Iraq Tightens Controls on Imports; Imposes Tariffs

Iraq is tightening controls on imports and slapping tariffs on thousands of goods to stem what officials say was a free flow of low quality products across the country's borders and to help local industry compete. A new import licensing scheme, covering around 8,000 items that are currently imported without any regulations, and tariffs of up to 100 percent, are being applied amid complaints by Iraqi factory owners over cheap foreign goods, many from China.

"All the goods entering the country were entering without an import license," Nawfal Saleem Hameed, Director General of the Public Committee of Customs, told Reuters on January 24, 2011. Duties on alcohol, according to a 742-page customs schedule, will amount to 80 percent and be applied from March 6. Tobacco imports will face a tax of 50 percent while underwater spear guns will have a tariff of 100 percent.

Cement imports, which compete against domestic producers including French giant Lafarge, will face duties of 15 percent, while vegetable imports will be taxed at 30 percent during the Iraqi harvest and 10 percent outside the harvest. Deputy Finance Minister Fadhil Nabi said on Tuesday the new tariffs would raise 1 trillion Iraqi dinars (around $855 million) in 2011. A current flat 5 percent tax on all imports raises just 400 billion Iraqi dinars annually. Iraq's main trading partners are Turkey and Iran, but markets in Baghdad are also flooded with goods made in China.

After the fall of Sunni dictator Saddam Hussein in the 2003 US-led invasion, US administrators cancelled the existing tariff scheme and imposed a flat 5 percent tax on imports to raise money to rebuild the country. Many of Iraq's 240 state-run factories were looted in the aftermath of the invasion, while the rest were outdated, or closed down because they were located in areas controlled by insurgents.

As the country emerges from the worst of the sectarian warfare, it is trying to kick-start its economy and lure foreign investment to help it rebuild infrastructure that has been left in shambles by decades of war, sanctions and underinvestment. Local factories trying to get back on their feet, however, complain they are drowning in a flood of imports. A lack of public electricity, which forces local plants to depend on expensive generators, is also hurting their ability to compete.