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

CHAPTER VI. TRADE REGULATIONS AND STANDARDS

A. Trade Barriers, Including Tariffs, Non-tariff Barriers, and Import Taxes

1. Structural barriers: shortage of domestic capital to finance investment and imports, lack of an effective judicial process for breach-of-contract resolution, logistical difficulties of serving the Kazakhstani market, and, despite a rationalization in the number of government bodies in August 1998, an unwieldy government bureaucracy. The current governmental organization scheme is set out in a Presidential Decree "On the Structure of the Government of Republic of Kazakhstan" signed on October 12, 1999.

2. Service barriers: Foreign insurance companies are limited to operating in Kazakhstan through joint ventures with Kazakhstani companies. A number of U.S. firms offering accounting and legal services operate in Kazakhstan. New amendments to the oil and gas law require that oil companies purchase services only from Kazakhstani companies unless the required service is unavailable in Kazakhstan.

3. Investment barriers: There is a severe lack of capital in domestic enterprises for servicing loans and a lack of capital to meet equity percentages in joint ventures. In addition, foreign firms currently cannot purchase land. Firms can obtain leasing rights to land only through a domestic partner and for a maximum of 99 years. Kazakhstani authorities often insist that U.S. firms invest in social programs for the communities in which they work.

4. Tariffs: Kazakhstan has no export tariffs. A new government resolution was issued in June 1998 that reduces the overall average trade-weighted import tariff rates from approximately 12% to 9%. The low average import tariffs are due to the fact that trade with Russia--Kazakhstan's major trade partner--is duty-free pursuant to the Customs Union agreement. However, in the first quarter of 1999 several punitive duties were imposed on a number of products imported from Russia, the Kyrgyz Republic and Uzbekistan. These were described as temporary measures to protect domestic producers and most were removed in June 1999. Merchandise from CIS and non-CIS countries are subject to a value-added tax (VAT) of 20% at the time of importation. In addition, Customs levies a 0.2% import processing fee, based on the declared value of the item. In July 1998 the Tax Code was amended, so that VAT applied on agricultural products and foodstuffs was reduced from 20% to 10%, while pharmaceuticals were exempted from VAT.

B. Customs Procedures

Kazakhstan's customs valuation rules largely conform to the WTO Valuation Agreement. In June 1997, Kazakhstan adopted HS 96 as its tariff nomenclature. Foreign firms can import some items for their own use duty-free. Article 22 of the 1994 Foreign Investment Law exempts equipment and spare parts from customs duties which are imported by a foreign investor as a contribution to the charter capital of an "enterprise with foreign participation" (defined as a Kazakhstani legal entity, such as a limited liability company, in which the foreign investor has an ownership interest). Generally, Customs requires that imported goods be placed in a temporary storage warehouse operated by a Customs-licensee pending clearance, a procedure that importers claim can add significant costs and delays to customs processing. U.S. firms have noted the problem of the need to present "transaction passports" to document procurements and bank transfers, in order to clear their goods with Customs (See E below). Although customs declaration procedures were successfully introduced in 1998, implementation of regulations allowing periodic declarations remains problematic.

C. Import Licenses

The Kazakhstani government has removed the need for import and export licenses on most commodities. However, for health and security reasons, a number of imported commodities, such as pesticides, medicine, drugs, nuclear materials, weapons, certain chemicals, and industrial waste, are subject to licensing requirements.

D. Export Controls

Kazakhstani export control laws and regulations are in the early stages of development. With U.S. assistance, Kazakhstan is working to improve its export controls on military and dual-use technology, and on sensitive/strategic materials. The Ministry of Energy, Industry and Trade has responsibility for the issuance of export licenses, however, other relevant ministries concerned with the goods must also concur in the issuance.

E. Import/Export Documentation

Importers and exporters are required to file a customs declaration, which is based upon the European Union Single Administrative Document, as well as a commercial invoice and shipping documents (e.g., bill of lading, airway bill, etc.). Customs may also require that importers submit a contract for the supply of goods, a certificate of origin, and a certificate of conformity, depending upon the circumstances of the importation. As a result of a 1997 regulation, Customs also requires submission of a "transaction passport," a document intended to enable the National Bank and Customs to monitor the use of funds in import-export transactions. Uncertainty about requirements for documents for particular shipments has been a frequent source of complaint by importers. The State Customs Committee has been taking steps to simplify these procedures. Reforms are slow, however. (See Chapter VII, (A.5))

F. Temporary Entry

Certain goods that are imported temporarily are exempt from payment of Customs duties and taxes. These include transport vehicles, professional equipment, goods imported for demonstration purposes, shipping containers, and advertising materials. Such goods may remain in Kazakhstan for one year duty-free. The period may be extended by Customs, subject to the importer's payment of 3% of the duty chargeable for each calendar month that the goods remain in Kazakhstan beyond one year.

A firm importing goods for a temporary period should provide Customs with documents containing a description and value of the goods, and a written confirmation stating that the goods will be sent out of Kazakhstan after a defined period.

With some exceptions, all other goods may be imported temporarily for a period of two years under a partial duty exemption. The amount of duty payable is also equivalent to 3% of the duty chargeable for each calendar month. Goods not eligible for full or partial duty exemption are food products, industrial waste, and consumable materials.

G. Labeling/Marking Requirements

Government observance of old Soviet standards, testing, labeling, and certification requirements is uneven. Such requirements constitute a barrier when they differ significantly from U.S. and Western standards. Starting April 1, 2000 Kazakhstan will ban the sale of certain products not labeled in both the Kazakh and Russian languages. For a complete list of goods that are exempted from the labeling requirements, contact the U.S. Foreign and Commercial Service at the U.S. Embassy in Almaty.

H. Prohibited Imports

According to Kazakhstani law, "printed or graphic material intended to undermine state and public systems, or promote war, terrorism or pornography" is prohibited. Narcotics, firearms, and other dangerous goods can be imported, subject to licensing.

I. Standards (e.g. ISO 9000 Usage)

In November 1996, the U.S. National Institute of Standards and Technology signed a Memorandum of Understanding with the Kazakhstani government to bring Kazakhstani metrology methods in conformity with international rules and practices. While Kazakhstan has sought to bring standards in line with WTO regulations, these reforms are uneven.

J. Free Trade Zones/Warehouses

See Chapter VII, E.

K. Special Import Provisions

According to the February 1997 Law on State Support for Direct Investment, Chapter II, Article 7, imported goods -- equipment, raw and other materials--can qualify for complete or partial exemption of duty if the goods are used as an investment in designated "priority sectors" of the economy. In addition to other so-called "priority sectors," this provision applies to all imported goods related to construction of the new Kazakhstani capital at Astana. (See Chapter VII (A) for more information on investment in "priority sectors.")

In April 1997 the Ministry of Finance announced that enterprises that import consumer goods used in industrial processing will be granted a three-month grace period in paying VAT taxes. Of these companies, those that regularly import such items may be granted a one-year grace period in paying VAT taxes.

L. Membership in Free Trade Arrangements

Kazakhstan is a member of a Customs Union with Russia, the Kyrgyz Republic and Belarus. Under the provisions of the Customs Union, trade between these four countries is free of customs duties. In 1996 and 1997 trade with Russia was complicated by the fact that Russia levied a VAT (approximately 20%) on exports, while Kazakhstan, after revising its trade regime to follow common practice in the West, levied a similar VAT on imports. Therefore, exports from Russia to Kazakhstan were subjected to VAT taxes twice. In 1998 a solution to the 'double VAT' problem between the two countries was reached. During 1998, Kazakhstan agreed to temporarily charge a VAT only on exports to Russia, to give Russia time to draft new VAT legislation. Starting January 1, 1999, the two countries intended to switch to charging VAT on imports. However, as of January 2000, Russia had not yet amended its legislation as agreed, and continues to assess the VAT on exports.