATT 1994") andArticle 8oftheAgreement onTrade-Related Investment
Measures (the"TRIMs Agreement") regarding certain measures affecting theautomotive industry
("the Measures") ofIndonesia (i.e.so-called National CarProgram). (WT/DS55/1)
On29November 1996, theGOJrequested additional consultations withtheGOIregarding
theMeasures under Articles 1and4oftheDSU, Article XXII:1 ofGATT 1994 andArticles 7and
30oftheAgreement onSubsidies andCountervailing Measures (the"SCM Agreement").
(WT/DS64/1)
On5November and3December 1996, theGOJandtheGOIheldinGeneva theconsultations
requested on4October 1996. On3December 1996 atthesame venue, bothGovernments heldthe
consultations requested on29November 1996. Unfortunately, theconsultations failed tosettle the
dispute onthismatter.
TheGOJ hereby requests thatapanel beestablished atthenextmeeting oftheDispute
Settlement Body ("DSB") pursuant toArticle XXIII:2 ofGATT 1994, Articles 4.7and6.1ofthe
DSU, Article 8oftheTRIMs Agreement andArticle 30oftheSCM Agreement, withastandard
terms ofreference provided forinArticle 7.1oftheDSU.
Measures atIssue
Themeasures were introduced bytheGOI on19February 1996 bypromulgating its
Presidential Decree No.2andalloftheimplementing regulations anddecrees (e.g. Government
Regulation No.20/1996, Decree oftheMinister ofIndustry andTrade No.31/MPP/SK/2/1996,
Decree oftheMinister ofFinance No.82/KMK.01/1996) andmodified on4June through its
Presidential Decree No.42andalloftheimplementing regulations anddecrees (e.g. Government
Regulation No.36/1996, Decree oftheMinister ofIndustry andTrade No.142/MPP/KEP/6/1996
andDecree oftheMinister ofFinance No.404/KMK.01/1996).WT/DS55/6
WT/DS64/4
Page2
Thethrust oftheMeasures andtheiradministration is:
- toprovide anIndonesian company with"Pioneer Status", where thedesignation is
conditional oncompliance with certain requirements, including theusage ofan
Indonesian original brand name (Decree No.01/SK/1996 of27February 1996),
- toexempt thespecific automobiles imported orproduced bythecompany with
"Pioneer Status" (so-called "National Car") from theluxury sales taxoncertain
conditions including compliance withlocalcontent requirements,
- toexempt thecompleted automobiles produced overseas andimported bythe
company with "Pioneer Status" from customs tariff during theoneyearperiod
beginning on1July1996, oncondition thattheoverseas automobile producer
concerned purchases, intheframework of"counter purchase", acertain value of
automotive components produced inIndonesia, and
- toexempt theautomotive components imported bythecompany with"Pioneer Status"
from customs tariff afterthecommencement ofautomobile assembly/production in
Indonesia oncertain conditions including compliance withlocalcontent requirements.
InFebruary 1996, theGOIdesignated "PTTimor Putra Nasional" ("TPN", anIndonesian
company supported byKiaMotor Corp. oftheRepublic ofKorea) asthesingle Indonesian company
with"Pioneer Status". InAugust 1996, theGOIstarted granting customs tariff exemption solely to
theimport ofthe"Timor" produced byKiaMotors andimported bytheTPN. InOctober 1996, the
GOIstarted granting luxury salestaxexemption tothesaleofthe"Timor". Asofearly April 1997,
around 19,000 Timors hadbeenimported and,among them, around 12,000 unitshadbeendistributed
toconsumers. Reportedly, KiaTimor Motor Corp. (aTPN-related jointventure withtheparticipation
ofKiaMotor Corp.) hasbeenpreparing fortheprojected domestic production inwestJava, which
willbenefit from thecustoms tariff exemption forautomotive components.
Legal Basis oftheComplaint
IntheviewoftheGOJ:
- theMeasures implemented bytheGOIareinconsistent withtheWTO Agreement, in
that:
- theexemption from customs tariff andluxury salestaxgranted solely tothe
completed automobiles originating intheRepublic ofKorea isinconsistent
withArticle I:1ofGATT 1994, since theexemption isnotaccorded tothe
likeproduct originating inother Members including Japan,
- theMeasures were notpromptly published andhavenotbeenadministered
inauniform, impartial andreasonable manner, thusbeing inconsistent with
Articles X:1andX:3(a) ofGATT 1994, andWT/DS55/6
WT/DS64/4
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- theGOIhasextended thescope ofexisting subsidies1inconsistent withthe
SCM Agreement, thusbeing inconsistent withArticles 3.1(b) and28.2ofthe
SCM Agreement (seeG/SCM/N/16/IDN);
- theMeasures, other thantheabove, stipulated intherelevant degrees andregulations
areinconsistent withtheWTO Agreement, inthat:
- thecustoms tariff exemption with regard totheimport ofautomotive
components pertaining totheMeasures isinconsistent withArticle I:1of
GATT 1994, since theexemption isnotaccorded tothelikeproduct
originating inallother Members including Japan,
- theluxury salestaxexemption withregard todomestically produced National
Carspertaining totheMeasures isinconsistent withArticle III:2ofGATT
1994, since imported automobiles aresubject toluxury salestaxinexcess of
thatapplied tothelikedomestic products (i.e.National Car),
- thelocalcontent requirements withregard todomestically produced National
Carspertaining totheMeasures areinconsistent withArticle III:4ofGATT
1994, since therequirements accord toproducts imported from Japan
treatment lessfavourable thanthataccorded tolikeproducts ofnational
origin, and
- thelocalcontent requirements combined withtheexemption ofcustoms tariff
andluxury sales taxpertaining totheMeasures correspond tothetrade
related investment measures stipulated inparagraph 1(a)oftheIllustrative
Listannexed totheTRIMs Agreement, thusbeing inconsistent withArticle
2oftheTRIMs Agreement.
TheGOJconsiders thatthesubsidies granted under theMeasures cause serious prejudice to
theinterests ofJapan asprovided forinArticles 5and6oftheSCM Agreement. Inthisregard, the
GOJreserves theright torequest theestablishment ofaPanel pursuant toArticle 7.4oftheSCM
Agreement.
TheGOJ asksthatthisrequest beplaced ontheagenda forthemeeting oftheDispute
Settlement Body scheduled tobeheldon30April 1997.
1Asalready stated indocument WT/DS64/1, theGOJconsiders thattheexemption fromcustoms
tariff andluxury salestaxgranted bytheMeasures constitutes subsidies andthatthese subsidies are
"prohibited subsidies" contingent upon theuseofdomestic overimported goods.