Kazakhstan: Smuggling still rife on border with China
Customs officials are part of the problem.
Contraband remains a booming business on the Sino-Kazakh border, over a year after President Kassym-Jomart Tokayev ordered customs officials to root it out.
So suggested an audit chamber official on February 9.
The value of goods being exported from China into Kazakhstan is being under-reported by more than a third, Ardak Tengebayev, a member of Kazakhstan’s Supreme Audit Chamber, said in remarks quoted by LS business news website.
He blamed two factors.
One is different reporting methods in Kazakhstan and China’s customs services, which officials have also cited in the past to explain away glaring discrepancies.
“But in our view incompetence in customs administration on goods imported from the People’s Republic of China plays a major role,” he continued.
“That is to say the lowering of the customs value of goods, their incorrect classification, the use of so-called ‘cover-up goods’ and so on.” The latter refers to low-value goods which are legally imported as a smokescreen to cover up the illegal import of more valuable items. Duty is then paid on the cheaper goods, not the more expensive items.
“There are many reasons,” Tengebayev added. “But the main one is the lowering of customs value.”
He may have charitably described that as “incompetence,” but it seems unlikely that large consignments of goods could pass through the frontier without active collusion from customs officers.
And this is no secret.
In January last year, President Tokayev ordered officials to root out smuggling on the Sino-Kazakh border, where it was “common knowledge” that “chaos is being wreaked.”
“Cars are not inspected; taxes and duties are not paid,” he railed. “The disparity between the mirror statistics [of Kazakhstan’s customs service] with Chinese customs bodies reaches billions of dollars.”
Tokayev’s crackdown on smuggling was interpreted partly as a bid to curb some of the economic power of the family of Nursultan Nazarbayev, the former president who fell out of favor in the wake of violent civil unrest in January 2022.
His brother Bolat and daughter Dariga reputedly had business interests on the border.
In any case, the customs data discrepancies were in plain sight: in 2021 Kazakhstan reported $7.1 billion less in bilateral trade than China; in 2020 it reported $5.7 billion less; in 2019 it reported $7.6 billion less.
Officials had always brushed aside these disparities as down to different reporting methods.
But in June the State Revenues Committee grudgingly acknowledged that “alongside objective methodological reasons” there was “possible false declaration [of goods] and the lowering of the customs value by importers.”
It announced plans to step up the fight against smuggling, including a new system of information exchange about cross-border rail cargos (information exchange about road cargos was already in place).
At the time, the committee boasted some good news: It had drastically reduced the disparity between Kazakh and Chinese customs statistics since Tokayev ordered the crackdown.
The gap stood at 40.5 percent in 2021, but was down to 26.1 percent in the first four months of 2022, it said.
Throughout 2022, the State Revenues Committee uncovered importers underreporting goods to the tune of 500 billion tenge ($1.1 billion), the audit chamber official said on February 9. The implication was that this sum had been recovered, though he did not specify.
But the bad news is that, after that initial flurry of action to smash smuggling rings after Tokayev’s broadside, the disparity has risen again, judging by the data Tengebayev cited.
It now stands at 34-38 percent.
Joanna Lillis is a journalist based in Almaty and author of Dark Shadows: Inside the Secret World of Kazakhstan.
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