In October of this year, the Republic of Kazakhstan adopted a law on the ratification of the Agreement on Cooperation and Mutual Administrative Assistance in Customs Matters between the Government of the Republic of Kazakhstan and the Government of the Islamic Republic of Pakistan. The Agreement will enter into force in accordance with its own provisions, typically once the parties have completed their domestic procedures and exchanged the relevant notifications through diplomatic channels.
Kazakhstan and Pakistan have recently been working on and negotiating mutual support, including in trade and customs. The ratification of this instrument is directly linked to the growth of Kazakhstan's exports through Pakistani seaports and to the development of new southern transit corridors. Access to Pakistan's maritime infrastructure opens promising foreign markets to Kazakh carriers and exporters. At the same time, it creates a qualitatively different environment for the control of cargo movements. How ready are your documents for this level of scrutiny?
A New Framework for Information Exchange
The key innovation of the Agreement is an exchange of information on export and transit customs declarations, including those raising suspicion, between the customs authorities of the two Contracting States. This interaction may operate on a request-and-response basis: one party requests information or assistance, and the other provides it in reply. The Agreement lays the legal and organizational groundwork for prompt interaction between the competent authorities in order to prevent and suppress violations of customs legislation and to coordinate joint response measures. The parties also undertake mutual obligations to ensure the information security and confidentiality of the data exchanged.
In other words, the information a Kazakh declarant provides when exporting goods or arranging transit may be requested by the Pakistani customs authority, and vice versa. In practice, this significantly narrows the scope for declaring goods in isolation in each country: once a request is made, discrepancies between the data submitted in the country of departure and in the country of destination will no longer go unnoticed by the supervisory authorities. This raises the question: which discrepancies are most likely to attract the attention of customs?
Risk Areas in Customs Clearance
From a practical standpoint, the main consequence of ratification is that customs declarations filed in the two countries can be cross-checked against each other. Before the mutual assistance mechanism was introduced, discrepancies between documents filed in the two jurisdictions often were not detected promptly, because there was no direct inter-agency channel. Under the new framework, therefore, any data mismatch that is identified becomes direct grounds for verification measures and for inquiries to the declarant and/or other participants in import and export operations.
Based on our practice, the following parameters are where discrepancies are most likely to lead to disputes and cargo delays:
- Description of the goods and their tariff classification code (EAEU CN FEA / HS);
- Weight of the consignment;
- Number of packages and their markings;
- Declared customs value.
It is important to understand that the identification of discrepancies may typically result in the suspension of customs clearance, the detention of cargo at border crossing points or ports, additional verification procedures and the imposition of administrative sanctions. For transport and freight forwarding companies, such delays mean vehicle downtime, terminal storage costs and, as a rule, claims from customers. Equally important, the cross-border transfer of data requires an assessment of the risk of disclosure of trade secrets.
What Should Businesses Do?
To prevent adverse consequences when carrying out shipments and export-import operations along this route, we recommend that participants in freight transportation take the following steps:
- Conduct a preliminary reconciliation of shipping documentation, comparing the description of the goods, classification codes, weight and value against the data declared by the Pakistani side;
- Carry out a sample review of documents for shipments completed in recent periods to confirm that they are consistent with information that may be requested in the course of administrative cooperation;
- Revise agreements with customs representatives and logistics contractors to clearly allocate responsibility for the accuracy of declared information and to require that declared parameters be agreed with the counterparty in advance;
- Take into account the transparency of transit declarations when planning supply chains that rely on Pakistani seaports.
- Review existing confidentiality agreements with counterparties in light of the scope of information subject to transfer to the competent authorities under this international agreement.
Thus, the ratification of the Agreement establishes a regime of mutual transparency in customs operations between Kazakhstan and Pakistan. A timely internal audit and alignment of declared information will allow businesses to use this logistics corridor without impediment, while minimizing legal and financial risks.