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World Trade Organization

WT/DS54/R
WT/DS55/R
WT/DS59/R
WT/DS64/R


2 July 1998
(98-2505)
Original: English

Indonesia - Certain Measures Affecting the Automovile Industry

Report of the Panel

(Continued)

III. Findings and Recommendations Requested by the Parties20

A. Japan

3.1 Japan requests the Panel to find that:

(a) the luxury sales tax exemption with regard to domestically produced National Cars pertaining to the February 1996 National Car Programme measures identified21 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 Cars);

(b) the local content requirements with regard to domestically produced National Cars pertaining to the February 1996 National Car Programme measures identified 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 domestic products;

(c) the local content requirements and the exemption from customs tariff and luxury sales tax pertaining to the February 1996 National Car Programme measures identified are trade related investment measures as stipulated in paragraph 1(a) of the Illustrative List annexed to the TRIMs Agreement, and are therefore inconsistent with Article 2 of the TRIMs Agreement;

(d) the customs tariff exemption with regard to the import of automotive parts and components and the sales tax exemption pertaining to the February 1996 National Car Programme measures identified are inconsistent with Article I:1 of GATT 1994, since the exemptions are not accorded to the like products originating in all other members including Japan;

(e) the exemption from customs tariff and sales tax granted under the extended National Car Programme of June 199622 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 products originating in other Members including Japan;

(f) the extended National Car Programme 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.

3.2 Japan requests that the Panel recommend that Indonesia bring its measures into conformity with its obligations under GATT 1994 and the TRIMs Agreement.

B. European Communities

3.3 The European Communities requests the Panel to find that:

(a) Indonesia violates the provisions of Article III:2, first sentence, by exempting from the luxury sales tax the sales of the following categories of motor vehicles:

(i) domestically manufactured motor cycles with engines of 250 cc or less;

(ii) combines, minibuses, vans and pick-ups using gasoline as fuel which are manufactured domestically and have a local content of more than 60 per cent;

(iii) combines, minibuses, vans and pick-ups using diesel oil as fuel which are manufactured domestically and have a local content of more than 60 per cent;

(iv) domestically manufactured buses;

(v) domestically manufactured sedans and stations wagons of less than 1,600 cc with a local content of more than 60 per cent;

(vi) National Cars assembled in Indonesia by pioneer companies; and

(vii) imported National Cars.

(b) the following measures favour the "use" by Indonesian car manufacturers of domestic parts and components over "like" imported parts and components and are, accordingly, inconsistent with Article III:4 of GATT:

(i) the exemption from the luxury sales tax of locally manufactured combines, minibuses, vans and pick-ups with more than 60 per cent local content;

(ii) the exemption from the luxury sales tax of locally manufactured sedans and stations wagons of less than 1,600 cc with more than 60 per cent local content;

(iii) the exemption from the luxury sales tax of National Cars assembled in Indonesia by pioneer companies meeting certain local content requirements;

(iv) the exemption from the luxury sales tax of National Cars assembled in Korea by "overseas producers" meeting certain counter-purchasing obligations;

(v) the grant of import duty relief to parts and components used in the assembly of motor vehicles (or of other parts and components for the assembly of motor vehicles) in Indonesia based on the finished vehicles (or the parts and components) meeting certain local content requirements;

(vi) the exemption from import duties for parts and components used for the assembly of National Cars in Indonesia by pioneer companies meeting certain local content obligations.

(c) the following measures are inconsistent with Indonesia's obligations under Article I:1 of GATT:

(i) the exemption from customs duties on imports of National Cars;

(ii) the exemption from the sales tax on luxury goods for imported National Cars;

(iii) the exemption from the sales tax on luxury goods for National Cars assembled in Indonesia; and

(iv) the exemption from customs duties on imports of parts and components for the assembly of National Cars in Indonesia.

(d) the measures listed in paragraph b. above are also TRIMs inconsistent with Article III of GATT and, accordingly, that by applying those measures Indonesia is in violation of its obligations under Article 2.1 of the TRIMs Agreement.

(e) the following incentives granted to PT TPN under the National Car Programme constitute "specific subsidies" within the meaning of Articles 1 and 2 of the SCM Agreement and cause "serious prejudice" to the interests of the Community in the sense of Article 5(c) of that Agreement:

(i) customs duty relief for parts and components intended for assembly into National Cars;

(ii) exemption from the luxury sales tax for National Cars;

(iii) customs duty relief for National Cars imported from Korea.

C. United States

3.4 The United States requests the Panel to find that:

(a) Indonesia's system of tariff and tax incentives under the 1993 Incentive System23 and National Car programmes24 and the government-directed $690 million loan to TPN are inconsistent with Article III:4 of GATT 1994 and are not covered by Article III:8 of GATT 1994;

(b) Indonesia's discriminatory application of the luxury sales tax is inconsistent with Article III:2, first sentence, of GATT 1994;

(c) alternatively, Indonesia's discriminatory application of the luxury sales tax is inconsistent with Article III:2, second sentence;

(d) Indonesia's exemption of CBU Kia Sephia sedans imported from Korea from import duties and the luxury sales tax violates Article I:1 of GATT 1994.

(e) Indonesia's system of tariff and tax incentives under the 1993 Incentive System and National Car programmes and the government-directed $690 million loan to TPN are inconsistent with Article 2 of the TRIMs Agreement;

(f) Indonesia's grant of "national motor vehicle" benefits only to motor vehicles bearing a unique Indonesian trademark owned by Indonesian nationals discriminates against foreign-owned trademarks and their owners and is inconsistent with Articles 3, 20 and 65 of the TRIPS Agreement;

(g) Indonesia has extended the scope of its tariff and tax subsidies in a manner inconsistent with Article 28.2 of the SCM Agreement.

(h) Indonesia's subsidies under the National Motor Vehicle Programme have caused serious prejudice to the interests of the United States within the meaning of Articles 6 and 27 of the SCM Agreement;

(i) Indonesia's subsidies under the National Motor Vehicle Programme have caused a threat of serious prejudice to the interests of the United States within the meaning of Articles 6 and 27 of the SCM Agreement.

3.5 The United States requests that the Panel recommend that Indonesia bring its measures into conformity with its obligations under GATT 1994, the TRIMs Agreement, the TRIPS Agreement, and the SCM Agreement.

3.6 The United States also requests that the Panel recommend, pursuant to Article 7.8 of the SCM Agreement, that Indonesia take appropriate steps to remove the serious prejudice and the threat of serious prejudice or withdraw its subsidies.

D. Indonesia

3.7 Indonesia requests the Panel to reject the complainants' assertions and find that the 1993 incentive programme and the 1996 National Car programme are allowable subsidies under the Subsidies Agreement and do not violate any provisions of GATT 1994, the TRIMs Agreement, or the TRIPs Agreement.

To Continue with Requests For Preliminary Rulings.

20The descriptions in this section of the findings and recommendations requested by the parties are as they appear in the parties' submissions. These descriptions do not necessarily correspond to the parties' claims as identified in their requests for a panel.

21Decree Nos. 114/1993, 645/1993.

22Presidential Decree No. 42/1996, Decree No. 142/1996.

23Decrees No. 114/1993, 645/1993, 647/1993, 223/1995, 36/1997, and Regulation 36/1996.

24Decrees No. 82/1996, 31/1996, 42/1996. 36/1996, 142/1996, Regulations 20/1996 and 36/1996, and Presidential Instruction No. 2/1996.


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