Russia’s Trade Status, Tariffs, and WTO Issues

Russia’s Trade Status, Tariffs, and WTO Issues

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April 1, 2022
Russia’s Trade Status, Tariffs, and WTO Issues
Following Russia’s 2022 invasion of Ukraine, Congress is
Delegated Presidential Tariff Authorities
considering legislation to revoke Russia’s permanent
Although congressional revocation of Russia’s PNTR status
normal trade relations (PNTR) status, which provides
would subject Russian imports to non-MFN tariffs, the
unconditional, nondiscriminatory, most-favored nation
President already possesses broad authority to restrict trade.
(MFN) treatment to goods and services traded with Russia.
In the International Emergency Economic Powers Act
On March 11, 2022, President Joe Biden announced his
(IEEPA, 50 U.S.C. § 1601 et seq.), Congress authorized the
support for such legislation, in coordination with the G-7
President to “regulate” a variety of economic transactions
countries. On March 17, the House passed H.R. 7108,
after declaring a national emergency. No president has
which would suspend PNTR with Russia and Belarus;
relied upon IEEPA to impose tariffs, but presidents have
provide the President authority to further increase non-
used the Act to impose other trade measures. For example,
MFN tariffs; and provide authority to restore normal trade
on March 11, 2022, President Biden cited IEEPA when
relations (NTR) under certain conditions. It also directs the
banning the import of certain products of Russian origin,
U.S. Trade Representative (USTR) to use its “voice and
imposing export controls, restricting investment in Russia,
influence” at the World Trade Organization (WTO) to
and taking other measures. Thus, even if Congress does not
encourage other WTO members to suspend trade
impose a blanket revocation of Russia’s MFN treatment,
concessions; consider further steps toward suspending
the President could rely upon IEEPA or other provisions of
Russia from the WTO; and seek to halt Belarus’s accession
federal law (e.g., Section 232 of the Trade Expansion Act
process. Removing Russia’s PNTR status would increase
of 1962) to impose tariffs on Russian imports.
applicable duties on U.S. imports from Russia, potentially
impacting certain sectors reliant on Russian inputs, and
Trade Impact from Removing PNTR
raise issues under U.S. WTO obligations.
If Russia’s PNTR were revoked, applicable duty rates on
History of Russia’s Trading Status
U.S. imports from Russia would be the rates listed in
column 2 of the U.S. Harmonized Tariff Schedule (HTS),
During 1992 to 2012, Russia’s NTR status was renewed by
unless otherwise specified by law or via other presidential
the President annually under Title IV of the Trade Act of
authorities. Column 2 duty rates are generally higher than
1974 (19 U.S.C. § 2431). The Act requires the President to
column 1 rates, which apply to countries with NTR.
deny NTR status to any country that did not have it at the
time of the law’s enactment on January 3, 1975, essentially
Pertinent for Russian trade, non-MFN rates for raw
covering “nonmarket economy” countries (
materials are relatively low.
i.e., the Soviet
Union and other Communist countries). It further denies
Although U.S. imports from Russia account for a relatively
NTR status as long as the country denies its citizens the
small share of U.S. imports (around 1% in 2021 based on
right to freedom of emigration under Section 402 of the Act
U.S. trade data), some commodities are important to
(the so-called Jackson-Vanik Amendment), which Congress
specific U.S. industries. For example, in 2021, certain
enacted in response to restrictive emigration policies the
titanium products (used by the aerospace industry)
Soviet Union implemented in 1972.
accounted for roughly 53% of total U.S. imports of similar
Amending Russia’s trade status was tied to its WTO
products. Without PNTR, the duty rate for these products
would increase from 15% to 45%. Based on the 2021
accession in August 2012. MFN treatment is a cornerstone
dutiable value of those products, U.S. importers would pay
of the WTO and its predecessor—the 1947 General
an additional $32.4 million in duties. Duty rates for most
Agreement on Tariffs and Trade (GATT). WTO rules
petroleum oil, a major Russian export (over 50% of U.S.
generally require each member to provide unconditional
imports from Russia) would double (see Table 1).
MFN treatment (i.e., a member’s lowest tariff or best trade
concession) to all WTO members. To comply with WTO
On March 8, 2022, the Biden Administration announced a
rules and ensure the United States benefited from the terms
ban on imports of Russian crude oil and certain petroleum
of Russia’s WTO membership (e.g., market access
products, liquefied natural gas, and coal. Subsequently, the
commitments, and recourse to dispute settlement
Administration announced import bans on other key goods,
procedures), Congress passed legislation in 2012 that
including seafood, spirits/vodka, and non-industrial
removed Title IV restrictions and provided the President
diamonds. In response, Russia announced an export ban on
authority to extend PNTR to Russia.
over 200 products, including medical equipment,
agricultural machinery, and grain.
Some proposed legislation to remove Russia’s PNTR status
would reapply Title IV restrictions and procedures to
It is difficult to estimate the direct impact on prices from
Russia for purposes of reinstating NTR. Other bills would
tariff increases, partly because U.S. importers may source
add new conditions that Russia would have to meet before
from other countries to offset possible increased costs.
regaining such status.
Industries reliant on Russian inputs would be impacted
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Russia’s Trade Status, Tariffs, and WTO Issues
more, and could face disruption to their supply chains if
other WTO members also cited Article XXI as the legal
businesses decide to stop sourcing from Russia altogether.
basis on which they intend to rely when revoking MFN.
Table 1. Change in Duty Rates for Top U.S. Imports
Russia may retaliate by revoking MFN for other WTO
from Russia
members or pursuing WTO dispute settlement. Russia has
Product
Column 1 Column 2
argued that the United States and others have violated their
Distil ate and residual petroleum
0.0525/bbla
0.21/bbl
WTO obligations by removing its MFN treatment. If WTO
fuel oil testing <25 degrees A.P.I.
members invoke GATT Article XXI during a WTO dispute,
Crude petroleum oil
0.105/bbl
0.21/bbl
panels will likely assess whether the measures taken “are so
remote from, or unrelated to” the justification offered to
Distil ate and residual petroleum
0.105/bbl
0.21/bbl
support the revocation of MFN. Given this relatively low
fuel oil testing >25 degrees A.P.I.
level of scrutiny, it is unlikely that a panel would rule
Unwrought or powdered
Free
Free
against a WTO member that justified revocation of MFN on
palladium
the grounds of an “emergency in international relations,” or
Light oil motor fuel
0.525/bbl
1.05/bbl
a need to meet its “obligations under the United Nations
Nonalloy pig iron
Free
$1.11/ton
Charter for the maintenance of international peace and
security.”
Crabs
Free
Free
Suspending or Expelling Russia from the WTO
Semifinished iron or nonalloy
Free
20%
steelb
Ukraine has urged WTO members to suspend Russia’s
participation in the WTO over its “violation of the purpose
Unwrought or powdered Rhodium
Free
Free
and principles” of the organization. Pending legislation and
Enriched uranium and other
Free
Free
some experts advocate suspending Russia from the WTO.
radioactive chemical elements
However, no WTO rules expressly address suspension. In
Source: CRS analysis of U.S. International Trade Commission.
addition, no mechanism exists to expel members, but WTO
Dataweb data and Harmonized Tariff Schedule of the United States.
members could seek to amend the Marrakesh Agreement
Notes: a. bbl=barrel; b. product subject to 25% Section 232 tariffs.
Establishing the WTO to create one. This would likely face
significant obstacles, as WTO decisions are generally made
The European Union (EU) announced additional trade
by consensus among the 164 members. Amending a WTO
restrictions with the revocation of Russia’s MFN status on
agreement requires the support of two-thirds of members; if
March 15, 2022, following earlier action by Ukraine and
a WTO member refuses to comply, three-fourths of the
Canada. Other G-7 countries and “like-minded partners”
membership could vote to apply the decision and dissenting
(e.g., Albania, Australia, South Korea, and New Zealand)
members “shall be free to withdraw from the WTO or to
announced similar intentions. The coordinated action may
remain ... with the consent of the Ministerial Conference.”
compound potential impacts on the Russian economy and
Some experts view a coordinated suspension of trade
global supply chains, depending on any accompanying
benefits as achieving the same effect as expelling Russia,
tariff increases. Canada, in its revocation of MFN, imposed
but through a “more practical” approach. Others point to
additional tariffs of 35% on nearly all goods from Russia
revoking MFN as primarily a symbolic gesture, questioning
and Belarus, while the UK imposed a 35% tariff hike on
the impact and whether it would undermine the WTO. For
key Russian goods. The EU opted not to increase tariffs, but
each of these options, a key issue is under what conditions
issued various import or export bans, deeming it “quicker
and more effective” than preparing a new tariff schedule.
the United States and others might reinstate Russia’s trade

status.
WTO Issues
Russia’s Potential Withdrawal from the WTO
Collective action by the United States and allies would limit
The State Duma, the lower house of Russia’s parliament, is
Russia benefiting from MFN treatment under its WTO
considering legislation to withdraw from the WTO. Under
membership. There is limited precedent for rescinding
Article XV of the Marrakesh Agreement, any member may
PNTR for a major trading partner; however, the United
withdraw. A withdrawal takes effect six months after the
States has delayed (e.g., Moldova) or withheld NTR (e.g.,
WTO Director-General receives written notice. If Russia
Cuba) for some WTO members. North Korea, a non-WTO
withdraws from the WTO, no WTO member, including the
member, is the only other country currently without NTR.
United States, will be under a legal obligation to extend
Key policy questions linked to revocation of MFN include
MFN to Russia. In this case, Congress would not need to
the scope (e.g., possible tariffs caps), duration, and
make revocation of PNTR temporary to address the current
authorities for revocation and possible reinstatement (e.g.,
crisis, but could introduce legislation to subject Russia to
congressional vs. executive control).
other treatment on a permanent basis.
When the United States announced its intent to withdraw
Russia’s MFN treatment, it indicated it would rely on
Cathleen D. Cimino-Isaacs, Specialist in International
Article XXI of the GATT, the so-called national security
Trade and Finance
exception, to justify this action. Article XXI allows WTO
Nina M. Hart, Legislative Attorney
members to take WTO-inconsistent measures to ensure
Brandon J. Murrill, Legislative Attorney
their “essential security” when there is an “emergency in
Liana Wong, Analyst in International Trade and Finance
international relations” or to implement their “obligations
under the United Nations Charter for the maintenance of
IF12071
international peace and security.” Ukraine, Canada, and 13

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Russia’s Trade Status, Tariffs, and WTO Issues

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https://crsreports.congress.gov | IF12071 · VERSION 1 · NEW