Collateral damage: Car importers in Armenia say Customs Union membership will ruin their business

Individual car importers in Armenia are concerned over the prospect of becoming unemployed after the country joins the Customs Union. Accession to the Russian-led trade block, among other things, will also mean higher customs duties for cars of non-Russian make, which will put thousands of second-hand car dealers in Armenia out of business.

Armenia’s authorities expect to finalize membership in the Customs Union of Russia, Belarus and Kazakhstan in autumn, and beginning January 2015 they want to join the Eurasian Economic Union. In the meantime, Armenia’s legislation is being harmonized with that of the Customs Union member countries, which implies an essential rise in customs duties for imports from non-Customs Union member states. Armenia mainly imports second-hand cars of foreign make from Georgia, which, unlike Armenia, has embarked on the path of European integration and is expected to form a deep and comprehensive free trade area with the European Union soon.

Head of the Union of Car Importers Tigran Hovhannisyan says that because of Armenia’s accession to the Customs Union, prices of the second-hand cars that are imported from Georgia and are in demand in Armenia will increase about threefold, ruining the businesses of about 7,000 private entrepreneurs involved in this sphere, as most Armenians who can now afford to buy such cars will not be able to do that.

“Even now many people buy cars with installment plans. But what will happen when their prices go up?” Hovhannisyan told reporters on Wednesday. “If we are to join a union and lose our jobs, then we are against [the Customs Union].”

The union’s head said that among the cars that are in great demand in Armenia are mostly second-hand Opel, Mercedes, BMW cars that are 10-15 years old. Monthly about 1,000 cars are imported from Georgia.

As for the possibility of importing cars of Russian make and foreign cars assembled in Russia without paying customs duties, members of the Union of Car Importers of Armenia are skeptical about it, saying that first Russian cars are not in great demand in Armenia, while those assembled in Russia yield to their foreign types by quality and, therefore, do not appear to be a good option.

Car importer Arayik Berakchyan says that importing cars from Russia will not be profitable either, because they will be more expensive and more difficult to bring than those from Georgia, as the journey will be longer and there are more obstacles involved due to crossing two borders. It is not yet known how Georgia is going to tax the goods imported from Customs Union member countries.

Armenia’s authorities say they are negotiating with the Customs Union for customs duty rates for about 850 commodities to remain at their current level, however, it is not known whether there are cars among these commodities.

The Union of Car Importers has turned to the Armenian government, asking it to get an exception for them in the current negotiations with the Customs Union. The matter is included in the negotiation package. According to the union’s head, they would like to have at least five years of time before the new regulations are enforced.

“Perhaps after that it will be better. Poverty in the country will be reduced. All we want is time, as otherwise we will be ruined,” Hovhannisyan said.

Individual car importers also note that high customs duties will not affect large car dealerships in Armenia, which are official representatives of different firms and sell new cars imported directly from manufacturers. And after Armenia’s joining the Customs Union they will also be able to import cars of foreign make assembled in Russia.