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)
(4) Calculation of subsidization from the one-year tariff exemption on CBU imports of the Kia Sephia from Korea
8.99 If the subsidy attributable to the one-year tariff exemption on CBU imports of the Kia Sephia from Korea is "expensed" (allocated to the year of receipt), the resulting subsidy is 122.18 per cent ad valorem. This figure is derived as follows:
Table 13
One-Year Tariff Exemption (Expensed)
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Step 1 |
Determine the US$ value of importations during the one-year period (1996-97). Based on Attachment U-12 to AV/14, this figure is US$368,453,066. |
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Step 2 |
Multiply the value of importations by 200% to arrive at the total subsidy amount in US$. ($368,453,066 x 200% =$736,906,132). |
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Step 3 |
Determine the total sales value during the same period. Based on Attachment U-12, this figure is Rp. 418,221,435,000. |
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Step 4 |
Divide the total sales value by the total number of units sold to arrive at an average sales value in Rp. of cars sold. (418,221,435,000/ 11,336 = Rp. 36,893,210.57). |
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Step 5 |
Multiply the average sales value by the number of units imported to arrive at the total sales value in Rp. of the cars imported. (36,893,210.57 x 39,727 = 1,465,656,576,238.97). |
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Step 6 |
Convert the Rp. sales value into dollars by dividing by 2430 (the conversion rate provided by Indonesia in Attachment A-28 to AV/14. (1,465,656,576,238.97/ 2430 = $603,150,854.42). |
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Step 7 |
Divide the total subsidy amount by the total sales value to arrive at the subsidy percentage. ($736,906,132.00/ $603,150,854.42 = 122.18%). |
8.100 If the subsidy attributable to the one-year tariff exemption on CBU imports of the Kia Sephia from Korea is "allocated over time", as it should be, the resulting subsidy is 10.18 per cent ad valorem. This figure is derived as follows: 453
Table 14
One-Year Tariff Exemption (Allocated)
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Step 1 |
The total subsidy amount calculated in Step 2, Table 13 ($736,906,132) is divided by 12, the number of years over which the subsidy should be allocated. 454 This results in an allocated subsidy amount for 1996-97. ($736,906,132/ 12 = $61,408,844.33). |
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Step 2 |
Divide the allocated subsidy amount for 1996-1997 by the total sales figure to arrive at the subsidy percentage ($61,408,844.33/ $603,150,854.42 = 10.18%). |
(5) Calculation of subsidization from the exemption from the 35 per cent luxury sales tax
8.101 For the period 1996-97, the subsidy attributable to the exemption of the Timor Kia Sephia from the 35 per cent luxury tax is 44.43 per cent. 455 This figure is derived as follows:
Table 15
Luxury Tax Exemption (1996-97)
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Step 1 |
Attachment U-12 to AV/14 states that the luxury sales tax is calculated on the basis of cost of goods sold. However, Indonesia did not provide a value for cost of goods sold, nor did it provide sales information for the 28,391 imported Kia Sephias that, according to Indonesia, had not yet been sold. However, AV/16, p. 3, indicates that all of the imported Kia Sephias will be exempt from the luxury tax when sold. Therefore, the calculation must be based on the estimated sales value of cars that were imported during 1996-97. |
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Step 2 |
Determine the US$ value of importations during the period (1996 97). Based on Attachment U-12 to AV/14, this figure is $368,453,066. |
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Step 3 |
Using Attachment A-30/1 to AV/14 as a guide, it is assumed that the value of importations equals the CIF price referred to in that attachment. |
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Step 4 |
Attachment A-30/1 shows that the amount of luxury sales tax is equal to 146.6259 per cent of the CIF price. However, this figure is based on the assumption that imported CBU cars are subject to the 200 per cent tariff, an assumption which does not hold for the Kia Sephias imported under Presidential Decree No. 42/1996. Therefore, by eliminating the effect of the 200 per cent tariff, the factor for the luxury tax is reduced to 72.6 per cent. |
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Step 5 |
Multiply the total CIF value by 72.6 per cent to arrive at the US$ value of the luxury tax exempted. ($368,453,066 x .726 = $267,496,925.90). |
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Step 6 |
Determine the total sales value for the same period. Based on Attachment U-12, this figure is Rp. 418,221,435,00.00. |
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Step 7 |
Divide the total sales value by the total number of units sold to arrive at an average sales value in Rp. of cars sold. (Rp. 418,221,435,000/ 11,336 = Rp. 36,893,210.57). |
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Step 8 |
Multiply the average sales value by the number of units imported to arrive at the total sales value in Rp. of importations. (Rp. 36,893,210.57 x 39,727 = Rp. 1,465,656,576,238.97). |
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Step 9 |
Convert the Rp. sales value into dollars by dividing by 2430 (the conversion rate provided in Attachment A-28) (Rp. 1,465,656,576,238.97/ 2430 = $603,150,854.42). |
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Step 10 |
Divide the total amount of the tax exempted by the total sales value to arrive at the subsidy percentage. ($267,496,925.90/ $603,150,854.42 = 44.43%. |
8.102 For 1998 and 1999, the estimated ad valorem subsidy rate attributable to the luxury tax exemption is 35.20 per cent. This figure is derived as follows:
Table 16
Luxury Tax Exemption (1998-99)
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Step 1 |
According to Attachment U-12, AV/14, the luxury tax is calculated based on the cost of goods sold. Again, Indonesia did not provide this value in its Annex V responses. |
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Step 2 |
Using Attachment A-30/2, AV/14, as a guide, we know that the luxury sales tax amount is 96.8793% of the CIF value. The CIF value can be obtained through information provided in Attachment A-28, AV/14. |
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Step 3 |
Indonesia did not indicate how the values in Attachment A-28 relate to the values in Attachment A-30/2. Therefore, certain assumptions have to be made. Logically, it seems that the "dealer price" in A-28 is the same as the "sole agent sales price" in A-30/2. Attachment A-30/2 shows that the "sole agent sales price" is 426.3768 per cent of the CIF price. Given this assumption, calculate the average dealer�s price (without subsidy - since we are trying to determine what part of that price is attributable to the luxury sales tax). [($22,170+$24,085)/2 = $23,127.50] |
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Step 4 |
Calculate the average CIF price by dividing the average dealer�s price by 426.3768 per cent. [$23,127.50 / 426.3768% = $5,424.19] |
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Step 5 |
Next, determine the estimated number of units to be sold.
[Attachment A-28]. In 1999, there are sales estimated in both the domestic and export markets. Assuming that the luxury sales tax would not be paid on exported cars, use only the number of units sold domestically in the calculation.
[1998 - 6,000] [1999 - 25,000] |
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Step 6 |
Multiply the number of units sold by the average CIF price to determine the total CIF value of sales.
[1998 - 6,000 x $5,424.19 = $32,545,157.24]
[1999 - 25,000 x $5,424.19 = $135,604,821.84] |
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Step 7 |
Multiply the total CIF value by 96.8793 per cent to arrive at the total amount of luxury tax exempted.
[1998 - $32,545,157.24 x 96.8793% = $31,529,520.52]
[1999 - $135,604,821.84 x 96.8793% = $131,373,002.16] |
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Step 8 |
Determine the total value of sales for the period. [Attachment A-28]
[1998 - $89,560,000.00] [1999 - $373,180,000.00 (domestic only)] |
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Step 9 |
Divide the total amount of tax exempted by the total sales to arrive at the % of subsidization.
[1998 - $31,529,520.52 / $89,560,000.00 = 35.20%]
[1999 - $131,373,002.16 / $373,180,000.00 = 35.20%] |
(6) Calculation of subsidization from the exemption from import duties on imported automotive parts
8.103 According to Indonesia, TPN�s one-year authorization to import CBU Kia Sephias from Korea duty-free has expired, and Kia Timor is now assembling Timor Kia Sephias in Indonesia. Under the National Motor Vehicle programme, as the producer of a "national motor vehicle", Kia Timor benefits from the tariff exemption on imported automotive parts. For 1998 and 1999, the estimated ad valorem subsidy rate attributable to the exemption from import duties on automotive parts is 14.17 per cent and 9.45 per cent, respectively. 456 This figure is derived as follows:
Table 17
Tariff Exemption on Parts (1998-99)
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Step 1 |
To determine the import duty exemption, we must know the total value of importations. This value was not provided in Indonesia�s Annex V responses. Therefore, we must extrapolate the value from what Indonesia did provide. |
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Step 2 |
Determine the amount of local content in the cars sold. [Attachment A-28, AV/14] [1998 � 40%] [1999 - 60%] |
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Step 3 |
From this, assume that the amount of imported content is:
[1998 - 60%] [1999 � 40%] |
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Step 4 |
To determine the CIF value of the completed car, follow the steps described above in connection with the luxury tax subsidy for 1998-99, Table 16, to arrive at the average CIF value of $5,424.19. |
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Step 5 |
Multiply the average CIF value by the percentage of imported parts to obtain the average CIF value of importations. Then multiply that amount by the number of cars sold to arrive at the total CIF value of importations.
[1998 - $5,424.19 x 60% x 6000 = $19,527,094.34]
[1999 - $5,424.19 x 40% x 25000 = $54,241,928.74]
(Note - For the number of units sold, the number sold solely in the Indonesian market was used because import duty exemption on parts incorporated into an exported product arguably would not be considered an actionable subsidy.) |
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Step 6 |
Multiply the value of importations by 65 per cent to arrive at the amount of import duty exemption.
[1998 - $19,527,094.34 x 65% = $12,692,611.32]
[1999 - $54,241,928.74 x 65% = $35,527,253.68] |
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Step 7 |
Divide the total value of import duty exemptions by the total sales value to arrive at the % of subsidization.
[1998 - $12,692,611.32 / $89,560,000.00 = 14.17%]
[1999 - $35,527,253.68 / $373,180,000.00 = 9.45%] |
To continue with Calculation of subsidization from the $690 million loan
453 Note that this calculation does not adjust for the "time value of money". If such an adjustment were made, as the United States believes it should be, the subsidy would increase.
454 The period of 12 years is based on the class life (in years) for manufacture of motor vehicles set forth in the Class Lives tables of the Modified Accelerated Cost Recovery System of the U.S. Internal Revenue Service. 1997 US Master Tax Guide [CCH], �190. Because the United States was unable to develop information concerning the actual life of assets for Kia Timor or for the automotive industry as a whole (either in Indonesia or worldwide), it has used the Class Lives tables as the best information otherwise available to it.
455 This figure relates to sales of imported CBU Kia Sephias from Korea during the one-year period authorized under Presidential Decree No. 42/1996. Although, after June, 1997, Kia Timor began to assemble Timor Kia Sephias in Indonesia, the data provided by Indonesia in its Annex V responses does not permit the calculation of the precise amount of subsidization attributable to the exemption from the luxury tax of cars assembled in Indonesia during the second half of 1997. However, given the nature of the subsidy, one can assume that the amount was around 35 per cent ad valorem.
456 Again, the data provided by Indonesia in its Annex V response do not permit the calculation of a subsidy rate for those Timor Kia Sephias assembled in Indonesia during the latter part of 1997.
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