Caspian Energy (CE): Which changes were made in the work of the customs system last year?
Colonel-General Safar Mehdiyev, Chairman of the State Customs Committee: Important measures were taken in 2019 to increase transparency and accountability level, promote legal trade and improve business environment.
Implementation of the Green Corridor gating system was commenced in accordance with the relevant order signed by President Ilham Aliyev late in 2018.
This is a project that changed the customs control philosophy for the country’s business sector and brought an understanding of the culture of voluntary adherence to our thinking. With this, the customs service has shown that if a business entity is our reliable partner, we, in turn, will create conditions for more intensive and higher cargo traffic, removing all barriers of control.
According to preliminary estimates, millions of funds were saved as a result of sending vehicles of the Green Corridor participants, who became reliable partners of the customs in 2019, directly to cargo warehouses rather than terminals.Thus, a contact with a customs officer was excluded and the right to unload goods was passed to the Green Corridor participants.
The introduction of the Green Corridor in the exports sector was an important step towards facilitating trade in the country’s non-oil sector. In 2019, 62.5% of agricultural and food products exported from the country were shipped by the Green Corridor system, and the time spent on customs clearance often made several minutes, given the fact that they were perishable products.
In this case, a declaration was filled in at an entrepreneur’s office or elsewhere, and submitted to the customs body in electronic format, whereupon customs clearance was completed if everything complied with the risk management system.
According to the rules of using the Green Corridor gating system by foreign trade participants, approved by the Azerbaijan Republic President’s order #427 dated 21 December 2018, 599 foreign trade participants have applied to the Customs Committee. Of them, 530 foreign trade participants have got a permanent access to the Green Corridor system.
CE: Which companies can use the Green Corridor gating system?
Safar Mehdiyev: In accordance with the 2nd part of the Rules approved by the Azerbaijan Republic President’s decree No. 427 dated December 21, 2018, the Green Corridor system can be constantly used by a person who meets all the requirements listed below and belongs to a low risk group for carrying out import and export operations:
For import operations:
- shall have an experience in import operations performed over the last one year;
- shall be able to use electronic services provided by customs authorities, or have an agreement with an authorized person for their provision;
- shall carry out transportation by using vehicles that comply with international transport standards;
- shall use warehouses for storing goods, which meet the requirements set by the Cabinet of Ministers of the Republic of Azerbaijan;
- shall have no criminal record for crimes related to smuggling or evasion of customs payments.
For export operations:
- shall have an experience in export operations performed over the last 1 year;
- shall be able to use electronic services provided by customs authorities, or have an agreement with an authorized person for their provision;
- shall carry out transportation by using vehicles that comply with international transport standards;
- shall have no criminal record for crimes related to smuggling or evasion of customs payments.
The right for permanent use of the Green corridor gating system is terminated in accordance with section 5 of the relevant Rules in the following cases:
- when a Green corridor system user files an application;
- if documents submitted for permanent use of the Green corridor system are found to be inaccurate;
- in the case of termination of a legal entity or when the court finds an individual as incapacitated or deceased;
- if a regular user of the Green corridor system did not perform import-export operations for 12 months;
- in case of committing a crime related to smuggling or evasion of customs payments;
- if causes for stopping a permanent use of the Green corridor system are not eliminated within the period specified in paragraph 5.2 of these Rules.
CE: Could you please tell about the performance results of the customs bodies for the period of 2019? What are the performance indicators?
Safar Mehdiyev: As in previous years, the trend of increasing the budget revenues continued in 2019 as well.
During 2019, the State Customs Committee transferred 4 billion 408 million 620 thousand manats to the state budget with a budget commitment of 3 billion 702 million manats, which is 706 million 620 thousand manats above the forecast. So, the forecast objective was fulfilled by 119.1%. Thus, the State Customs Committee has shown record fiscal indicators since its creation, and the sum it transferred into the state budget over the past two years was 2 billion manats higher than the budget forecast.
Imports totaled $13 billion 668 million in 2019, which means an increase by $2 billion 202 million or 19.2 percent vs. the same period of 2018. The volume of export operations amounted to 19 billion 635 million US dollars and increased by 146 million 620 thousand US dollars or 0.8 percent compared to 2018.
In the structure of imported goods, the base for value added tax was 63.89% the share of privileges was 36.11%, the base for taxation on customs payments was 34.97%, and the share of privileges for customs duties was 65.03%.
Further acceleration of movement of goods and vehicles across the customs border, simplification of operational procedures and operations, minimization of additional time losses at customs control, as well as reduction of costs for foreign trade participants in import and export of goods were achieved thanks to the «one inspector – one vehicle» principle of the «single window», which was applied to the registration of goods and vehicles at customs and border checkpoints where cargo vehicles were moving in different directions.
In addition, the green corridor service windows were opened at customs and border checkpoints in accordance with the «single window» principle in order to prioritize the registration of goods belonging to foreign trade participants who are granted permanent access to the Green corridor system.
In addition, the number of drugs, psychotropic substances or their precursors detected and seized over the past two years as a result of increased measures to combat customs offences has reached record 3 tons 168 kg.
For comparison, the total number of drugs detected over the previous 10 years totaled 3 tons 59 kilograms. At the same time, as a result of operational search measures, an illegal import of medicines into the country worth more than 3 million manats was prevented.
The State Customs Committee, which held one of the leading positions in the field of electronic services in the country, provided more than 4,500,000 different services to foreign trade participants in 2019, which is 55% more than in 2018.
The most important innovation in the international cooperation through 2019 was election of Azerbaijan’s customs for a two year period (2019-2021) with the support of all European countries as the Vice-Chair of the WCO Customs Cooperation Council, and the Chair for the European Region during the WCO’s Heads of Customs Conference.
CE: How is the radiation background of goods, imported to Azerbaijan, being controlled? How is the transit of chemical or highly dangerous goods carried out?
Safar Mehdiyev: Primary radiation control is carried out by the State Border Service using stationary radiation monitoring systems to detect radioactive materials spread on vehicles entering the state border, and at entry points.
Customs officers use radiometric spectrometers and gamma spectrometers to determine equivalent doses and types of isotopes of radioactive materials distributed in the zone of additional and detailed radiation control at border points in accordance with the radiation safety category. The Ministry of Health and the Ministry of Ecology and Natural Resources are taking appropriate measures.
CE: How will the Brexit affect the transit of the European goods across Azerbaijan? Will there be changes in the rules in regard to the British producers?
Safar Mehdiyev: First of all, it should be noted that the transit of goods is carried out within the framework of international transit systems regulated by customs transit procedures and interstate agreements in accordance with the requirements of the national legislation.
The Azerbaijan Republic’s customs code based on the EU Customs code, of which the United Kingdom is also a member within the national transit system, forms the basis of the national transit in the national legislation which contains rules regulating the Union’s transit procedure.
Meanwhile, the Republic of Azerbaijan is currently a party to the Customs Convention on the international transport of goods (TIR Convention, 1975), which has 76 members, and the transit is carried out in accordance with the requirements of the Convention within the framework of the above-mentioned international transit system.
As is known, an adaptation of the national legislation was set to accelerate an introduction of the European new computerized transit system (NCTS) and measures were taken to establish a system of transit guarantee in accordance with the clause 7.2.1.1 of the plan of actions meant for implementing the Azerbaijan Republic President’s order dated July 13, 2016 No. 2199 «On additional measures to be taken to improve the business environment in the Azerbaijan Republic and ensure further advancement of the country in the international ratings», approved by the No. 2947 decree of the President of Azerbaijan Republic on June 2, 2017.
In order to join the 1987 Convention on the common transit procedure which covers 35 countries that are members of the European Union, as well as Switzerland, Norway, Iceland and Liechtenstein, Turkey, Macedonia and Serbia, the State Customs Committee held relevant activities and received an observer status in the working structures of the Convention in 2017. While joining the Convention, significant steps will be taken to facilitate transit transport between the European countries (including the UK) and Azerbaijan.
One of the key issues discussed in the working bodies of the Convention after the start of the Brexit process was determining the status of the common transit procedure of the United Kingdom of Great Britain and Northern Ireland. Thus, the UK automatically joined the transit system as a member state of the Union. A separate accession process is required for the country’s participation in the transit system after the Brexit process ends.
On the 28th of May 2018 the United Kingdom announced its intention to join the Convention as a separate country. In accordance with the decision made at the meeting of the Joint Committee of the Convention in Skopje (Northern Macedonia) on 4 December 2019, the mentioned country will be invited to join the common transit system as a third country. There are anyway temporary measures foreseen, making it possible to carry out transit transport without delays during the accession process.
Thus, regardless of the results of the Brexit process, as well as the completion of measures for the accession of the Republic of Azerbaijan, transit operations between the UK and Azerbaijan will start running under the new unified system. This will allow, first of all, delivering goods produced in Azerbaijan to the British market and the British products to the Azerbaijani market, proceeding from minimum costs and minimum documentation. The «New agreement between the Republic of Azerbaijan and the European Union» project is currently under development.
The «Trade» section of this project will also be the subject of comprehensive regulation of customs and trade issues in general. If the agreement is signed, the bilateral agreements on the customs issues, which will be included into the draft text, will be applied to the United Kingdom of Great Britain and Northern Ireland as a member of the European Union.
Given that the UK is the main trading partner for the Republic of Azerbaijan both as a member of the European Union and as a separate Brexit process, the trade between the two countries, including imports, exports and transit of goods, will be regulated by bilateral documents.
In addition, on 7 July 1997 the government of the Republic of Azerbaijan and the government of the United Kingdom of Great Britain and Northern Ireland signed a memorandum of understanding on mutual administrative assistance to customs authorities.
Meanwhile, on February 19, 2019, the State Customs Committee of the Republic of Azerbaijan and the State Secretariat of the Ministry of Internal Affairs, acting on behalf of the British border troops, signed a joint statement on continuation of cooperation in the customs field.
CE: With which countries do you plan to cooperate this year?
Safar Mehdiyev: The State Customs Committee is constantly developing an international cooperation, and lines of cooperation are being defined and developed. To date, about 120 international documents were signed with 53 countries and 9 international organizations to create a legal framework.
An international anti-drug conference, organized jointly by the State Commission on Fighting Drug Addiction and Illicit Drug Trafficking and the U.S. Department of Justice, was held in April 2019 with the participation of more than 500 representatives from 115 countries.
In June, the World Customs Organization held a conference and exhibition of information technologies and technological innovations with the support of the Korean Customs Service at the Heydar Aliyev Center. It was one of the most important events of the World Customs Organization.
We will continue our cooperation with neighboring countries, and issues arising in the field of customs will be solved.
Cooperation with other countries in the field of customs will also be continued within the framework of relevant international organizations.
CE: What are the privileges for products exported under the “Made in Azerbaijan” brand? Do they enjoy a special status when crossing the border?
Safar Mehdiyev: Determined were the privileges associated with the export of goods (including those produced in the Republic of Azerbaijan) for foreign trade participants who received the right to use, and the requirements for acquiring the right to use the Green Corridor.
The mentioned privileges envisage submitting a customs declaration, including information about goods and vehicles, to customs authorities in electronic format without entering a customs office, also sending foreign trade participants directly from warehouses to customs checkpoints, as well as crossing a customs border with minimal physical inspection and first registration. This, in turn, is of great importance for entrepreneurs engaged in export of local products, and in addition to stimulation of export of such goods it also increases competitiveness of Azerbaijani products in foreign markets.
CE: Which countries use preferential conditions when trading with Azerbaijan? What are the preferential regimes in the country’s customs system today? Are there any restrictions or barriers for certain types of products?
Safar Mehdiyev: To date, Russia, Ukraine, Belarus, Georgia, Moldova, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan have signed free trade agreements. According to these agreements, the import customs duty is not applied to goods imported directly into the customs territory of the Republic of Azerbaijan, and a certificate of origin ST-1 is issued in case if a contract with a resident of this country exists.
Preferences cover all product categories, and there are no barriers or restrictions in this area.
CE: What do you think about shifting to a fully automated mode of operation without taking a human factor into account? It is possible technically?
Safar Mehdiyev: Currently, our IT resources are aimed at minimizing contacts between officials and foreign trade participants through the integrated system of customs management over customs services, introduced in 2009.
In fact, the use of the «Green corridor» and the simplified customs clearance system implies further improvement of the e-declaration and the shift to automated passage systems.
This includes full automation of complex operations performed at all stages of customs clearance, using the single automated management system (SAMS). Many of the services provided by customs authorities have already been introduced electronically, and new electronic services are introduced every year.
As I have already said, the use of e-services increased by 61% last year vs. 2018. This shows how well the single automated management system (SAMS) can work. At the same time, the process of transferring electronic services from customs services into the Smart Customs mobile app has already begun. So, the electronic services we provide will also be available via mobile phones.
However, it is impossible to refuse the engagement of human resources at all stages of control, given the fact that customs control is complex and multi-faceted. But information technologies are developing at a rapid pace, which means that in the future there will be «artificial intelligence», «computer-based learning», robots, and so on. The use of such technologies perhaps will make it possible to switch to a fully automated mode of operation without taking the human factor into account.
Thank you for the interview
