Joint recommendations from RAKA and Transport Ministry likely to propose reductions on certain components, while maintaining protective stance on foreign aircraft (534 words)

Published: 10/10/2001

The Russian aerospace industry and the country's administration may finally grasping the realities of the aerospace market. Andrey Osipov, Deputy Head of Aviation Development Programmes at the Russian Aerospace Agency (RAKA) along with the Ministry of Transport, says that, while tariff barriers should remain in place for aircraft, they should be reduced for certain component imports reflecting the industry's increasing dependence on non- Russian products. Osipov's comments come after the government assigned both RAKA and the MoT with the task to review the current structure of import duties on aviation industry by October 2001. The detail of the recommendations is expected to be submitted before 12th October for review by the State Commission on Tax and Tariff policy. While observing that the current tariff barriers protect domestic producers, Osipov did concede that, in certain unspecified cases, high tariff barriers on components were having the effect of constraining the development of aerospace products within Russia. He therefore proposed that the tariff barriers should be reduced on certain classes of imported components where there is not a Russian equivalent or where the quality of the imported item considerably exceeds that of a Russian produced part. The proposal from the two bodies to the government therefore seem likely to recommend the following: - Tariff barriers to be maintained on foreign aircraft, where there is a comparable Russian product in what has been described as “serial production”, although it is unclear what this exactly means given that few aircraft currently produced could be regarded as being currently in serial production outside of the Tu-204 and Tu-214. - Tariffs on certain components reduced from a level regarded as "inhibiting" to an "acceptable level”. The proposed changes could open the Russian market up to a number of products on substantially reduced tariffs. The various pieces of navigation equipment required by aviation bodies to be installed in Russian aircraft flying internationally could be first on the list, with reports suggesting tariff cuts from 15% to 5%. It has also been speculated that duties on the import of light aircraft (up to 2 tonnes) will be substantially reduced. Osipov says that the Russian aerospace industry is unlikely to develop serial production of light aircraft in the foreseeable future, suggesting that he is not entirely convinced by the ability of the Il-103, the only internationally certified Russian light aircraft, to meet demand. He therefore considers it necessary to import aircraft to meet demand within Russia for the recovering general aviation sector. On a more general level, Osipov also hinted that the liberalisation and simplification of the duty regime would also have the effect of encouraging local aerospace production. Although not specific about where the benefit would lie, it may well be that the increasingly cooperative nature of the relationship between Russian producers, led by RAKA and western producers Boeing and EADS and related suppliers, has led the government to consider both easing and making more flexible regulations across the board to facilitate this process, as recently demonstrated by proposed changes allowing foreign participation in Russian military projects.

Article ID: 2811