Renault’s Logan Car: Managing Customs Duties for a Global Product

1. Renault’s Logan Car: Managing
Customs Duties for a Global Product
-Manas Ranjan Tripathy
MBA IB
500035420

2. Case Background
• Renault- French Automobile Company
• According to Exhibit 1, 4% decrease in Worldwide Unit Sales
• Decrease in Operating Margin and Net Income (Exhibit 3)
• 44% Share in Nissan
• Carlos Ghosn becomes CEO of Renault after successful term with Nissan
• Ghosn introduces Strategie Renault- Contract 2009
• X90 Platform introduced to achieve sales target
• Logan 1st vehicle on platform
• Affordable Car for Global Sales sold under Renault and Dacia brands

3. Case Scenario
• Logan had to be launched globally
• In order to keep cost of vehicle low, custom duties for importing cars
or parts had to be kept minimum
• Renault’s Customs Consulting Group was responsible for Global
Planning and Operations
• Use of Trade Beam Software
• Import options available:
CBU- Completely Built-up Unit
CKD- Completely Knocked Down Unit
IPO- Identify Parts Order

4. Country-wise Analysis:
Romania
• Main Plant built in Pitesti,
Romania
• Produce Logan for domestic as
well as international markets
• CKD parts to Russia, Morocco,
Columbia, Brazil, India, Iran
• CBU for European Union, Croatia,
Turkey as Free Trade Agreements
and Customs Union existed
• Before 2007: Romania had to
supply to both Western and
Eastern Europe
• After 2007: Morocco could supply
CBUs to Western Europe

5. Russia
• Factory in Moscow
• Before Sept 06: CKD Duty at 5 to 15%
• After Sept 06: Preferential Duty Rate (0% for 90% imported parts)
under Russia’s Decree 166 against some FDI inflow and gradual
decrease in imported parts by 30% in 54 months
• Domestic demand and demand for Ukraine (FTA between Ukraine
and Russia)

6. Morocco
• Assembly Plant in Casablanca (Agreement
between Moroccon Govt and Renault)
• CKD parts imported duty free from Romania
• CBU exports to MAGREB nations (Algeria,
Morocco, Tunisia, Libya, Mauritania) with zero
duty
• After Feb 04: Agadir Agreement with Jordon,
Tunisia and Egypt could be utilized
• Pan-Euromed Protocol would benefit diagonal
cumulation between EU, Morocco, Turkey,
Tunisia, Jordan and Egypt
• FTA with US(2004), Turkey(2006)
• After 2007: CBU Export to Europe duty free

7. Columbia
• Assembly Plant at Envigado with CKD parts from Romania
• CBU export to Venezuela, Equador (Andean Pact- Bolivia, Ecuador,
Peru, Columbia, Venezuela*)
• Zero Percent Duty achieved by meeting Regional Contents Obligation
• Associate Member to Mercosur (Argentina, Brazil, Paraguay, Uruguay,
Venezuela)

8. South Africa
• Nissan Plant in Roselyn
• Renault was considering investment in South Africa
• South Africa had no FTA with Argentina, Brazil, India
• Motor Industry Development Programme introduced to promote
Automobile Industry
• 25% Duty on CBU and 20% Duty on CKD
• Duty Free Allowance allowed 27% of wholesale to be imported duty
free
• Value of Exports Performance used to calculate amount of CKD or
CBU parts to be imported duty free
• Productive Asset Allowance allowed return of 20% of investment as
duty free certificate over 5 yrs

9. Questions for Discussion
• Should South Africa form a strategic location for Renault?
• Should Renault invest in production capacity in Morocco?
• Should Morocco remain regional exporter?
• Could Morocco serve other markets?
• If Morocco could import CBUs duty free, should production be moved
elsewhere?