Global Trade Alert

On 11 June 2010, the Deputy Prime Minister of the Republic of Kazakhstan issued Order No. 113. It contains rules for industrial assembly, applicable with respect to resident juridical persons.
The mandatory conditions of the agreement for industrial assembly of motor vehicles classified under code 8703 that the juridical persons must comply include:

• assets worth at least 2 billion Tenge as of the signature date of the agreement,
• production capacity not less than 25 thousand motor vehicles per year or not less than 50 thousand motor vehicles for not more than 2 legal entities who have signed the relevant multilateral agreements in the period not exceeding 84 months since the signing of the agreement,
• launch in industrial assembly regime of at least one model of motor vehicles classified under code 8703,
• import of auto components for industrial assembly from countries outside the CIS Customs Union to be used for industrial assembly of motor vehicles classified under codes 8701 - 8705. Their amount must not to be more than 70 % of the total cost of the components used for the production, including the cost of the vehicle body, classified under commodity position 8707.

If juridical persons cooperate in a multilateral agreement for industrial assembly for vehicles classified under code 8703, prior to its expiry they must ensure a local content level of at least 50%.
A legal entity that has signed a contract for industrial assembly of motor vehicles classified under codes 8701, 8702, 8704, 8705 must accumulate within 6 months from the date of signing of the agreement assets at the amount of at least 0.5 billion tenge, as well as to ensure that:

• the production capacity for vehicles under classification codes 8701, 8704, 8705 is not less than 10 000 motor vehicles per year in two-shift mode of operation, and
• for classification code 8702 -- not less than 1200 motor vehicles per year;
• prior to expiry of the contract for industrial assembly, the juridical person must ensure a local content level of at least 50%.

The legal document defines industrial assembly of motor vehicles as asystem of serial production on the basis of technological processes,which incorporates the following technological operations:

• welding, painting and vehicle body assembly;
• installation of cabin equipment;
• installation of a power unit, a steering, an exhaust system;
• installation of electrical equipment, suspension elements;
• installation of exterior elements;
• conducting control tests of assembled motor vehicles.

 
Decision No. 130 of 27 November 2009 of the Commission of the Customs Union opened the possibility for the introduction of local content, and Kazakhstan took advantage of it, in its article 6:

'In case that the legislation of the Member States of the Customs Union contains a localisation requirement for the manufacturing of components in motor vehicle assembly regime for positions 8701-8705 '...', the use of components, produced in other Members States of the Customs Union, shall be recognised as a proper fulfilment of this 'localisation' rule'.