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US House Approves Repeal Of Jackson-Vanik Amendment

by Glen Shapiro, LawAndTax-News.com, New York

28 November 2012


The United States House of Representatives has passed legislation to restore Permanent Normal Trade Relations (PNTR) with Russia, and introduce new penalties on those who perpetrate human rights offenses in Russia.

With 365 votes in favor, and 43 against, the House passed the Sergei Magnitsky Rule of Law Accountability Act, which repeals the Jackson-Vanik amendment introduced in 1974 to prohibit most favored nation status for non-market economies originally on the basis of human right concerns. The United States has retained the law but has each year since 1992 granted a waiver to Russia.

The United States must revoke the amendment in order to benefit from the preferential commitments Russia made in return for membership of the World Trade Organization (WTO). Under its WTO package, Russia has agreed to liberalize market access, and lower its final legally-binding tariff ceiling to 7.8% from a 2011 average of 10%, for all products. The average tariff ceiling will be 10.8% for agriculture products (13.2% currently) and 7.3% for manufactured goods (down from 9.5% currently).

Additional provisions included in the bill have been included following the death of Sergei Magnitsky, a lawyer appointed by the Hermitage Capital Investment Fund, who was due to face charges of tax fraud but died, officially due to 'negligence', in a pre-hearing detention centre. Magnitsky, who had accused several government officials of corruption, fraud and embezzlement by falsifying Hermitage's corporate tax returns, was to face trial on tax fraud charges himself brought by Russian prosecutors, in his role as lawyer for Hermitage.

Magnitsky's case was shelved in November 2009 when the lawyer died in his jail cell of heart failure. Following his death, the lawyer's family pursued an investigation into his death, claiming that he had died as the direct result of a beating from prison officers and was denied appropriate medical care. Russia responded by firing two physicians at the facility and charging them with manslaughter but the family failed to achieve a ruling of murder.

The new law will introduce penalties on those who have perpetrated human rights offenses in Russia, including visa denials and asset freezes. An updated version of the Bill, approved by the Senate Finance Committee in June, includes controversial additional provisions to address corruption issues in Russia, and to ensure that the US Administration closely monitors and enforces Russian compliance with its WTO obligations.

The legislation must be endorsed by the US Congress in December, and receive final approval from the President, Barack Obama, before it can become effective.

TAGS: Russia | tax | business | export duty | fiscal policy | law | tariffs | enforcement | legislation | United States | import duty | penalties | trade

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