Minsk Fails to Defend Confiscation Record

UNCLAS SECTION 01 OF 03 MINSK 001355

SIPDIS

SENSITIVE

SIPDIS

PASS USTR FOR ALLGEIER AND DWOSKIN
EB/OT FOR CRAFT
USDOC FOR ITA/JACOBS

E.O. 12958: N/A
TAGS: ECON ETRD PGOV WTRO BO
SUBJECT: Minsk Fails to Defend Confiscation Record

Refs: (A) Minsk 492, (B) 04 Minsk 296


1. (SBU) Summary: On October 25, State Customs Committee (SCC)
officials attempted to defend their government's confiscation
practices to Econoff. Their main arguments were that the SCC used
to confiscate much more, even though current levels remain high,
and that confiscations `were not their idea.' The officials
clearly seemed uncomfortable defending this practice, and stressed
they are trying to improve the situation. However, it is likely
only Lukashenko could end confiscations. Econoff raised two recent
confiscation cases against American firms. In one instance the
firm received its goods back after fighting in court for two
months. The other cargo was lost. In recent weeks Dutch and
Kazakh diplomats have commented their businessmen continue to also
face significant problems with confiscations in Belarus. End
summary.


Customs' Lackluster Defense
--------------


2. (SBU) After the U.S. Department of Commerce warned U.S.
businesses in August not to transit goods through Belarus for risk
of confiscation, Belarus' State Customs Committee (SCC) told the
press they were ready to "tell the Americans the truth." Post rose
to this challenge and requested a meeting, which the SCC finally
granted in late October.


3. (SBU) On October 25, Econoff met with Vladimir Garifov, Head of
the SCC's Enforcement and Investigation Department, and three of
his underlings. Garifov expressed surprise that the USG made such
a statement this year, as "We confiscated much more from you in
previous years." To back up this claim, Garifov said in 2003 the
SCC confiscated 184 American-owned cargos; in 2004, 133 American-
owned cargos; but in the first nine months on 2005 the SCC has only
seized 22 American-owned cargos. He further qualified this by
saying some of those 22 were simply fined, not fully confiscated.


4. (SBU) Garifov agreed that perhaps Belarusian law is too strict,
leading to disproportionate punishments. As an example he said
Belarusian law mandates the SCC seize a bus if one of the
passengers is smuggling cigarettes. The SCC exists to promote
transit through Belarus, thereby earning revenue, so it is drafting
new, less stringent laws. However, Garifov stressed that if the
documents presented by a shipper do not comply with Belarusian law,
the cargo is seized and the case goes to court for final
confiscation.


SCC Ready to Help
--------------


5. (SBU) Garifov also complained that the USG would issue such a
statement after the SCC helped prevent the smuggling of cars stolen
in the U.S. to Kazakhstan. [Note: He was referring to 16 cars
Apollo Motors, a Chicago chop shop closed by police, shipped in
early 2003.] Econoff thanked Garifov for this effort, but then
asked if the GOB had made any effort to return these stolen cars to
their rightful owners. As Garifov squirmed, his deputy outlined
the lengthy bureaucratic process needed to learn the fate of
confiscated goods.


How to Verify Non-existence?
--------------


6. (SBU) One of the main pretexts used by the SCC to confiscate
goods is to claim either the sending or receiving company does not
exist. Post has helped a few American companies try to prove their
existence to the SCC, sometimes even successfully. Econoff asked
how the GOB could verify whether an American firm exists. Garifov
replied Belarus has a responsibility to safeguard Russia, as there
is no customs check on the Belarusian-Russian border. He claimed
the SCC has the Belarusian Embassy in Washington DC check on the
existence of companies, and sometimes the SCC checks through
Interpol or searches on the internet. He asked if there was any
way to check directly with the USG, and added the SCC would like to
cooperate with U.S. Customs on a range of issues. Having direct
contact with U.S. Customs would also greatly cut down the amount of

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time American cargos are held at the border (now up to ten days) as
they are being checked.


SCC Not at Fault?
--------------


7. (SBU) Econoff laid out the reasoning behind the USG warning
(reports of U.S. confiscations, the Russian Embassy publicly
complaining of having USD 100 million in goods confiscated a year,
problems reported by many other embassies, the existence of a
budget line for USD 84 million in projected confiscation revenue in
FY05, and the existence of a network of shops selling confiscated
goods; ref A). All four instantly said some variation of, "Those
shops were not our idea!" Garifov also said that the Russian MFA
and Customs recently, "changed their minds," that Belarus
confiscates too much. He added the SCC is meeting with foreign
transporters to get advice on how to improve procedures, strives to
work openly and transparently, and stated, "things are getting
better."


Two Recent American Cases; One Victory?
--------------


8. (SBU) On July 26, Belarusian customs at the Berestovitsa-2
crossing point on the Polish border seized an American owned cargo.
Emerson Process Management (EPM),based in St. Louis, MO, was
shipping a hydraulic pumping unit from the Czech Republic to
Moscow. The invoice listed the value of the pumping unit at USD
23,552. When the goods left Poland, Polish customs listed their
value as USD 25,356, adding the price of shipping to the value of
the good. [Note: Post has been told the Poles routinely add the
cost of shipping to the value of a good.] Knowing this could cause
problems, Polish customs included a notarized statement of
explanation, in Russian, for Belarusian customs. Regardless,
Belarusian customs cited this discrepancy as the reason they seized
the pumping unit.


9. (SBU) Belarusian customs placed the unit in a warehouse and
referred the case to a Grodno court. In many previous cases the
courts ruled to confiscate goods within days of their seizure. EPM
immediately hired local lawyers, sent a representative from Moscow,
and contacted the Embassy for help. Post contacted customs, the
MFA and the Ministry of Justice on EPM's behalf, and arranged for
the Polish Consulate on Grodno to provide supporting documents.
After more than two months, the court ruled the goods were seized
by mistake and released the pumping unit to EPM. However, under
the terms of its Moscow contract, EPM reported it lost more than
the value of the unit in fines for late completion of the project.


10. (SBU) In another recent case, on August 5 Belarusian press
reported customs seized USD 8,200 worth of sheetrock and other
construction materials headed to Russia. Although no one
approached the Embassy in this case, Grodno customs officials told
Emboff the goods were owned by an American firm, Cartwright
Trading, Ltd. The GOB claimed it learned from Interpol that
Cartwright had gone out of business in 2001. On August 15 a local
court ruled to confiscate this cargo.


Other Countries Still Face Confiscations
--------------


11. (SBU) On October 27, Econoff met with Dutch Economic and
Commercial Counselor Frank ter Borg, covering Belarus from the
Dutch Embassy in Warsaw. Borg began the meeting by thanking the
USG for issuing the public warning to American businesses to avoid
transiting goods through Belarus because of the risk of
confiscation. He said Dutch businesses continue to lose goods and
vehicles to confiscation by the GOB. Not having an embassy in
Minsk, Borg said he did not know other countries were also having
such problems, and that such a warning coming from the USG is more
effective than from a small country like the Netherlands.
Therefore, Borg has taken to giving the USG warning to Dutch
businesspeople.


12. (SBU) In a chance encounter on October 24, Kazakhstan's
Economic Counselor also thanked Econoff for the USG warning, and

MINSK 00001355 003 OF 003


said in the past year Kazakh businesses have had roughly USD 60
million worth of goods confiscated by the GOB in transit.


GOB Attacks Customs
--------------


13. (U) At a government meeting on October 20, Lukashenko and a
number of ministers lashed out at the State Customs Committee.
Lukashenko complained of red tape, incompetence and harmful
personnel practices, and ordered the SCC to search only two or
three vehicles out of 1,000. Regarding confiscations, Gennady
Nevyglas, head of the Security Council, stated, "Among foreign
carriers there is a deeply entrenched opinion that Belarus should
be bypassed. There are contracts that directly indicate, `Passage
via Belarus is strictly prohibited.'" Foreign Minister Sergey
Martynov added, "There is not a single interlocutor at talks in
Europe who does not touch on the issue that your customs is an
obstacle to transit."


SCC Probably Not at Fault
--------------


14. (SBU) Comment: The meeting with SCC officials reinforced the
view that Belarusian customs officials would like to improve the
situation, but is hamstrung by higher ups. These customs officials
are professionals who were clearly uncomfortable defending a
practice they do not agree with; witness the weakness of their
arguments. They would like to improve their practices and their
country's image, but the SCC is also being pressured from above to
make money for the state. In this system, confiscations will
probably continue until the Presidential Administration orders them
to stop. Given the success of this cash cow for the Belarusian
budget and for off-budget funds, the Presidential Administration is
unlikely to issue such a directive soon, even though the practice
imperils Belarus' efforts to join the WTO.

KROL