How much will be customs clearance fee for vehicles after joining the Customs Union

There is a debate going on about the potential skyrocketing of prices for certain types of products in Armenia after joining the Customs Union.

Primarily this will concern products that are imported from non-CU countries. The reason of price increase will be higher CU tariffs on import of products instead of Armenia’s existing 10 per cent.

There are estimations and announcements about the increase margin, however there is no valuable research data and calculation. We researched and found the tariffs for all product groups. We will research and publish analysis of different types of products. In this publication we will discuss only the section on vehicles that work on petroleum.

In Armenia to do customs clearance for a vehicle that runs on petroleum, importers shall pay environmental fees, VAT 20% and Customs Fee 10%. There is no Customs Fee for Russian cars.

Below is a chart with customs fees on import of foreign vehicles that work on petroleum into Russia, Belarus and Kazakhstan. The Customs Fee is higher than 30%, and if the price of a vehicle is low, there are other conditions levied that make the fees payable very high.

As an example, there are many Opel cars in Armenia that are used as taxi cabs. The retails price of such cars (1997-1998) is around 4-5 thousand dollars. This is the price of a vehicle after customs clearance. This means that all fees for importing one Opel Astra are around 500 dollars.

Let’s calculate the price for Armenia in case if the same Customs Rules are applied in Armenia. For an Opel Astra, 1998, with the engine capacity of 1.4 l. the customs tariff would be the following: EUR 2.7 per 1 csm. This means that only the customs fee will be approximately EUR 3780, or USD 5000. If the engine is 1.6 l., the customs fee will be at EUR 4640. For new vehicles with 3 l. and more engine volume the import customs fee will be at least EUR 8,400 (approx. USD 11k). For similar cars that are five years or older, the rate will be EUR 17,400. Other cars and specifications can be calculated by using this chart. The amounts above concern the Customs Fee only, which is 10 per cent in Armenia now. The other tariffs include VAT 20%, fee 2% and environmental fees, which will remain the same.

Now when they speak about double increase of prices, it is not far from the reality. However, our government officials have announced a number of times that Armenia is not comfortable with the CU fees, and the final rates are subject to negotiation and correction. No one knows what the final tariffs will be. Maybe higher customs rates on import are will make it easier to direct financial inflow into the budget.

By Babken Tunyan

P.S. As this publication caused a big discussion and many interpretations were heard, we would like to speak about a few of them. It is assumed that this law will ensure that the import of the number of cheap and bad quality cars to Armenia will reduce. That is the reason why clearance fees in Armenia are higher than in Georgia but in reality there are more old cars in Armenia than in Georgia. The expensive clearance fees didn’t serve their goals. Besides that, everybody wants to have a new car but only a few have the means to buy cars only 5 years old.

P.S. They mention that the clearance of luxury cars will lower because in Armenia besides the 20% VAT, 10% clearance fee and 2% payment in Armenia they have to pay additional 20% luxury tax. First, the luxury tax includes cars in the value of 25 million AMD and more, for vehicles with over 4,5 liter engines and up to 2 years of use. Besides nobody can claim that after becoming a member of the CU the luxury tax will be eliminated.

P.S. They are mentioning that there won’t be need for worry, because in Russia several foreign-based vehicles are produced. It means that next year we might import Chevrolet Astra instead of Opel Astra. Everybody is well aware of the quality of Russian cars. That is the reason why people prefer to buy 10-year-old Mercedes and not a new Russian car.

P.S. They are also mentioning that during the import of old cars they are levying an environmental tax as well. For example, Opel Astra has 90-100 horsepower engine. Its environmental payment will amount to 270-300 thousand drams. It is incompatible with the 30% clearance pay. They never said that after joining the CU the environmental fees will reduce. The fact is that the customs and clearance fees will increase to a certain extent as well after joining the CU.