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3. Barriers to trade
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3.1 Tariff and tariff administration measures

The average tariff rate in Kazakhstan is 8.6 percent. However, Kazakhstan imposes much higher rates on certain imports, among which are canned fish and shrimps (30 percent), sugar (25 percent), and processed meat (30 percent). Some other imports are subject to a high import tariff rate of 100 percent. Besides, Kazakhstan also sets the minimum tariff duties on imports such as color television sets and recorders. The tariff rate on color television sets with screens ranging from 52cm to 75cm is 10 percent, but the minimum tariff on each piece is not lower than €40. Color television sets of other sizes are charged a rate of 10 percent and a minimum tariff of €20. The tariff structure of Kazakhstan has had negative impact on the relevant Chinese exports. The Chinese side is concerned over the issue.

At the end of 2004, the Kazakhstani government adjusted the standards for load limits of imports. Kazakhstan imposes a unified tariff on certain imports from China, charging by vehicle regardless of the load limit of the vehicle. Due to the strict load limit to imports in the new regulation, the tariff per unit of goods has increased at least by 30 percent. China is concerned about the unreasonable practice of charging the tax by vehicle.

3.2 Barriers to customs procedures

Since October 2002, Kazakhstan has authorized a third-party organization to do "customs audit" on imports, which usually determines the customs value of imports based on the international prices. The practice is not in accordance with Article 7 of the WTO Customs Valuation Agreement and results in overvaluation of about 20 percent of the imports.

The Kazakhstan Customs specifies that when declaring imports with photocopies or fax copies of documents, an importer must verify the authenticity of such documents through notarization and notify the Customs with a letter; the imports will not be released if an importer fails to provide the "Transaction Passport" issued by the Kazakhstan Customs and the Central Bank for the purpose of supervising the use of capital during the transaction. The cumbersome Customs clearance procedures and unreasonable documentation requirements of Kazakhstan have added to the importer's Customs clearance costs and risks and have constituted practical obstacles to Customs clearance. The Chinese side is concerned over this issue.

Furthermore, the Kazakstani Customs Code clearly states that a certificate of origin is required of imports only under three circumstances. However, in the actual practice, the Customs requires certificates of origin of imports under other circumstances as well; otherwise, import duties will be doubled based on the specified legal rates of Kazakhstan. This arbitrary practice has caused great uncertainty for relevant Chinese exports to Kazakhstan. The Chinese side is concerned about this issue.

The Chinese side hopes that Kazakhstan will take effective measures to reduce the negative effect of Customs clearance procedures on the imports.

3.3 Discriminatory taxes and fees on imported goods

Kazakhstan imposes discriminatory taxes and fees on imports, which constitutes discrimination against the imports. The Kazakshstani Tax Code states that the excise duties on domestic products subject to taxation are paid in local currency, while those on some imports subject to taxation must be paid in Euros. For example, the excise duties on domestically-produced alcohol are 300 Tenge per liter, while those of imported alcohol are 3 Euros per liter. The influence of exchange rate fluctuation may lead to higher domestic taxes on imports. The Chinese side hopes that Kazakhstan can unify the domestic taxes and fees on domestic products and imports.

3.4 Technical barriers to trade

Kazakhstan sets special testing regulations on certain imports, which are required to pass the national safety test conducted by the Kazakhstani Committee on Standards, Metrology and Certification to ensure that they do not jeopardize human health, property or the ecological environment. Mechanical and electronic products exported from China, such as washing machines, refrigerators, lighting equipment, and food-processing equip ment are subject to tests by the Kazakhstani Committee on Standards, Metrology and Certification. This regulation has both added to the inspection fee of enterprises and caused them great inconvenience. The Chinese side is concerned about this issue.

3.5 Sanitary and phytosanitary measures

Kazakhstan demands that imported food and feed are subject to strict sanitary and health tests. The Chinese enterprises complain that in testing relevant imports, Kazakhstan arbitrarily adds testing items and upgrades inspection standards, which become much higher than those for the like domestic products. The practice has constituted discrimination against imports. China hopes that Kazakhstan can unify the testing standards of the imports and the like domestic products, improve the transparency in the making and revision of sanitary and health testing standards, and grant enterprises a reasonable period of time to make adjustments, so as to reduce the unreasonable policy risks that relevant Chinese imports to Kazakhstan must endure.

3.6 Trade remedies

On December 31, 2004, the Kazakstani Ministry of Industry and Trade passed an act that provides provisionary safeguard measures for certain imported candies. As of January 8, 2005, the six-month provisionary safeguard measures were applied to three kinds of imported candies, imposing a protective tariff of 21 percent plus no less than €0.15 per kilogram on candies containing no cocoa powder and candies with or without filling. The act also imposes a protective tariff of 42 percent plus no less than €0.28 per kilogram on toffees containing no cocoa powder, hard candies and like candies. As China exports a great variety of candies to Kazakhstan, China watches the enforcement of these safeguard measures with great concern.

On October 15, 2004, the Trade Committee (now known as the Committee of Trade and Tourism) affiliated with the Kazakhstani Ministry of Industry and Trade initiated an anti-dumping investigation of active dry yeast imported from China. The case is still in progress. The Chinese side holds the view that its export of dry yeast to Kazakhstan constitutes no dumping and that its export does not lead to any injury to the dry yeast industry in Kazakhstan. Kazakhstan's abuse of anti-dumping measures has seriously affected the economic interests of the relevant Chinese enterprises. The Chinese side is concerned about this issue.

3.7 Government procurement

In October 2002, Kazakhstan enacted the Law on State Procurement, which sets strict regulations on the procedures and requirements for go vernment procurement. However, in practice, government procurement in Kazakhstan still lacks transparency; and extensive preferences are granted to domestic suppliers. These regulations on bidding for government projects constitute discrimination against foreign enterprises. The Chinese side is very concerned about the issue.

Kazakhstan's Oil and Gas Law requires that domestic mining and oil enterprises give preemptive consideration to domestic suppliers when procuring products or services. Domestic mining and oil enterprises are not allowed to import foreign products or services, unless such products or services are not available in Kazakhstan. The regulation constitutes discrimination against foreign product and service providers, including Chinese enterprises.

3.8 Export restrictions

To support domestic manufacturers of paper products, heat insulation materials, and toiletry and hygiene products, and to encourage the export of processed products, the Kazakhstani government has passed a resolution prohibiting the export of regenerated paper, corrugated cardboard, waste and scrap paper as of September 26, 2004.

According to the new Tax Code of 2004, the Kazakhstani government imposes export duties on crude oil based on the fluctuation of the international price, with the rates ranging from 1 percent to 33 percent. The practice of imposing export duties based on the international price rather than on the actual export price and the unpredictability of progressive duty rates have, in effect, restricted the export of petroleum from Kazakhstan. The Chinese side is concerned about the matter.

3.9 Barriers to trade in services

3.9.1 Telecommunications

According to Kazakhstan's Laws on Telecommunications, foreign investors can have no more than 49 percent ownership in joint ventures operating inter-city and international telecommunication networks until 2008. Additionally, foreign investors need to gain permission from the Kazakhstani government to get involved in projects such as operating television and wireless broadcasting, planning and designing, construction of national and international trunk lines for communications, providing technical maintenance of telecommunication networks and lines as well as production and services of other projects in the telecommunication sector. The Kazakhstani government is entitled to refuse a foreign investor's application for such a license based on national security concerns. This arbitrary practice increases the difficulty of foreign investment in the telecommunications sector in Kazakhstan.

3.9.2 Construction

According to the Law on Architecture and Town Planning and Construction Activity of Kazakhstan, foreign investors can enter the construction sector in Kazakhstan in the form of joint ventures, with foreign ownership of no more than 49 percent. However, if a foreign-funded local company with 100 percent foreign equity joins a construction joint venture as a principal, then foreign ownership can exceed 49 percent. In general, Kazakhstan's restriction on foreign ownership makes it difficult for foreign investment to enter the construction sector in Kazakhstan.

3.9.3 Banking

Kazakhstan still has restrictive regulations on the access of foreign-funded banks. In general, foreign banks' total capital share should be no more than 25 percent of the total capital of all banks in Kazakhstan. Additionally, Kazakhstan requires that at least one member of the regulatory commission of any foreign bank should be Kazakhstani citizen with a minimum of 3 years of banking experience, and that at least 70 percent of the employees should be Kazakhstani citizens.

3.9.4 Insurance

Kazakhstan requires that the total capital share of non-life insurance joint ventures in Kazakhstan should be no more than 25 percent of the total capital of the domestic non- life insurance market, and that the total capital share of life insurance joint ventures be no more than 50 percent of the total capital of the domestic life insurance market. This regulation practically forbids foreign latecomers from entering the Kazakhstani insurance sector.

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