IN THE MODE OF PREFERENCES

Comprehensive reforms in the sphere of Azerbaijan's foreign trade have been implemented in the country for several years now. The main element of this strategy was the updating of the regulatory framework in connection with the adoption of the new Customs Code in the middle of 2011. Specifically, the Milli Maclis recently began discussion of a most important draft law "On customs tariffs", which is expected to be adopted at the spring session of parliament.

Updating of documentation

About two years ago, with the endorsement of the Customs Code, on the instruction of Azerbaijani President Ilham Aliyev, there began the process of updating 59 acts of a legislative nature in line with the requirements of the new code which was due to submit serious changes to the mechanism of Azerbaijan's foreign-trade activity. The clauses of the new code are more transparent and have been simplified, thus helping to speed up the process of moving goods across the border, reducing bureaucratic hurdles to a minimum and making life easier for businessmen. The new legislation also provides for the broad use information technology in the execution and inspection of freight, as well as the standardization and simplification of customs procedures.

"Since the adoption of the new Customs Code the updating of the regulatory framework in this sphere has been completed by over 70%. One of the most important draft laws regulating customs tariffs was recently tabled for discussion by parliament, two other documents are being reviewed in the president's administration and other statutory regulations are going through the procedure of preparation and inter-departmental coordination," Aydin Aliyev, the chairman of the Azerbaijani State Customs Committee (SCC), said.

The document he refers to is the new draft law "On customs tariffs", which the parliamentary committee for economic policy of the Milli Maclis began discussing the other day. It is destined to replace the law "On customs tariff", which was adopted about 18 years ago and is now distinctly outdated. The new document regulates the shaping and application of customs tariffs, as well as the levy of customs duty when clearing goods across the state border, and will have huge significance from the point of view of developing the economy and ensuring the country's national security.

"The main purpose of the draft bill "On customs tariffs", which consists of five chapters and 23 articles, is the regulation and rationalization of the import commodity structure, ensuring a beneficial correlation of foreign currency income and expenditure, protection of the country's economy from the unfavourable impact of foreign competition and providing the conditions for Azerbaijan's effective integration into the world economy," Mirqasim Vahabov, chief of the Main Customs Control Directorate of the State Customs Committee, said. Questions of the customs declaration of goods, the protection of secret information, the rights and obligations of the applicant and the customs body, methods of determining the customs value of goods, aspects of exemption from payment of customs duty, preferential tariffs, and so on, are reflected in the document.

One new development in the document, Vahabov said, is the adoption of seasonal customs for the prompt regulation of the import and export of goods in a number of instances, but their validity period must not exceed six months in a year. Specifically, in order to develop high-priority branches of the economy, preferential tariffs may be applied for a certain period for the import of raw materials and state-of-the-art technology. The draft bill also provides for certain spheres of activity where exemption from customs duty or the introduction of other benefits is possible.

Another development could be the administrative and financial liability of SCC employees in the event of their acceptance of a commodity shipped across the border that is incorrect and does not comply with the existing schedule of charges. If the complaints of entrepreneurs are upheld by a decision of the judicial bodies then the damages incurred by the applicant and the mark-up on the goods will be recovered at the customs employee's expense.

Requirements of the WTO

When speaking about reforms in the sphere of customs tariffs, one should not fail to mention the importance of this question in the process of Azerbaijan's entry into the World Trade Organization (WTO). After all, it was precisely in the context of this process that the government drew up a project for transfer to the fewer-stage system of customs duty in order to liberalize the regulation of foreign trade. Thus, since 2001 a system of customs tariffs with rates of 0, 0.5, 1, 3, 5, 10 and 15% has been operating in the country. As a result of the change of classification it is planned to preserve only three of these rates - 0%, 5% and 15%. Some producers' goods (strategically important raw materials and equipment) will have a zero rate. This will also apply to certain types of output on which a duty of 0.5% is currently levied. This applies to about 10-15% of imports. At the same time, it is proposed to exempt the export of local output from customs duty. However, a final decision on the transfer to a fewer-stage system of customs duty is linked with progress in the talks with the WTO.

According to Vahabov, although Azerbaijan's entry into the WTO is extremely important for increasing foreign trade turnover, at the same time certain negative effects on the country's economy are also possible. For example, the maximum rate of duty on imports into Azerbaijan is 15%. During the initial talks with the WTO Azerbaijan proposed a rate of 50-60%, but in the process of the discussions this threshold was reduced. "Today a number of the WTO member-countries would like to import their output to Azerbaijan at a zero rate, which could become a serious obstacle in the development of the country's industry and agriculture," Vahabov stressed.

The point is that despite Azerbaijan's appreciable successes in the diversification of the economy, especially in the development of its non-oil sector, at the moment over 85% of its exports are made up of raw hydrocarbons and derived products. In addition, despite the dynamic development of light industry, agriculture and the processing and food industries, the output produced in these sectors does not always conform to international quality standards and is sometimes insufficiently competitive price-wise.

On this basis, as Ziyad Samadzada, head of the economic policy committee of the Milli Maclis, justifiably pointed out, "maximum efforts must be made to ensure that the output of our industry and agriculture is capable of standing up to competition on the domestic and foreign markets". It is this factor which will ensure the success of Azerbaijan's participation in the WTO and make it useful for the country. That is why the thoroughness and even caution of the negotiations group during the discussions with the member-countries of the WTO of the customs Baum-tariffs [highest protective tariffs] is fully justified.