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Cablegate: Customs Hurdles to Iraq Trade Liberalization

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

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