US embassy cable - 04ANKARA2107

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