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Country Commercial Guides FY 2000: Azerbaijan Report prepared by U.S. Embassy Baku, released July 1999 Note*

CHAPTER VI. TRADE REGULATIONS, CUSTOMS AND STANDARDS

A. Trade Barriers: Special import provisions: The GOAZ still uses government-to-government agreements to manage some trade.

B. Customs Regulations:
Importers are required to provide customs with:

1. Signed import contract;
2. Customs declaration specifying what is being imported;
3. Invoice for the goods imported;
4. Permission from the relevant ministry if imports include pesticides, medicines, or weapons and ammunition;
5. Bill of lading;
6. Certificate of origin; and
7. Certificate of quality of the imported merchandise.

Exporters are required to provide customs with:

1. Document verifying the legal status of the business entity;
2. Legal entity's code determined by the state statistics committee;
3. Copy of the contract;
4. Certificate of the origin of the product being exported;
5. Document issued by an authorized bank on the pre-payment or opening of a letter of credit for the exported product;
6. Permission of the Cabinet of Ministers if exporting weapons, ammunition, nuclear technology and explosives, and permission of appropriate ministries if exporting certain animal bones; medicinal raw materials;
information about natural resources; inventions; precious stones; antiques; and
7. Customs declaration.

C. Tariff Rates: Under the guidance of the IMF, the GOAZ introduced a new, simplified import tariff schedule, effective July 1, 1997 and which was subsequently updated February 27, 1999. All imports are at uniform rates of 15, 5, or 3 percent, or are duty free. Most goods are subject to 15% import customs duties.

The following groups of commodities are subject to 5 percent duties:

Live animals (except breeding stock)
Grain products
Ores
Organic and non-organic chemical products
Explosive materials
Wood and wood products
Paper and cardboard products and wastes
Textiles - Cotton and chemical fibers and fabric
Ferrous metals
Non-Ferrous metals - Copper, Nickel, lead, zinc, tin and their articles
Nuclear reactors
Some types of mechanical and electric devices
Railroad locomotives and carriages
Some types of vehicles
Planes and space apparatus
Ships
Some types of medical equipment.

The following are items that are exempt from import duties:

* Seeds, fertilizers, forage, breeding animals, medicines, medicines for veterinary use, biologic preparations and veterinary supplies, packed baby food, syringes, and pharmaceutical goods;

* Goods and property for official use by diplomatic missions and equivalent missions in Azerbaijan and for private use by diplomatic and administrative employees of these missions and their resident family members;

* Humanitarian aid for free distribution delivered by properly registered humanitarian organizations and by other legal entities and physical persons under the permission of state commission on international humanitarian aid;

* Technical equipment, including raw material and parts for their production, to be used for prophylactics and treatment of disability (except for automotive transport);

* Goods transferred to state property following confiscation, ownership disputes, or inheritance disputes;

* Property to be used as contribution by a foreign investor to the charter fund of a joint venture or for the creation of an enterprise fully owned by a foreign investor;

* Goods delivered to Azerbaijan for a limited term and to be returned unchanged to the country of origin under pre-defined conditions (VAT shall be paid at entrance and reimbursed at exit);

* Transit goods (under the control of customs);

* Goods to be sold in tax-free shops

* Property of foreign employees of enterprises with foreign investment in Azerbaijan for private use;

* Currency, cash, bills in legal turnover (not for numismatic purpose), official state document letterheads and forms, passports and securities, delivered on the basis of approving document issued by the National Bank or the Ministry of Finance;

* Goods delivered for a limited time for re-export or processing (VAT shall be paid on entrance and refunded on exit);

* Goods imported on the account of the state budget (must be approved by the Ministry of Finance).

* Fish and fish articles produced in the Caspian basin within the quota for Azerbaijan and delivered to Azerbaijan.

Customs duties do not apply to goods imported under bilateral free trade treaties between GOAZ and foreign states.

Also, importers are subject to the payment of a Customs Processing Fee in the amount of .015 % of the declared customs value or a minimum of 16,500 manats, whichever is greater. This fee is payable regardless of whether the goods are exempt from customs duties or IVAT.

D. Import Taxes: In addition to customs duties, a 20% value added tax (VAT) is charged on certain imports. Commodities exempted from VAT are the same as those shown above exempted from import duties, with the exception of fish and fish products. Goods from other CIS countries (except Kazakhstan) are assessed VAT in their country of origin, not in Azerbaijan

E. Import License Requirements: The GOAZ requires import licenses for food products of animal origin. The State Veterinary Committee (SVC) issues these licenses (contact numbers are provided in Chapter XI, Appendix E).

F: Temporary Entry: Commodities temporarily imported for a specified period that will be re-exported or used for processing, are exempt from import duties. Temporary import permits must be renewed after one year. Failure to do so risks forfeiture of the duty free status and full assessment of duty with penalties back to the time of initial import.

G. Special Import/Export Requirements and Certifications: Imported goods may be kept in a Customs warehouse for up to three-years duty free. Once the goods are released from the warehouse, they're subject to all applicable duties and taxes.

Goods imported into Azerbaijan for processing and then re-exported are subject to normal duty and taxes at the time of importation. As soon as processing has been completed and the goods are re-exported, a draw-back procedure can be initiated to recover the taxes and duty paid. To become a processor, a license must be obtained from the Customs Committee. There is no formal procedure for submitting an application. The Customs Committee established the time for the processing and re-export of the goods, usually within two-years. In addition, they may also stipulate a minimum amount of finished product to assure the imported goods are utilized for the purpose intended.

Provisions for the importation of goods and equipment under Production Sharing Agreements (PSAs) are an integral part of each agreement. Essentially, all good, tools, equipment, supplies, and services necessary for successfully carrying out the objectives of the PSA are exempt from import duties and taxes. By extension, foreign firms registered to do business in Azerbaijan and who provide services for Contractor Parties (CP) or Foreign Subcontractors (FSC) participating in Production Sharing Agreements (PSA) may also be exempt from duties and VAT on imported goods and equipment relevant to their work.

H. Labeling, Marking requirements: At present there are no labeling or marking requirements in Azerbaijan.

I. Prohibited Imports: The GOAZ prohibits the import of radioactive materials and wastes, narcotics and psychotropic drugs. Special permission is required to import weapons, explosives and certain radioactive equipment used in the oil industry.

J. Warranty and Non-Warranty Repairs: If the goods and services are purchased from local dealers and distributors, they will provide warranty services as stated in the product instructions. In the past, it has been the practice of most of the foreign companies to buy products, especially office equipment, from their home countries. As a result, these companies may experience difficulty in obtaining warranty repair and maintenance services from the dealers/distributors of those same companies in Azerbaijan.

Non-warranty services are available in the local market for reasonable prices. However, companies are cautioned not to rely on these services for state of the art, sophisticated equipment and products.

K. Export Controls: GOAZ regulations prohibit the export of weapons, explosives, radioactive materials and wastes, narcotics and psychotropic drugs. In addition, it regulates the export of strategic commodities produced in Azerbaijan. At present, strategic commodities include: petroleum products, cotton, electric power, and non-ferrous metals. Potential buyers of such commodities must get approval of the state commission on supervision of foreign economic relations.

The GOAZ has eliminated a foreign currency surrender requirement for exporters. At present exporters are required to sell thirty percent of their hard currency export earnings on an interbank currency market. Under the present exchange rate regime, this is not an onerous requirement.

L. Standards:
* Electrical - Current is 50 cycle, 220/440 volts. Typical small appliances use European standard plugs and electric connectors.
* Weights/Measures - The metric system is used.
* ISO-9000 - Not yet a factor except, perhaps, for some of the oil & gas companies.
* The State Veterinary Committee (SVC) is responsible for ensuring basic health standards on imported food and animal products. State Plant Quarantine Inspection Laws ensure standards on products that may carry diseases, pests and/or weeds that have quarantine significance for Azerbaijan. Goods subject to inspection include plants, certain food stuffs, wood, and leather.

M. Free Trade Zones/Warehouses: Although the Azerbaijani Customs Code provides for the establishment and operation of bonded warehouses, they require free economic zones. There are currently no such free trade or economic zones in Azerbaijan.

N. Membership in Free Trade Arrangements: On July 1, 1999, Azerbaijan entered into a Partnership and Cooperation Agreement with the European Union that was designed to make all legislation in Azerbaijan compatible with the European directives to which EU countries must abide. This includes the protection of: intellectual property rights; assets and investments; and corporate and personal belongings against abuse. It also awarded Azerbaijan Most Favored Nation (MFN) status with the EU. In addition, the GOAZ is currently seeking WTO membership.

O. Customs Contact Information: Information regarding application of the current rules can be obtained from the GOAZ's customs service (Contact numbers provided in Chapter XI, Appendix E.)