ERBIL, Kurdistan Region – Iraq is becoming a less popular market for Kurdish businessmen thanks to the new customs checkpoints Baghdad has set up between Iraqi cities and the Kurdistan Region.
“The customs checkpoints that have been set up between Iraqi and Kurdistan Region cities to take tax from traders have had a negative impact on trade activities in the Kurdistan Region,” Samala Abdulrahman, director general of customs at the KRG ministry of finance, told Rudaw.
In October 2017, the Iraqi Army and Hashd al-Shaabi paramilitias took over the disputed city of Kirkuk. One year later, the Iraqi government set up three customs checkpoints on the roads between Iraqi and Kurdistan Region cities, imposing new duties on trade.
Erbil and Baghdad have long disputed who should receive the revenues from customs fees.
However, under article 24 of the Iraqi constitution and the 1984 customs law number 23, these customs checkpoints are illegal and unconstitutional.
“Currently, we have a joint committee to unify customs fees between the two. The committee’s work is ongoing. That is why I think setting up these checkpoints is not related to differences in customs fees,” Abdulrahman said.
According to figures released by the planning department of the KRG’s Ministry of Trade and Industry, 94 percent of trade exchanges in the Kurdistan Region are carried out with 15 countries – 72 percent of these exchanges with Turkey, China, Iran, and South Korea.
According to these figures, almost $15.928 billion was spent in 2016 importing goods to the Kurdistan Region, and more than $16.133 billion in 2017. Almost 75 percent of these goods were then exported to Iraqi cities.
“The export of goods to Iraqi cities has dropped by 50 percent due to these customs checkpoints and re-taxing the goods coming through the Kurdistan Region border gates especially via Ibrahim Khalil Gate. If this continues to be the case, we will experience another 25 percent drop in exports to Iraqi cities,” said Jutiar Omar, general manager of the Nawras Company.
Omar mainly imports lentils, rice, beans and other food items from Ukraine, Russia, India, Mexico and other countries to the Kurdistan Region. He sells some of his imports to Arab traders in Zakho and Erbil.
He used to sell 1,000 tons of lentils every month – most of it for export to Iraq. Now he sells around 400 tons monthly, mostly inside the Kurdistan Region.
“There is a big difference in customs fees between the Kurdistan Region and Baghdad. For example, $15 is taken at Ibrahim Khalil Gate for importing a ton of lentil or beans from Turkey, but $100 in Iraqi customs checkpoints. This is in addition to the $30 we spend on transporting it,” Omar added.
Some traders have already turned to importing goods to Iraqi cities via the port in Basra because of lower customs fees and cheaper transport.
“The role of Ibrahim Khalil Gate will diminish if Kurdistan Region officials do not try to remove these checkpoints,” Omar warned.
According to figures from the KRG’s Ministry of Trade and Industry, Iraq spent $7.6 billion importing goods from Turkey in 2016 – $7.5 billion of this through Ibrahim Khalil Gate.
The figures show imports worth of 3.6 trillion dinars were made via Ibrahim Khalil Gate in 2017.
“The Iraqi government has set up these customs checkpoints to undermine trade activities in the Kurdistan Region. They take taxes from traders after they have already been taxed. This has led to price hikes in Iraqi cities. That is why traders do not import as many goods to Iraq,” Nawzad Adham, an official from the KRG Ministry of Trade, said.
“Because these checkpoints have been set up illegally, they take different amounts of taxes each time they tax traders. Sometimes they only take the difference in customs fees, sometimes the whole tax fee, and sometimes they tax on the basis of their estimates,” he added.
Turkey is also unhappy about these internal checkpoints, he said, as it harms Turkish exports.
“That is why both parties have agreed to open a new border crossing outside the territory of the Kurdistan Region. And the intention of both was to weaken trade activities of the Kurdistan Region, but they didn’t succeed in this,” he detailed.
These customs checkpoints also tax exported goods made in Kurdistan Region factories.
“They take taxes for goods imported from abroad or produced inside the Kurdistan Region. But they don’t tax goods produced by factories that have a license from the Iraqi government,” Adham added.
“The customs checkpoints that have been set up between Iraqi and Kurdistan Region cities to take tax from traders have had a negative impact on trade activities in the Kurdistan Region,” Samala Abdulrahman, director general of customs at the KRG ministry of finance, told Rudaw.
In October 2017, the Iraqi Army and Hashd al-Shaabi paramilitias took over the disputed city of Kirkuk. One year later, the Iraqi government set up three customs checkpoints on the roads between Iraqi and Kurdistan Region cities, imposing new duties on trade.
Erbil and Baghdad have long disputed who should receive the revenues from customs fees.
However, under article 24 of the Iraqi constitution and the 1984 customs law number 23, these customs checkpoints are illegal and unconstitutional.
“Currently, we have a joint committee to unify customs fees between the two. The committee’s work is ongoing. That is why I think setting up these checkpoints is not related to differences in customs fees,” Abdulrahman said.
According to figures released by the planning department of the KRG’s Ministry of Trade and Industry, 94 percent of trade exchanges in the Kurdistan Region are carried out with 15 countries – 72 percent of these exchanges with Turkey, China, Iran, and South Korea.
According to these figures, almost $15.928 billion was spent in 2016 importing goods to the Kurdistan Region, and more than $16.133 billion in 2017. Almost 75 percent of these goods were then exported to Iraqi cities.
“The export of goods to Iraqi cities has dropped by 50 percent due to these customs checkpoints and re-taxing the goods coming through the Kurdistan Region border gates especially via Ibrahim Khalil Gate. If this continues to be the case, we will experience another 25 percent drop in exports to Iraqi cities,” said Jutiar Omar, general manager of the Nawras Company.
Omar mainly imports lentils, rice, beans and other food items from Ukraine, Russia, India, Mexico and other countries to the Kurdistan Region. He sells some of his imports to Arab traders in Zakho and Erbil.
He used to sell 1,000 tons of lentils every month – most of it for export to Iraq. Now he sells around 400 tons monthly, mostly inside the Kurdistan Region.
“There is a big difference in customs fees between the Kurdistan Region and Baghdad. For example, $15 is taken at Ibrahim Khalil Gate for importing a ton of lentil or beans from Turkey, but $100 in Iraqi customs checkpoints. This is in addition to the $30 we spend on transporting it,” Omar added.
Some traders have already turned to importing goods to Iraqi cities via the port in Basra because of lower customs fees and cheaper transport.
“The role of Ibrahim Khalil Gate will diminish if Kurdistan Region officials do not try to remove these checkpoints,” Omar warned.
According to figures from the KRG’s Ministry of Trade and Industry, Iraq spent $7.6 billion importing goods from Turkey in 2016 – $7.5 billion of this through Ibrahim Khalil Gate.
The figures show imports worth of 3.6 trillion dinars were made via Ibrahim Khalil Gate in 2017.
“The Iraqi government has set up these customs checkpoints to undermine trade activities in the Kurdistan Region. They take taxes from traders after they have already been taxed. This has led to price hikes in Iraqi cities. That is why traders do not import as many goods to Iraq,” Nawzad Adham, an official from the KRG Ministry of Trade, said.
“Because these checkpoints have been set up illegally, they take different amounts of taxes each time they tax traders. Sometimes they only take the difference in customs fees, sometimes the whole tax fee, and sometimes they tax on the basis of their estimates,” he added.
Turkey is also unhappy about these internal checkpoints, he said, as it harms Turkish exports.
“That is why both parties have agreed to open a new border crossing outside the territory of the Kurdistan Region. And the intention of both was to weaken trade activities of the Kurdistan Region, but they didn’t succeed in this,” he detailed.
These customs checkpoints also tax exported goods made in Kurdistan Region factories.
“They take taxes for goods imported from abroad or produced inside the Kurdistan Region. But they don’t tax goods produced by factories that have a license from the Iraqi government,” Adham added.
Comments
Rudaw moderates all comments submitted on our website. We welcome comments which are relevant to the article and encourage further discussion about the issues that matter to you. We also welcome constructive criticism about Rudaw.
To be approved for publication, however, your comments must meet our community guidelines.
We will not tolerate the following: profanity, threats, personal attacks, vulgarity, abuse (such as sexism, racism, homophobia or xenophobia), or commercial or personal promotion.
Comments that do not meet our guidelines will be rejected. Comments are not edited – they are either approved or rejected.
Post a comment