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Baghdad Delays New Iraqi Customs Law

As disagreements persist with Erbil, Baghdad has requested that an unimplemented customs tariff law be postponed in what some see as a bid to buy time for tensions to cool.
A customer shops for clothes at a clothing store in Baghdad's Karrada district August 14, 2012. Iraq relies on imports from neighbours like Syria, Turkey and Iran for 95 percent of its consumer goods. Syria in particular is a key supplier of manufactured goods, fresh vegetables and fruit. But as an uprising there against President Bashar al-Assad grinds through its 17th month, the supply of Syrian goods to Iraq is slowly drying up as Syrian businesses are forced to close and trucks struggle to cross borders

An Iraqi customs law, held up for almost three years, may still stall because of a dispute between Baghdad and the Kurdistan Region over the collection of customs revenue at border crossings.

The Iraqi parliamentary finance committee has announced that it added amendments to the law regulating the levying of a customs tariff on goods entering the country, enacted Feb. 2, 2010. The government had then requested to postpone its implementation in order to avoid price increases, provided that this law enters into force as of June 30, 2013.

The Iraqi government had requested that the implementation of this law, by virtue of which the customs fees on imported goods are collected in accordance with the rates specified in the customs duty rate table and crop calendar, be postponed for one year “in order to preserve market prices and protect consumers.”

In an interview with Al-Monitor, MP Amin Hadi, a member of the Iraqi parliamentary finance committee, said that “All members of the finance committee agreed to submit the customs tariff law to vote, and there were no objections.” Hadi continued, “We discussed the government’s request to postpone the implementation of the law for one year,” and explained that “The law will be gradually implemented over a period of three years, once it is passed.” 

He explained, “Goods entering the country will be classified according to three categories. During the first year, the law will be implemented on luxury goods, in the second year the law will be applied to basic commodities and in the third year the law will cover non-essential commodities.”

He added, “This mechanism, which is extended over a period of three years, gives the authorities concerned with developing the infrastructure to implement the law the necessary opportunity to accomplish their tasks.” He explained, “The application of the customs tariff law needs a large computerized system and a high level of supervision.”

Before 2003, Iraq imposed customs tariff on goods in accordance with Law No. 77 of 1955. This was suspended after US forces entered Iraq, and former administrator of the Coalition Provisional Authority in Iraq Paul Bremer issued a decree imposing a 5% tax on all commodities entering the country. This tax was known as the "Iraq Reconstruction Tax" back then.

Yet the Iraqi parliamentary economy and investment committee believes that the proposal to implement the customs tariff law according to a three-year plan is not related to completing the infrastructure necessary to apply the law, but rather to settling the conflict between the central government and the semi-autonomous Kurdistan Region regarding the management of border crossings.

There are 13 border crossings linking Iraq to neighboring countries, as well as five airports in the Kurdistan Region alone, and five seaports. Chief among these are the Ibrahim Khalil border crossing between Iraq and Turkey, the al-Waleed and Rabia crossings with Syria, the Trebil crossing with Jordan, the Arar crossing linking Iraq to Saudi Arabia and the Shalamjah crossing and Mundhiriyah port linking Iraq to Iran.

Since the early 1990s, Baghdad has not controlled the Ibrahim Khalil crossing with Turkey, Administration of the crossing was turned over to the Kurdistan Regional authorities. Post-2003 up to today, the situation has remained unchanged. 

The Ibrahim Khalil crossing is located approximately 70 km (43 miles) northwest of the city of Dohuk, the capital of Dohuk province. It is the primary crossing that connects the Kurdistan Region with Turkey, and is the main commercial land gateway between Iraq, Turkey and European countries.

The Baghdad government stated, “All border crossings in the Kurdistan Region are out of the central government’s control, although Erbil denies this.”

Those close to Iraqi Prime Minister Nouri al-Maliki have accused Kurdistan Region President Massoud Barzani of imposing control over the Ibrahim Khalil crossing by force and monopolizing all funds derived from it.  

MP Amer Al-Fayez, a member of the Iraqi parliamentary economy and investment committee, said that the “three-year time limit specified by the proposed application of the customs tariff law came to resolve the problems between Baghdad and Erbil over the border crossings in the [Kurdistan] Region, and it has nothing to do with the idea of ​​completing the infrastructure [to apply the law].”

Speaking to Al-Monitor, Fayez added that the proposed formula is not satisfactory, but will probably give the central government the time needed to settle the conflict with Erbil over the management of the border crossings in the Kurdistan Region. He continued, “Erbil believes that managing the Kurdistan Region’s border crossings falls within its scope of competencies. Yet the constitution stipulates that the Kurdistan Region and the central government jointly manage these border crossings.”

He went on, "The government will work with the Kurdistan Region to settle the disputes within the three-year time limit specified in the law.” He stressed that “Settling the disputes and the proper implementation of the law create significant gains for the Iraqi economy, and protects the GDP and the consumer at the same time.”

Fayez called on “the relevant parties — the Central Organization for Standardization and Quality Control in particular — to benefit from this time limit in order to create an integrated electronic system at the border crossings, so that the law is properly implemented and Iraq reaches the level of developed countries [in this regard].”

Omar al-Shaher is a contributor to Al-Monitor’s Iraq Pulse. His writing has appeared in publications including France’s Le Monde, Iraq's Alesbuyia, Egypt’s Al-Ahaly and the Elaph website. He previously covered political and security affairs for Iraq's Al-Mada newspaper.

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