Kazakhstan’s Little Customs Problem

While barely mentioned in foreign press, Kazakhstan’s business community has had to face a curious problem for the last few weeks. On August 21, 2007, a new law has been put into effect amending the customs and tax procedures in Kazakhstan. The goal was to bring Kazakhstan’s legislature closer to the requirements of World Trade Organization (WTO) and World Customs Organization (WCO). The new legislature, however, resulted in a virtual halt of all Kazakhstan’s imports. Currently, as goods heading to Kazakhstan lie in temporary storage on the borders, Kazakh business community and lawmakers try to resolve the impasse.

The cause of this trouble is article 383 of the new law about “The Introduction of Changes of and Additions to Several Legislative Acts of the Republic of Kazakhstan to Simplify Customs and Tax Procedures”. This paragraph requires all importers bringing goods into Kazakhstan to produce a cargo custom declaration issued in the country of departure. An exception is made for those countries which legislation does not stipulate the issuance of these declarations. Sounds confusing? The law does not provide a list of countries that are exempt from this requirement. Neither does the law provide any guidance on what declaration form needs to be provided and how. Neither does it take into account the legislature of the importing countries as how it relates to the custom declaration forms that they issue.

According to experts, this system could work if there were bilateral agreements in place between the countries of origin and Kazakhstan regulating the issuance and use of the custom declaration forms. At the present state, however, for a majority of importers, it is virtually impossible to obtain and present this declaration. For example, there are several countries in the European Union that issue cargo custom declarations. However, there is a great number of these forms, and the law does not specify which is the one to be used. The forms may vary depending on goods, their values, etc.; for goods which cost less than 1000 Euro — which covers the majority of goods imported via courier services like DHL or TNT – the declaration does not exist at all.

Furthermore, the cargo customs declaration forms are often used by importing companies to receive back the value-added tax in the countries of origin. Therefore, these companies are quite reluctant to leave these forms with Kazakhstan’s customs officials even when they have them since the procedures are unclear even to the local authorities.

The law was passed on August 20, 2007 and came into effect the following day. It arrived with virtually no warning, and gave the importers neither a chance to protest it nor an opportunity to prepare. TNT, the global parcel delivery firm, has the following statement on its company website commenting on the current situation in Kazakhstan:

“The demand of a cargo customs declaration issued in the country of departure. is a unique condition in the field of customs procedures. Through the appropriate channels, concern about the legality of the action has been raised with Kazakh Government. There has not been enough time to prepare for the changes dictated by the changes in the Customs Code. No period of consultation has been undertaken and the new procedures are impractical. Action has been taken to get suspension of the current procedure, which is at the moment still in force.”

The current situation frustrates both domestic and foreign importers, and it seems to be only a matter of time until the overall economy becomes affected. Even now, Kazakh experts reckon that the only reason why it has not been reflected in rising inflation numbers is that most small- and medium-size businesses import goods illegally anyways and thus were not affected. However, as the pile of goods waiting in storage at Kazakhstan’s borders grows, it is bound to have an effect on Kazakhstan’s economic health.

So far, there seems to have been limited effort on part of Kazakhstan’s government authorities to solve the problems. And while many businesspeople, both Kazakh and foreign, express their hope that the issue will be soon resolved, there has been no concrete indication of that yet.

News Roundup - September 2, 2007

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