31 JULY 2002

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Lower duties on non-EU car imports with EU membership

While cars imported from European countries and those brought into the country by private individuals are to retain their current tax and registration payment levels, those imported from outside the common market are to be subject to a lower customs duty if Malta is to join the EU come 2004.

For this latter category, which would include the numerous makes imported from Asia, Malta will have to apply the EU external tariff of 10 per cent, instead of the current customs duty Malta applies to car imports from non-EU countries of 12 per cent.

Malta currently imports cars from the EU on a duty free basis and VAT is subsequently charged upon sale. This state of affairs would remain unchanged with EU membership. Additionally, the steep car registration charge applied to individuals bringing cars into the country is considered a national tax and consequently would not be treated by the EU.

However, just a few days ago the EU launched a new regulation for car distribution in an bid to introduce higher competition levels within the industry. The new regulation, intended to make purchasing cars from other EU countries directly or to use intermediaries to help them do so, will affect the market as it is expected to provide a downward pressure on prices.

Apart from its aim of lowering prices, the EU Commission also expects the regulation to make access to spare parts easier and less costly to the consumer.

The regulation takes the car industry one step closer to free competition and enters into force this October, giving EU companies one year to adapt their existing contracts. As such they apply to the European Economic Area which includes the EU as well as Iceland, Norway and Liechtenstein.

However, the regulation is also of interest to Malta in the context of the prospect of membership - although even without membership, Maltese official importers dealing with EU companies are usually offered standard contracts that apply in the EU market and these contracts should now reflect the new conditions introduced by these new EU rules.

A key point in the new rules is that car manufacturers will lose some of their power in deciding how, where, who and at what price cars are sold throughout Europe. In turn, dealers will obtain more independence from the car manufacturers, which supply them with cars.

Although matters such as "exclusive distribution" and "selective distribution" will remain in place, there will be stricter controls to ensure that these do not lead to competition being stifled out.

More concretely, consumers should be able to buy different brands of cars from the same dealer and not just different models of the same brand. So far, dealers in the EU have not been able to sell different brands, except under very strict conditions which made it difficult or even commercially unattractive.

The regulations will also be easier for consumers to shop around for the best price in other countries, either directly on their own or through the use of intermediaries. Intermediaries are persons who basically shop around in other countries for good deals and avoid consumers the hassle of having to do it themselves. So far the use of intermediaries had been greatly discouraged by manufacturers. But now, this type of activity will become much freer at a clear advantage of consumers. Intermediaries will only need to produce a mandate from consumers on whose behalf they are acting in order to ensure that they get served from dealers outside their own country.

As far as repairs are concerned, the new rules introduce some very important changes. It will be easier for dealers to shed their responsibility over repairs. So far, official dealers were obliged to carry out repairs. But this will no longer be necessary if repairs are sub-contracted. Equally, the new rules enable mechanics to become "official repairers" and they cannot be refused if they meet the standards to join the official network. Moreover, if mechanics become official repairers, they may still repair other cars of different brands.

More importantly, however, the rules will, for the first time, give greater access to independent repairers (mechanics) to get the complete know-how relating to the repairs of particular cars without suffering any discrimination because they are not part of the "official network". This is very important because it means that any mechanic who wants to specialise on certain types of cars without being part of an official dealer can obtain the full technical information and training under the same conditions as official repairers.

For the consumer this means it will be easier to have a car repaired at a mechanic of their choice rather than repair the car only at the repairs department of the official dealer. It will also give consumers who already use independent mechanics the peace of mind that the mechanic is up-to-date with latest technology relating to your car and is not fiddling around and second-guessing how your car should be repaired.

Much the same applies to spare parts where the new rules ensure that it will be easier for consumers to get a better choice between original spare parts supplied directly by the manufacturers or by other spare parts manufacturers and non-original (matching) spare parts supplied by others. Until today, the consumer had been rather limited in choosing spare parts, in Malta even having to endure long delays before a part’s delivery.


Copyright © Network Publications Malta.
Editor: Saviour Balzan
The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07, Malta
Tel: (356) 21382741-3, 21382745-6 | Fax: (356) 21385075 | e-mail: editorial@networkpublications.com.mt