Renault launched the Logan car in 2004 as part of its low-cost X90 program. To manage customs duties for global sales of the Logan, Renault established production and assembly operations in several countries. Key sites included Romania for parts production and export of CKD kits, and assembly plants in Colombia, Morocco, and Russia. Renault's customs strategy considered factors like local content rules and trade agreements to minimize duties on cross-border shipments and maximize the competitiveness of the Logan.

1. Renault’s Logan Car: Managing
Customs Duties For A Global
Product
Presented By:
Divishi Saxena
MBA(IB)

2. Company & Product Overview
 Renault- French Automobile Company in business of
manufacturing automobiles and offering financing.
 Alliance with Nissan happened in 1991
 Carlos Ghosn becomes CEO of Renault after successful term
with Nissan
 In 2006 Renault sold passenger cars and LCVs throughout
the world
 Operating margins and net income has decreased from
2005 to 2006

3. Renault Logan
 Launched in 2004
 First car of X90 programme
 Developed for new markets with high growth
potential at low cost
 Sold under Renault , Renault Samsung and
Dacia brand

4. X90 Programme & Strategic Renault
:Contract 2009
• Called for 6% profit margin and worldwide
expansion of vehicle production by 2009
• Logan was first vehicle in X90 vehicle lineup
• Most cost invested in modernization of plant in
Romania
• X90 forms a part of Renault’s international
growth opportunity

5. Major Functions
Logistics &
Administration
Global Customs
&Trade
•International Growth
Programmes
•Improving Supply
Chain
•Enhancing Capability
to Respond
•Paying associated duties &
taxes
•International regulations
management
•Customs Documentation
Minimizing logistics cost
Creating locally adapted
Internationalization
strategy

6. 3 types of car exports
•Completely built-upVehicle (CBU)
•Completely knocked down units (CKD)
•Identify Parts Order (IPO)

7. Major Challenges
• Use of car for longer-than-average period of time in
some markets
• Accounting for specifications in different countries
• Global sourcing of parts, manufacturing, assembly &
delivery
• Export as CBU,CKD or IPO
• Minimizing custom duties
• Quality & precision of customs declaration
• Avoiding penalties
• Understanding each country’s economic strategy

8. Factors in Determining Customs
Strategy
 Level of Local Assembly Content
 Competitiveness of Local Suppliers
 Trade Compliance
 Economic Factors
 Logistics
 Customs Programs as Incentives

9. Operations Structure for Logan
 To guarantee the success of Logan program
globally, Renault made several strategic
decisions in designing its infrastructure.
 Parts production & assembly in
 Romania
 Assembly plants in
 Colombia
 Morocco
 Russia

10. Romania
 €489 million investment prior to Logan Project
 Providing CKD parts to Russia, Iran, Brazil, Morocco,
Colombia and India
 Export CBU to EuropeanCountries, Croatia andTurkey
 January 1, 2007 Romania joined E.U
 Benefiting from all E.U rules of Origin

11. Morocco
 €30 million investment
 January 2004, Agreement between Renault and
Moroccan government to duty free CKD imports (Pitesti
Plant in Romania)
 July 2005 released Logan in Morocco (Second Largest
Market in North Africa)
 Export to Maghreb Nations (More than 20,000 Logan
sold there by 2006)
 2004, free trade agreement with the US (Zero% import
from US)

12. Russia
 €230 million investment in building the factory
 Providing cars for local market, export to Ukraine
 2004-2006, Imported CKD parts from Romania
subject to 5%-15% duty
 September 2006, achieving preferential duty rate
under “Russia Decree 166” (Zero% duty on Up to
90% of the parts
 Obligation to increase direct investment and reduce
the imported parts by 30% over 54 months

13. Colombia
 €23 million investment
 September 2005, Release of Logan in Colombia
using CKD imported from Romania
 Assemble 15,000 Logan per year by 2010
 Export 40% to Andean Pact countries Mostly
Venezuela and Ecuador
 Mostly local and country based regulations prior
to 2000
 Slowly adopting WTO’sTRIMs regulations

14. South Africa
 No Renault Facility
 Motor Industry Development Program (MIDP) first
introduced in 1995, twice revised, extended to 2012
 Decrease duties on CBUs from 38% to 25% from 2003-2012
 Decrease duties on CKDs from 29% to 20% from 2003-2012
 Duty Free Allowance (DFA) allowed to import duty free of
27% of the whole sale of the value
 Productive Asset Allowance (PAA) encouragement to direct
investment to benefit from up to 20% duty free credit
certificate of the value of the investment

15. Recommendations

16. Romania
 Continue to invest
Competitive advantage in Manufacturing-(£489 million
investment for great infrastructure)
 Comparative advantage in lower labor cost -(Before 2007
was not a EU member)
Free trade agreement with exporting countries
 Comparative advantage in logistics
(Centre of the Europe-Asia, nearAfrica)
 Keep producing CKDs
 Produce CBUs for European market

17. Morocco
 Invest more into Morocco
 Import CKDs from the Pitesti plant in
Romania at 0%
 Export CBUs at 0% by making use of various
FTAs

18. Agadir Agreement
 Jordan
 Tunisia
 Egypt

19. Russia
 Opportunity of Russia’s FTA with Ukraine
provided for a zero percent duty rate for
imports into Ukraine from Russia
 Import as Renault was successful in achieving
preferential duty rates in exchange for some
FDI

20. Colombia
Import as CKDs as Renault could
only achieve zero percent duty
rate on CKD parts if assembled
CBUs meet regional content
obligations

21. South Africa
 Lack of successful free trade agreements
generally not favor the import-assemble-
exportActivities
 Mostly serves to satisfy local market
 Heavy presence ofToyota makes it harder to
compete for low-middle class cars
 Not a suitable choice for Logan
 It may be used as a hub for more Luxurious
cars of Renault Group

22. Other Global Operations
 Potential in new markets like India and South
Africa and Western Europe
 Nissan’s manufacturing presence in South
Africa can reap additional savings on import
duties for Logan’s CKD parts

23. Thanks
for the
Patience…..