This Q&A covers key matters relating to the regulation of international trade in Azerbaijan, including recent trends, trade agreements, trade negotiations, rules relating to the supply of services, imports and exports requirements, trade remedies, and international trade sanctions.
- What are the recent trends affecting the regulation of international trade in your jurisdiction?
Azerbaijan’s geographical location at the crossroads of Europe and Asia has contributed to the success of its trade policy. One of the main objectives of this policy is to expand and strengthen Azerbaijan’s foreign trade relations. The Karabakh region, which was liberated from occupation and returned to the control of Azerbaijan in 2020, also represents an economic potential for the country.
Decree No. 1032 dated 22 May 2020 on the establishment and organisation of the activities of the Alat free economic zone created a free economic zone in Alat, and established the authorised body of the free zone. This free trade zone will play a leading role in the Eurasian supply chain and will allow the Baku International Sea Trade Port to realise its full potential. The aim is for Azerbaijan to become a hub that serves both European and Asian markets. Alat is located in the most convenient position for both international road and railway lines. In particular, the free zone is expected to have the following impact:
- Trade turnover will increase.
- Investments in the region will increase.
- Employment will be strengthened in the region, and new jobs will be created.
- Integration of the national economy into the global economy will be accelerated.
- Opportunities for educational and professional experience of qualified personnel will be expanded.
- Technical centres and scientific research will be involved in production.
The government has released Azerbaijan’s economic development strategy and a long-term development strategy until 2025.
On 2 February 2021, the President of the Republic of Azerbaijan signed a decree approving the Azerbaijan 2030: National Priorities for Socio-Economic Development. The five national priorities for socio-economic development to be implemented in the next decade are:
- Steadily growing competitive economy.
- A society based on dynamic, inclusive, and social justice.
- Competitive human capital and space for modern innovations.
- Great return to liberated territories.
- Clean environment and “green growth” country.
The national priorities are also of particular importance for the implementation of commitments arising from the UN 2030 Agenda for Sustainable Development.
Azerbaijan is also currently negotiating an agreement on trade co-operation with Belarus.
- Is your jurisdiction a member of the World Trade Organization (WTO)? What are the main international, regional or bilateral trade agreements to which your country is a party?
Azerbaijan is not a member of the WTO (see Question 20).
The main international trade agreements to which Azerbaijan is a party are as follows:
- Customs Convention on the Temporary Importation of Road Vehicles 1956 (ratified in 2000).
- Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) 1973 (ratified in 1998).
- European Convention on Foreign Trade Arbitration 1961 (ratified in 1996).
- Universal Postal Convention and its Final Protocol (ratified in 2019).
- Convention for the Unification of Certain Rules for International Carriage by Air 1999 and its amending Protocol (ratified in 1999).
- Convention for the Unification of Certain Rules Concerning International Air Carriage (Warsaw Convention) and its Additional Protocols (ratified in 1999).
- Convention on International Cargo Transportation and its Amendments (ratified in 2000 in 2003).
- Convention concerning International Carriage by Rail (ratified in 2015).
- United Nations Convention on the Use of Electronic Communications in International Agreements 2005 (ratified in 2018).
Additionally, Azerbaijan is a party to the following bilateral trade agreements:
- What are the authorities responsible for negotiating trade agreements? How long does it usually take to conclude a trade deal with your country?
The Ministry of Economy is responsible for negotiating trade agreements.
There are no official statistics indicating the average duration of trade negotiations. The length of negotiations varies depending on the agreement.
Supply of Services
- Is your jurisdiction a party to international agreements on cross-border trade in services? Is your jurisdiction taking part in the negotiations of the Trade in Services Agreement (TiSA)?
The bilateral free trade agreements listed in Question 2 include provisions on trade in services.
Azerbaijan is not taking part in the negotiations of the TiSA.
- What domestic legislation and international rules apply to the supply of financial services and legal services in your jurisdiction? What are the main requirements that suppliers must comply with?
Regulatory framework. Licensing requirements and procedures for the provision of financial services are set out in the Rules of Prudential Regulation on Licensing, Permits and Activities of the National Postal Operator for the Provision of Financial Services No. 10, approved by the Decision of the Chairman of the Board of Directors of the Chamber of Control over Financial Markets of the Republic of Azerbaijan dated 7 July 2017.
There are no specific regulations governing cross-border offers of financial services. These are subject to the licensing requirements outlined below.
Main requirements. To provide financial services in Azerbaijan, financial institutions must apply for a licence by submitting the following documents to the Chamber of Control over Financial Markets:
- Application form including the name of the legal entity, its organisational and legal form, legal address, settlement account number and name of the bank, and types of financial services supplied.
- Notarised copies of the entity’s state registration certificate and charter.
- Business plan including the entity’s commercial strategy and financial forecasts (balance sheet, profit and loss statement) for the first three years of operation.
- Audited financial statements for the last financial year and balance sheet, profit and loss statement covering the last quarter, and a cash flow statement.
- Information on control and risk management systems (such as organisational structure, regulations of relevant structural units, including internal audit department, regulations of the supervisory board and internal committees, and so on).
- Sample form of internal rules and agreements for each type of activity related to financial services.
- List of directors and officers, and certified copies of documents with information on their profession, experience, and criminal record.
- Information on members of the supervisory board and head of the internal audit department.
Regulatory framework. There is no specific law relating to the provision of legal services in Azerbaijan. Legal services do not require licensing, except for barristers (advocates) who must pass exams to become members of the Azerbaijan Bar Association.
Azerbaijan is not party to agreements for the mutual recognition of professional qualification or standards.
Main requirements. To become a lawyer and practise law in Azerbaijan, an individual must have a bachelor’s degree diploma in law or international law.
To become an advocate, an individual must fulfil the following requirements:
- Higher legal education.
- At least three years’ work experience in law or in a legal field in scientific and pedagogical educational institutions.
- Passing a qualification examination.
- Successful completion of compulsory training with the Justice Academy of the Ministry of Justice.
- Are there restrictions on market access for specific services sectors?
The following sectors are subject to a public monopoly:
- Transportation of oil and oil products by main pipelines.
- Transportation, storage, and distribution of natural gas through pipelines.
- Electric and thermal energy transmission and distribution services.
- Operation of main and local railway lines and road facilities, traffic management and traffic safety activities, and management of railway stations and passenger stations.
- Airport services, operation of airports, runways and facilities, and air navigation services for aircraft.
- Operation, traffic management and traffic safety of roads, tunnels and stations of underground transport facilities.
- Water port services, operation of port facilities, cargo handling, and swimming safety activities.
- Operation and control of public electric and postal communication services, radio and television stations, and high-frequency devices.
- Operation of main water treatment plants, main pipes, water supply networks, and pressure and regulating devices on them.
- Operation of mechanical treatment stations, pumping stations, main rain collectors, and sewer lines.
- Operation of reservoirs, canals, collectors, pipelines, and dams related to land reclamation and irrigation.
- Heat supply services.
(Law on Natural Monopolies No. 590-IQ dated 15 December 1998.)
- What is the authority responsible for enforcing customs laws and regulations?
The State Customs Committee of Azerbaijan is responsible for the implementation of customs laws and regulations.
The State Customs Committee can conduct:
- Search operations.
- Investigations and preliminary investigations of customs-related offences.
- Administrative proceedings against administrative offences (it can also refer offenders to the courts).
(Decree of the President of the Republic of Azerbaijan No. 646 dated 4 June 2012 on approval of the Regulations on the State Customs Committee of the Republic of Azerbaijan and the Structure of the Committee.)
The State Customs Committee can use physical force and special means (including technical means) in cases and in the manner prescribed by the Customs Code.
- How can customs decisions be challenged?
Interested parties can challenge decisions, actions, and inactions of the customs authorities and their officials by bringing:
- An administrative complaint before the head of the competent customs authority.
- An administrative appeal before the courts.
Administrative complaints are governed by the Law on Administrative Proceedings No. 1036-IIQ dated 21 October 2005. Unless otherwise provided by law, an administrative complaint must be considered, and a decision must be issued, within 15 days of filing. If additional documents and materials are required for investigation of the complaint, this period can be extended by 15 days. The authority reviewing te complaint must issue its decision in writing. The complainant must be informed of the decision. If the decision is unfavourable to the applicant, the reasons for the decision must be stated in writing, and the person must be informed of their right to appeal the decision to a higher customs authority or court. If a decision is not issued within the applicable period or the complainant disagrees with the decision, they can appeal to the courts.
Administrative appeals against decisions of customs authorities are governed by the Code of Administrative Procedure.
Decisions of the customs authorities must be revoked if all the following apply:
- The decision is based on inaccurate or incomplete information.
- The person who provided the information knew or should have known that the information was inaccurate or incomplete.
- If the information provided had been correct and complete, the decision would have been different.
Additionally, a person can apply to the customs authorities in writing to determine in advance the classification, customs value, country of origin, and customs payments related to specific goods and operations. The decision of the customs authorities will be binding on the applicant. However, a decision must be revoked if subsequent changes to customs legislation contradict the decision.
Import Duties, Tariffs and Rates
- Where can information be found about import tariffs and other customs charges?
General Tariffs and Rates
The main regulations governing customs import tariffs are the:
Certain imported goods are exempt from customs duties, including:
- Certain goods imported by representations of foreign states and their employees, as well as other non-residents.
- Goods to be transferred to state ownership in cases established by law.
- Food products and means of transportation, as well as personal equipment, spare parts, and personal items intended for traveling personnel, imported as aid and distributed as such in zones of natural disaster, as well as free textbooks for schools, preschools, and medical institutions.
- Goods imported by states or international organisations for gratuitous assistance and charity, including technical assistance, cash, and other material assistance received as a grant under a grant agreement or decision.
- Goods intended for export to third countries and passing through the customs territory under the special customs transit procedure.
- Goods imported by individuals which are not intended for production or commercial purposes.
- National cultural treasures.
- Sports equipment and goods imported by the relevant executive authority for the training of national sports teams.
- Personal and household items, as well as items necessary for the employment activity of foreign migrant workers in Azerbaijan.
- Certain goods imported into, produced or processed in, or exported from special economic zones.
- Goods exempted or partially exempted from customs duties under the Customs Code.
- Imports of machinery, technological equipment, and plants by legal entities and individual entrepreneurs that benefit from an investment promotion incentive (for seven years from grant of the incentive).
- Goods imported for the construction of infrastructure, production areas, and scientific-research and experimental design works in industrial or technology parks established by decisions of the Ministry of Economy, Ministry of Transport, Communications and High Technologies, or the President of the Azerbaijan Republic.
- Imports of machinery, technological equipment, and facilities by the management organisation or operator of technology parks based on the approval document of the relevant executive authority.
- Imports of machinery, technological equipment, and plants by legal entities and individuals engaged in entrepreneurial activities who are residents of industrial and technological parks, on the basis of a confirming document from the relevant executive authority within seven years from the date of registration of the resident in the industrial or technological park.
- Import of all types of goods into an industrial park established by decision of the Ministry of Economy, based on approval by the industrial park executive authority for the purposes of activities defined by that authority (for a period of up to five years).
(Article 20, Law on Customs Tariffs.)
Azerbaijan applies preferential tariffs to certain countries under free trade agreements. For example:
- Under the GUAM Agreement, the parties have committed to eliminate customs duties, equivalent taxes and fees, and quantitative restrictions on trade.
- Under the Preferential Trade Agreement between Azerbaijan and Turkey, the parties have agreed to reduce or abolish tariffs on goods specified in Annexes 1-A and 1-B, and to eliminate para-tariffs and non-tariff barriers.
Additionally, when local production needs cannot be met, the relevant executive authority can decide to apply tariff preferences for a specific period to imports of production raw materials and equipment to ensure the development of a specific industry.
Non-Tariff Barriers to Imports
- Are there non-tariff barriers to imports into your jurisdiction?
Imports of the following goods require a licence or permit from the competent supervisory authority:
- Plant protection products and agrochemicals.
- Endangered species of wild fauna and flora.
- Psychotropic substances included in Schedules 1 and 2 to the Convention on Psychotropic Substances 1971.
(Law No. 176-VQ dated 15 March 2016 on Licences and Permits.)
Precursors requiring a licence for import, export, transit and production in Azerbaijan are listed in Law No. 960-IIQ dated 28 June 2005 on Approval of the Lists of Drugs, Psychotropic Substances which Circulation is Forbidden, Restricted and Controlled in the territory of the Azerbaijan Republic, and Precursors Requiring a Licence (special permission) for Import, Export, Transit Transportation and Production in the Territory. This Law also contains a list of drugs that are subject to import prohibition or restrictions.
There are also special import bans or restrictions for certain goods, including:
- Goods withdrawn from civil circulation (for example, military equipment and human organs) (Law No. 564-IIQ dated 23 December 2003 on the list of items not allowed to be in civil circulation (withdrawn from civil circulation)).
- Goods requiring a special permit (for example, equipment for the manufacturing of military weapons and ammunition and remote-controlled unmanned aerial vehicles) (Law No. 565-IIQ dated 23 December 2003 on the list of items which may belong to certain parties of civil circulation and which circulation is allowed on the basis of special permission (with limited civil circulation)).Regulated ozone-depleting substances, as defined by the Montreal Protocol on Substances that Deplete the Ozone Layer 1987.
- Certain potent and toxic substances.
- What is the main legislation relating to trade remedies? What are the authorities responsible for investigating and deciding on trade remedies?
The main laws relating to trade remedies are the:
- Law No. 261-VQ dated 31 May 2016 on Anti-Dumping, Countervailing and Safeguard Measures (Anti-Dumping Law).
- Decree of the President of the Republic of Azerbaijan No. 261-VQ dated 31 May 2016 on application of the Law on Anti-Dumping, Countervailing and Safeguard Measures.
- Law on Customs Tariffs.
The Anti-Dumping Law regulates the application of anti-dumping, countervailing and safeguards measures against dumped, subsidised or increased imports that harm or threaten to cause harm to local production, with a view to protect the economic interests of Azerbaijan.
The Anti-Dumping Law covers the following matters:
- Definition of dumped imports and dumping margins.
- Calculation of production costs and profits related to such imports, including comparison of the export price and normal value.
- Subsidies and their calculation.
- Harm and risk of harm to domestic production.
- Initiation and conduct of trade remedies investigations.
- Conditions of application of anti-dumping, countervailing, and safeguard measures.
- Duration of relevant measures and their review.
- Appeals against the application of anti-dumping, countervailing, and safeguard measures.
Trade remedies can take the following forms:
- Anti-dumping duties.
- Price undertakings from exporters.
- Compensation duties.
- Undertakings from the competent authority of the subsidising state or exporter.
- Temporary and final special duties.
- Import quotas.
The investigating authority is the Anti-Monopoly and Advertising Legislation Control Department of the State Service for Anti-monopoly Policy and Consumer Protection (Anti-Monopoly Department). The Anti-Monopoly Department is also responsible for preparing reports to substantiate the decisions of the Cabinet of Ministers.
The Cabinet of Ministers is the decision-making body. It has the power to decide on the imposition of temporary and final measures, and on the extension and cancellation of these measures.
Investigations and Enforcement
- Does your jurisdiction apply a lesser duty rule and/or a public interest test in trade remedy investigations? Are there any other notable features of your jurisdiction’s trade remedy regime?
The Anti-Dumping Law does not specifically include a lesser duty rule or public interest test. However, the Anti-Dumping Law states that the assessment of the material impact of dumping on local manufacturers should include an analysis of the current and potential impact of dumping on employment, salaries, production growth, investment attraction, and so on.
- Is there a right of appeal against the authority’s decision? What is the applicable procedure?
Interested parties can bring an administrative or judicial appeal against the decisions of the Anti-Monopoly Department and Cabinet of Ministers (Anti-Dumping Law).
Decisions of the Anti-Monopoly Department can be appealed to Board of Appeal of the Ministry of Economy. If the appeal is unsuccessful, the decision can be appealed before the Board of Appeal of the Presidential Office.
Decisions of the Cabinet of Ministers can be appealed to the Head of the Cabinet. If the appeal is unsuccessful, the decision can be appealed before of the Board of Appeal of the Presidential Office.
If the administrative appeal is not successful, decisions of the administrative authorities can be appealed to the courts (courts of first instance, Court of Appeal, and then Supreme Court). The Constitutional Court of Azerbaijan can also hear individual claims in certain circumstances.
Sanctions and Export Controls
- What is the main legislation governing sanctions and export controls? What are the authorities responsible for enforcing sanctions and export controls?
The main regulations governing sanctions and export controls are the:
The State Customs Committee is the authority responsible for the enforcement of export controls (Regulations on the State Customs Committee, approved by Decree of the President of the Republic of Azerbaijan No. 646 dated 4 June 2012).
The President is responsible for imposing trade sanctions based on proposals from the Ministry of Economy.
Generally, domestic goods exported from Azerbaijan must be placed under the export customs procedure. This does not apply to the following goods:
- Goods placed under a special customs procedure for final use or processing abroad.
- Goods placed under a special customs procedure for domestic transit, or which are temporarily exported from Azerbaijan.
An exporter or the person acting on its behalf must submit a short export declaration to the State Customs Committee.
Domestic goods intended for re-import are placed under the temporary export procedure. These goods are fully or partially exempted from customs duties and taxes, and are not subject to trade policy measures.
- Are certain categories of goods subject to non-country-specific export controls?
The following goods require a special export permit from the relevant authority regardless of origin, owner, and time of production:
- Goods and technologies subject to export controls under international agreements to which Azerbaijan is a party.
- Military goods, including weapons of mass destruction and their means of delivery (transportation).
- Dual-use goods that can be used in the creation and manufacture of weapons of mass destruction, weapons, military equipment, and ammunition.
- Explosives and radioactive substances, radioactive devices, and ionising radiation sources and devices.
- Other goods as determined by the President of the Republic of Azerbaijan, including those that are subject to export controls for certain end-uses or users.
(Export Control Law.)
To obtain a special export permit, the exporter must submit the following documents to the relevant state body:
- Application for a special permit for the circulation of goods including:
- for legal entities: name, legal address, and type of activity; or
- for individuals: name, surname, information relating to their identity card (series, number, date of issue, and issuing authority), and type of activity.
- Tax registration document.
- Copy of any required licence.
- Opinion of the relevant executive authority, when required by law.
Additional requirements may be imposed by the Cabinet of Ministers.
- Are there specific restrictions on trade with certain jurisdictions, entities, or persons?
The Order of the Financial Market Supervisory Authority of the Republic of Azerbaijan No. 31 dated 13 July 2017 approved the “List of states (territories) possibly involved in the legalisation of criminally obtained funds or other property, financing of terrorism, supporting transnational organised crime, as well as armed separatism, extremism and recruitment, illegal circulation of narcotic drugs or psychotropic substances, and the disclosure of identification information which is not required during the conduct of financial transactions.”
This list includes the following countries:
- Côte d’Ivoire.
- The Democratic Republic of the Congo.
- Democratic People’s Republic of Korea (North Korea).
- Lao People’s Democratic Republic.
The list was prepared on the basis of the:
- List of states (territories) subject to UN sanctions, embargoes, or other related sanctions.
- List of states (territories) subject to a public declaration issued by the Financial Action Task Force (FATF) or equivalent regional body.
- List of states (territories) declared by the UN and the Council of Europe as supporting transnational organised crime, armed separatism, extremism and recruitment.
- List of states (territories) declared by the United Nations Office on Drugs and Crime as having a high risk of illicit trafficking in drugs or psychotropic substances.
- What are the consequences of non-compliance with sanctions and export controls?
Liability for violations of customs regulations is governed by Chapter 37 of the Code of Administrative Offences No. 96-VQ dated 29 December 2015. The following penalties apply:
- Non-compliance with customs clearance requirements and procedures:
- individuals: warning or fine from AZN20 to AZN50;
- legal entities: fine from AZN250 to AZN500; and
- officials: warning or fine from AZN75 to AZN150.
(Article 490, Code on Administrative Offences.)
- Obstruction to activities of export control bodies:
- individuals: fine from AZN100 to AZN150;
- legal entities and officials: fine from AZN350 to AZN500.
(Article 551, Code on Administrative Offences.)
- Failure to submit documents and information required for export control purposes:
- individuals: fine from AZN100 to AZN150;
- legal entities and officials: fine from AZN350 to AZN500.
There are no specific consequences for failure to comply with trade sanctions. The penalties for violations of customs regulations apply.
The Criminal Code approved by Law No. 787-IQ dated 30 December 1999 also imposes sanctions for violation of the export control regime. The export of goods subject to export controls (including works, services, and results of intellectual activity) to prohibited and restricted states and end users is punished by:
- Correctional works from one to two years.
- Restriction of liberty from two to five years.
- Imprisonment from two to five years.
(Article 224-2, Criminal Code.)
- Are businesses subject to specific compliance requirements? What practical steps should a business take to ensure compliance with trade sanctions and import/export requirements?
However, “monitoring entities” must have anti-money laundering compliance programmes. Monitoring entities include the following:
- Credit institutions.
- Insurers, reinsurers, and insurance intermediaries.
- Investment companies.
- Legal persons providing leasing services.
- Institutions and other organisations providing postal services that are engaged in transfers of money funds.
- Investment funds and their managers.
- Non-governmental organisations, branch or representative offices of foreign non-governmental organisations in Azerbaijan, and religious organisations the activities of which include receiving, collecting, delivering, or transferring funds.
- Persons who have a licence to conduct currency exchange activities.
Foreign Trade Barriers
- What is the procedure for local exporters to complain against foreign trade barriers contrary to the WTO or other trade agreements?
There is no specific procedure under domestic law.
Developments and Reform
- Are there impending developments or proposals for reform affecting international trade in goods and services?
To accelerate Azerbaijan’s accession to WTO membership, a Commission for the preparation of Azerbaijan’s accession to the WTO was established by Order of the Cabinet of Ministers No. 175 dated 22 August 2003.
Azerbaijan’s Working Party was established on 16 July 1997. The Working Party met for the fourteenth time in July 2017.
The articles on this blog are not, nor are they intended to be, legal advice. You should consult a lawyer for individual advice or assessment regarding your own situation. The article only reflects the views of the author.