VZCZCXRO9570
PP RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #2759/01 2871026
ZNR UUUUU ZZH
P 141026Z OCT 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 5066
INFO RUCNRAQ/IRAQ COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC

UNCLAS SECTION 01 OF 02 BAGHDAD 002759 
 
SENSITIVE 
SIPDIS 
 
USTR FOR DAWN SHACKLEFORD 
JUSTICE FOR JOE JONES, ANDREW NORMAN 
 
E.O. 12958: N/A 
TAGS: ETRD PGOV KCOR EAID WTO ECON EINV IZ
SUBJECT: CUSTOMS HURDLES TO IRAQ TRADE LIBERALIZATION 
 
REF: BAGHDAD 2374 
 
¶1.  (SBU) SUMMARY AND COMMENT: Iraq's customs and trade 
dispute resolution procedures lack the structure and 
transparency to ensure orderly, consistent resolution of 
complaints by importers.  According to the President of 
Iraq's Customs Court, the court does not have jurisdiction 
over civil cases - erroneous imposition of tariffs or the 
arbitrary refusal to admit imports - that arise from 
cross-border trade disputes.  Instead, Iraq's judiciary 
handles the disputes ad hoc, referring complaints to civil 
courts based primarily on geographic jurisdiction, not 
expertise in customs and commercial law.  Iraq's General 
Customs Commission may also prohibit imports without 
oversight by the Executive or Parliament.  A draft Customs 
Tariff Law currently pending second reading in the Council of 
Representatives does not address these business hurdles, and 
fails to capitalize on the best opportunity the GOI has to 
codify Iraq's prohibited items list, despite recommendations 
by USAID contractors who have repeatedly advised the bill's 
drafters at the Ministry of Finance to move toward 
international practices with WTO accession-friendly fixes. 
We continue to believe that WTO accession negotiations - 
something the GOI is delaying (reftel) - would be the best 
forum to push for the many steps Iraq needs to improve its 
business and investment environment.  Though we do not expect 
discussion at the upcoming Dialogue on Economic Cooperation 
in Washington to reach this level of detail, we believe a 
frank exchange about the steps Iraq needs to take toward WTO 
accession may help speed the process.  END SUMMARY AND 
COMMENT. 
 
BACKGROUND 
 
¶2.  (SBU) Located at the Rusafa Judicial Palace in Baghdad, 
the Iraqi Customs Court operates under the authority of the 
Higher Judicial Council as a criminal court that specializes 
in customs violations.   Most challenges investors and 
traders face at the border, such as tariffs disputes, are 
outside of the Court,s jurisdiction and there is no 
officially designated court for the potential problems they 
may encounter - including the erroneous imposition of 
tariffs, the assessment of excessive tariffs, or the 
arbitrary refusal to admit imports.  According to Customs 
Court President Najim Abudullah Muhsin, the Customs Court 
deals exclusively with violations of the Customs Law, has the 
power to detain individuals, and its procedures are governed 
by the Iraq Law on Criminal Procedure.  Iraq's General 
Customs Commission initially investigates criminal cases that 
it then transfers to the investigative judge at Rusafa. 
 
NO TARIFF DISPUTE RESOLUTION IN IRAQ CUSTOMS COURT 
 
¶3.  (SBU) Iraq's Customs Court does not assist traders or 
investors when they encounter tariff problems at the border, 
as its function is purely criminal.  Customs Court Judge Saad 
Mohammed Abdul Karim has told us that importers must appeal 
to the Director General of the Ports of Entry (POE) to 
dispute tariffs on shipments of goods or to seek release of 
goods held at the border.  (COMMENT:  POE DGs are widely 
suspected of corrupt practices, and it is unlikely that the 
rare criminal investigation would broadly resolve systemic 
import delays.  END COMMENT).  In most cases, according to 
Karim, it would be less costly for the importer to pay the 
disputed tariff.  Although Muhsin has told us that civil 
action could be brought in any court, civil order enforcement 
in Iraq is uncertain in many instances.  If a customs 
Qin Iraq is uncertain in many instances.  If a customs 
official is holding goods for a bribe, the investor would be 
able to file a complaint with the Customs Court to initiate a 
criminal investigation.  Damages might also be available in a 
criminal case against the customs official.  However, if the 
customs official holds goods or assesses a tariff without 
criminal intent but under conditions the importer disputes, 
immediate relief under the current, ad hoc civil system is 
unlikely. 
 
CUSTOMS COURT PROSECUTES CORRUPTION CASES 
 
¶4.  (U) Corruption complaints may be filed with the 
Commission on Integrity (CoI), the Ministry of Finance (MoF), 
the Customs Court, or with any court in the area where the 
violation occurs.  Muhsin has told us that the court sees 
numerous cases of collusion between customs officials and 
importers.  A customs violation is usually discovered by 
identifying inconsistencies in the accompanying documentation 
when the goods reach a second inspection checkpoint.  Mushin 
said for example, a customs official at the border would 
 
BAGHDAD 00002759  002.2 OF 002 
 
 
prepare documentation and charge an importer for 100 kilos of 
goods, but allow 300 kilos of goods into the country.  The 
customs official at the second checkpoint will discover the 
inconsistency and report the importer to the General Customs 
Commission for investigation. 
 
¶5.  (U) The Customs Court has prosecuted both those who give 
and receive bribes, according to Muhsin.  Also, the court 
exercises its prerogative to detain individuals prior to 
their hearing.   The Court does not publish its decisions, so 
consistency in interpretation of the Customs Law is not 
assured, and guidance for potential importers is limited. 
 
NO OVERSIGHT IN ADMINISTRATION OF PROHIBITED ITEMS LIST 
 
¶6.  (SBU) According to Muhsin, the General Customs Commission 
is responsible for promulgation of the GOI's prohibited items 
list, the list of imports the GOI restricts based on concerns 
ranging from protecting domestic producers to national 
security controlled items.  Muhsin could not identify any 
executive or legislative oversight of the GOI's list.  USAID 
contractors working closely with the Ministry of Finance 
during the process of drafting the GOI's Customs Tariff Law 
had advised drafters to codify procedures for administering 
the prohibited items list, including the process for adding 
goods.  The draft law underwent its first reading in the CoR 
on June 9, 2009, without these provisions.  The second 
reading, originally scheduled for October 1, has been 
postponed while the Ministry of Finance works to incorporate 
an unrelated schedule of the commercial items and their 
relevant tariffs into the draft bill. 
HILL