Iraq: Turkish Foreign Trade's Questions on

UNCLAS SECTION 01 OF 03 ANKARA 002107

SIPDIS


DEPT FOR NEA/NGA AND EUR/SE


SENSITIVE


E.O. 12958: N/A
TAGS: ETRD ELTN PREL TU IZ
SUBJECT: Iraq: Turkish Foreign Trade's Questions on
Reconstruction Levy, Truck Manifest System, Scrap Export
Ban

Sensitive But Unclassified. Please Handle Accordingly.


REF: (A) Baghdad 181 (B) Ankara 1709



1. (U) This cable contains action requests for the
Dept/CPA. See para 12.


Summary:
--------------



2. (SBU) Foreign Trade officials formally requested
additional information on the implementation of the Iraq
reconstruction levy on April 15, and suggested that it
be collected at final destination rather than on the
border to minimize disruption to Habur operations. The
GOT also requested more information on the new truck
manifest requirement and fee, and on scrap metal trade
rules. Embassy requests the Department and CPA's
response to Turkish inquiries on these subjects.
Foreign Trade claims that throughput at Habur has
reached record levels and exceeds the 3,700 truck per
day target, but U.S. statistics indicate that crossings
have remained below this target. End Summary.



3. (SBU) In an April 9 meeting with Econoff, Sevket
Ilgac, Deputy Director General for Agreements at the
Turkish Foreign Trade Undersecretariat, posed technical
questions on the Iraqi reconstruction levy, questioned
the basis for a new Iraqi manifest fee, and requested a
status report on a ban on trade in scrap metal. He also
claimed that throughput at the Habur border crossing has
reached record highs.


Questions on the Reconstruction Levy
--------------



4. (U) Ilgac, to whom we had earlier sent the ref A
press release on the April 15 implementation of the five
percent reconstruction levy, passed Econoff a note (para
13) on implementation. In particular, Ilgac asked for
details on how taxable value of imports will be
determined, and whether it will simply be based on
invoice value. He also asked whether the importer,
rather than the exporter, would be responsible for
paying the fee, as is usual worldwide. Ilgac urged that
the levy not be collected at the border crossing, but at
its final destination to avoid congestion at Habur. He
also opined that most small importers would choose to
pay the fee at each shipment, rather than using a
monthly billing system.



6. (SBU) Note: EUCOM, Defense Energy Supply Command
(DESC) and PWC representatives told Adana Congen that
they had spread word of the levy implementation and
believe that the Turkish transportation community is
becoming informed of the change. DESC reported rumors
of Turkish "counter-levy or tax", but Foreign Trade made
no mention of this. End Note.



7. (SBU) Ilgac raised the practice by which the
Kurdistan Democratic Party collects fees from Turkish
drivers, and called for this to cease or at least for a
reduction in fees charged.


Questioning the New Manifest Requirement
--------------



8. (U) Referring to a letter from the Iraqi
Transportation Minister to his Turkish counterpart (para
15) announcing a new manifest requirement for trucks,
Ilgac asked for further details and provided a note
(para 14) on this subject. Ilgac said the Turkish side
did not object to the documentary requirement, which is
apparently aimed at enhancing security and preventing
smuggling. However, the Turks do object to the USD 15
fee per truck, which is apparently not charged in
exchange for insurance coverage or any other service.
Ilgac maintained that such fees are prohibited by the
prewar bilateral road transport agreement.


Scrap Metal Trade
--------------



9. (SBU) Ilgac complained that a single company in
northern Iraq maintained an export monopoly on scrap
metal and was charging exorbitant fees. Referring to
the March trade talks in Ankara (ref B),he maintained
that MFA Senior Advisor Ambassador Neumann had said that
these exports were prohibited. Ilgac asked for
confirmation, preferably in writing, that these exports
were now illegal. Note: At the March talks, Foreign
Trade had promised to ban scrap imports into Turkey.
They asked that Iraqi officials send the GOT a letter
confirming the Iraqi export ban, along with a copy of
the relevant regulations, and asking the Turks to impose
a corresponding ban on imports. End Note.


Foreign Trade Maintains Habur Crossings Up
--------------



10. (SBU) Econoff told Ilgac that we have had reports
that throughput at Habur remains on average considerably
below targeted levels, and this is apparently due to the
fact that the crossing is not staffed on a 24/7 basis.
Note: U.S. sources at Habur indicate an average of 2998
trucks crossing daily in the 30 days prior to April 10.
End Note. Ilgac maintained that daily crossings at
Habur had reached record high levels in recent weeks,
claiming that traffic had ranged between 3,500 and 4,000
trucks per day on a number of days. He stated that
3,500 trucks daily should be considered the normal
capacity limit. Higher throughput means loosened
controls, with consequently higher budget losses to fuel
smuggling. Ilgac maintains that, for security reasons
and additional fees charged during these hours, very few
truckers are willing to cross the border at night.



11. (U) On rail transport, Ilgac added that one fuel
train was traveling to Iraq daily, and that the
authorities were working to increase this to two trains
daily in the next few months. Ilgac told us that
Habur's Build-Operate-Transfer (BOT) modernization
project is slated to begin in July.


Action Request
--------------



12. (U) Embassy requests detailed information which we
can share with the GOT and Turkish exporters on how the
reconstruction levy will be processed with respect to
the Habur crossing. This is vital to minimizing or
averting any disruption to the flow of vital supplies
for Iraq. Embassy also requests background on the
manifest fee and on scrap trade rules to answer Foreign
Trade's inquiries on these subjects.



13. (U) Begin text Foreign Trade U/S Note Regarding the
Reconstruction Levy:


The Reconstruction Levy will be imposed on certain goods
to be imported into Iraq from all countries beginning as
of April 15, 2004, at a rate of 5 percent of the taxable
value of goods.


The necessary measures should be taken in order to
prevent the congestion at the Habur-Ibrahim El-Khalil
Gates. Within this framework, detailed information on
the reconstruction levy implementation has to be given
to the concerned companies.


According to international practice, customs duties have
to be paid by importer companies. Therefore, we would
like to have a detailed explanation regarding the
responsibilities of the Turkish exporter and
transportation companies in this regard.


The collection of the Reconstruction Levy at the border
gates will pave the way for longer waiting times for the
goods to be cleared. In order to simplify the
procedure, in accordance with international practice,
the Reconstruction Levy should be collected at the
custom point of destination of the goods rather than the
customs gate.


End Text Reconstruction Note.



14. (U) Begin text Foreign Trade U/S Note Regarding the
Iraqi Manifest System


According to the letter of the Iraqi Minister of
Transportation Mr. Behnam Ziya Polis addressed to the
Turkish Minister of Transportation Mr. Binali Yildirim,
the Iraqi side would implement the manifest system as of
April 2, 2004, with the aim of providing security and to
prevent smuggling for all trucks, including fuel
tankers.


Even though these manifest documents have to be
considered as Customs Declaration Documents, in practice
they are used as TIR carnets.


The manifest documents are being sold by the Iraqi
Companies for USD 15 to the Turkish transportation
companies in accordance with the authorization given by
the Iraqi State Co. for Land Transportation.


It is very important to clear up whether the Iraqi State
Co. for Land Transportation authorized such companies to
issue these documents.


According to our preliminary investigations this amount
is not charged in return of any service given by the
Iraqi State Co. for Land Transportation.



15. (U) Begin text Polis/Yildirim Letter:


H.E. Mr. Binali Yildirim
Minister of Transportation
Ankara, Turkey


Excellency, it gives me the pleasure to extend our
compliments and would like to bring to your Excellency's
attention of the following:


In order to maintain full control regarding details of
all goods imported through official border outlets from
all the different aspects, particularly the security
aspects and in order to put an end to smuggling, the
competent Iraq authorities have decided to renew the
application of the Iraqi Manifest system, and the non-
persistence of trucks loaded with goods, including oil
products from leaving or entering the border points
without being accompanied with manifest documents, this
procedure will commence as from 2 of April 2004.


From our own side, we have opened an Iraqi Office of
Land Transportation at Abraham al Khaki customs point
and we have instructed the said office of the above-
mentioned regulations, namely of not permitting the
entry or departure of trucks unless accompanied with
manifest documents.


Would you kindly therefore inform the competent Turkish
Authorities, the transportation companies, as well as
Turkish border outlets of the new arrangements.


(Complimentary closing)
BEHNAM ZIYA POLIS, IRAQI MINISTER OF TRANSPORTATION


End text Polis/Yildirim letter.



16. (U) Baghdad minimize considered.
Edelman