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DE RUEHTA #1982/01 3140519
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O 100519Z NOV 09
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INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE 2126
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
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RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 2582
RUEHNO/USMISSION USNATO 2885

UNCLAS SECTION 01 OF 02 ASTANA 001982 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/RUS, EUR/UMB, EEB/ESC 
STATE PASS TO USTDA, OPIC, EXIM, USTR 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON ETRD KIPR RS BO KZ
SUBJECT:  KAZAKHSTAN:  CUSTOMS OFFICIALS PREPARE FOR CUSTOMS UNION 
 
ASTANA 00001982  001.2 OF 002 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On November 4, Kazakhstani Deputy Chairman of 
the Customs Control Committee of the Ministry of Finance Serzhan 
Duisebayev told EconOff that the government will likely approve 
several long-anticipated amendments to the current Kazakhstani 
Customs Code by the end of November, including ex-officio powers for 
customs agents to seize counterfeit goods at the border.  Duisebayev 
also explained the implementation timeline and administrative 
structure of the Russia, Belarus, Kazakhstan (RBK) Customs Union, 
which includes the abolition of all internal borders as of July 1, 
2011, a Moscow-based headquarters, and enhanced border cooperation 
with Russia.  Kazakhstani customs officials continue to demonstrate 
their commitment to progressive customs procedures, as evidenced by 
the impending amendments to the current Customs Code.  Whether they 
can do so or not in the RBK Customs Union remains to be seen.  END 
SUMMARY 
 
¶3.  (SBU) During a November 4 meeting with EconOff, Deputy Chairman 
of the Customs Control Committee of the Ministry of Finance of the 
Republic of Kazakhstan Serzhan Duisebayev asserted that the 
Presidents of Russia, Belarus, and Kazakhstan will meet November 27 
in Minsk to sign the underlying technical agreements that will 
establish the Customs Union's legal foundation.  These agreements 
include a common customs code and unified customs tariff. 
Officially, he said, the Customs Union will be launched as of 
January 1, 2010, but the unified customs code and customs tariffs 
will become active July 1, 2010.  On July 1, 2011, the three member 
states will abolish internal borders, having established a unified 
broad-spectrum regime of customs tariffs, taxes, internal 
administration, and governing legislation.  Duisebayev stressed the 
continued validity of all bilateral and international tariff 
treaties -- the much anticipated new unified tariff will not impact 
previously negotiated and ratified treaties.  According to 
Duisebayev, Ministry of Industry and Trade officials have reported 
the successful negotiation of 95% of tariffs. 
 
ADMINISTRATIVE STRUCTURE TAKING FORM 
 
¶4.  (SBU) Duisebayev asserted that the Customs Union's 
administrative structure is also rapidly taking form.  Currently 
based at the Eurasian Economic Union building in Moscow, Duisebayev 
said that the administration will eventually move into a new complex 
in Moscow.  According to current plans, a Customs Union Commission 
will be the "tri-party nerve center" of decision-making.  A 
Secretariat, also based in Moscow, will support the Commission. 
Proportional representation from each member state will staff the 
Secretariat's numerous departments. (COMMENT:  If "proportional" 
means by population, Russia will hugely dominate.  END COMMENT.) 
 
CONCERNS SAID TO BE LARGELY PRACTICAL 
 
¶5.  (SBU) Duisebayev told EconOff that a non-tariff agreement will 
specifically exclude protective and anti-dumping measures.  No 
single member state will be able to introduce trade bans without the 
support of the other members, he said.  In the future, only the 
Customs Union Commission will have the authority to introduce or 
lift trade restrictions.  (COMMENT:  While practical in theory, each 
country will have a proportionally different number of votes in the 
Commission, allowing significant political influence into the 
process.  END COMMENT.) 
 
¶6. (SBU) Duisebayev highlighted the many pending practical issues. 
Member states are negotiating unified tariffs, but the Secretariat 
and the Commission later will determine the mechanism for the 
distribution of customs fees and relevant taxes collected at the 
point of entry.  According to Duisebayev, Customs Union agreements 
will not impact existing legislation and accords unless specifically 
addressed and negotiated by the Commission.  As a result, Duisebayev 
pointed to varied Value Added Tax (VAT) rates as a potential area of 
 
ASTANA 00001982  002.2 OF 002 
 
 
conflict.  In his opinion, some businesses might prefer Kazakhstani 
points of entry, because its VAT (12%) is lower than Russia's (18%). 
 
 
AMENDMENTS EXPECTED TO CURRENT CUSTOMS CODE 
 
¶7.  (SBU) According to Duisebayev, Kazakhstan has indefinitely 
suspended further development of Kazakhstan's new Customs Code, on 
which officials had been working diligently in order to meet WTO 
standards.  Nonetheless, Parliament and the President are expected 
to approve several long-anticipated amendments to the existing code 
by the end of November.  These amendments will contain declaration 
rights for foreign citizens, ex-officio rights for customs agents to 
seize counterfeit goods at the border, and standardized guidelines 
for the valuation of goods. 
CUSTOMS UNION'S CUSTOMS CODE 
 
¶8.  (SBU) The current draft of the Customs Union's customs code 
contains eight sections, 50 chapters, and 373 articles.  Its 286 
references (grandfathered provisions from each member state) include 
48 references to international treaties, 56 references to the 
decision of the Custom Union Commission, and 182 references to 
national legislation.  Duisebayev proudly highlighted the success of 
Kazakhstani negotiators in integrating about 50% of Kazakhstan's 
current customs norms into the new customs code.  However, he 
acknowledged that Kazakhstan still had to compromise on some of its 
more progressive customs policies.  Duisebayev described existing 
customs legislation as "uneven," with trade more liberalized in 
Kazakhstan than in Russia.  "Now, they would like to come up with 
something in the middle; not as liberal as in Kazakhstan, and not as 
conservative as in Russia.  Russia was also very surprised to see 
private businesses taking part in discussions of new (customs) 
legislation in Kazakhstan," Duisebayev asserted. 
 
EXPERIMENTAL BORDER COOPERATION 
 
¶9. (SBU) The Deputy Head of the Customs Control Organization 
Department at the Customs Control Committee, Dauren Tulemissov, 
described Kazakhstani and Russian authorities' joint, "experimental" 
operations at 15 points of entry along their border.  He explained 
the role of the importing country to manage customs procedure, while 
the exporting country has no influence at these test sites. 
Tulemissov termed implementation of this procedure difficult due to 
the reluctance of both countries' authorities to relinquish control 
over exports. 
 
¶10.  (SBU) COMMENT:  Working-level officials throughout the 
Kazakhstani government continue to grapple with the technical 
implementation of the highly politicized RBK Customs Union, even 
while providing positive spin to outside interlocutors.  Because the 
decision to create the Customs Union was political, the expert-level 
bureaucrats are now obligated to try to make it work, even if it 
means Kazakhstan will have to cede some of its progressive 
legislation of the last decade.  Those on the front lines, the 
Kazakhstani Customs Agents, hope that the representational nature of 
the proposed governing structure will protect their sovereign 
interests.  However, their ability to influence policy of a Customs 
Union headquartered in Moscow, and likely dominated by 
proportionately larger Russian interest groups, remains to be seen. 
Meanwhile, Kazakhstani customs officials continue to demonstrate 
their commitment to progressive customs procedures, as evidenced by 
the impending amendments to the current Customs Code.  Whether they 
can do so or not in the RBK Customs Union remains to be seen.  END 
COMMENT. 
 
HOAGLAND