People check out a Mercedes Benz at the Erbil Car Fair on March 7, 2019. Photo: Mohammed Shwani/Rudaw
ERBIL, Kurdistan Region – The unification of customs tariffs between Erbil and Baghdad has dealt a blow to the Kurdistan Region’s lucrative car import business, slapping an extra few hundred to few thousand dollars onto the price of vehicles.
Car imports into the Kurdistan Region top more than $1 billion annually. According to figures from the Kurdistan Regional Government (KRG)’s Ministry of Trade and Industry, automobile imports into Iraq totaled $7.5 billion over the past four years. The bulk of the vehicles entered the country through the Kurdistan Region’s borders, though the numbers have steadily declined over the past four years.
"More than 75 percent of vehicles imported by traders through the Kurdistan Region crossings have been sold to traders from Iraqi cities," Nawzad Adham, general manager of trade at the ministry, told Rudaw.
Most of the imports come through the Ibrahim Khalil border crossing with Turkey.
Lower prices drove a large number of car salesmen from central and southern Iraq to come to buy vehicles in the Kurdistan Region’s markets, making a nice profit for Kurdish businessmen.
"Last year, we sold 75 percent of our vehicles to Arab buyers," Khalis Aziz, head of the Kuwait Company for Trading Imported Vehicles in Erbil, told Rudaw.
The number dropped, however, after customs duties were unified.
After months of wrangling, Erbil and Baghdad finally reached a customs deal
The Kurdistan Region controls all of Iraq’s border with Turkey and a large stretch of the frontier with Iran and the KRG imposed its own customs on trade. Seeking to bring the borders under federal control and get a share of the profits after the Kurdistan Region’s independence referendum, Baghdad set up internal customs points on roads linking the Region with the rest of Iraq, effectively charging a second tax on all foreign products and taxing Kurdistan-made goods.
Under their agreement, the two governments agreed to a single tariff system at all entry points and Iraq removed its internal customs points. A consequence of the new system is higher duties on some products, including luxury cars.
"Due to the unification of customs duties, the business of importing and selling vehicles has almost come to a halt, as customs fees on luxurious and expensive vehicles have greatly increased," Aziz said. "For example, customs fees on the Land Cruiser known [colloquially] as Wanawsha has increased to $5,000 and fees on brand new Lexus and Ranger Rover are now $8,000 to $10,000."
"This has affected the sale of vehicles," he said.