Armenia’s automobile boom and the car dealers who brought thousands of old cars into the country

Armenia is experiencing a real automobile boom: from the beginning of 2019 to November, 140,000 cars were brought into the country.

The fact is that since 2020, the amount for “customs clearance” of cars will increase significantly. Moreover, the changes will affect not only car dealers, but also individuals.

Fees will increase especially for old cars, which are now being bought at a low price and imported into the country in a very large amount in order to repair and make money on it.

Auto dealers are now protesting against the need to clear customs in the second city of Gyumri, where they need to transport old cars, often without wheels, spend money on tow trucks and stand in queues.

All the details about what is happening now in the Armenian car world and why.

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The Eurasian Union and the consequences of leveling customs fees

Armenia has become a kind of “graveyard” for old cars, since the rules of the Eurasian Economic Union, which has been operating in other member countries of the organization for 5 years, will come into force in 2020.

As a result, the customs duties of 800 goods imported to Armenia, including automobiles, will increase significantly: this concerns goods and cars that will be imported into Armenia from  non-EAEU countries.

The Eurasian Economic Union is an international organization for economic integration, which operates under the auspices of Russia and includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

The organization provides its members with freedom of movement of labor, goods, services and capital.

Since 2015, Armenia joined the EAEU and automatically became part of the Customs Union of this organization.

In the same 2015, it was decided to level customs duties in all countries of the Eurasian Economic Union. The ultimate goal of this process is the formation of a single market.

The increase in duties in Armenia was postponed, that is, exceptions were made for some goods. It was assumed that by 2020 the Armenian authorities will adapt the country’s economy to changes.

But now, with the entry into force of the amendments for the import into Armenia of goods not from the EAEU, high customs duties will have to be paid at the border. Thus, goods from the EAEU will have a competitive advantage.

What are automobile dealers protesting against?

As a result, from 2015 to 2020, the customs duty on cars in Armenia remained at the level of 10%, regardless of the age and volume of the engine. But by the beginning of next year there is very little time left, which has caused the rush.

In addition, the country has introduced changes to the process of “customs clearance” itself.

In 2019, it was decided to build a new customs point in Gyumri.

This decision was not taken to by ordinary motorists and Armenian car dealers. Many consider the initiative of the authorities pointless, and the funding allocated for the construction of a new customs point a waste of money.

On November 11, car dealers staged a protest and blocked the road near the customs point on the outskirts of the capital.

Motorists explain their protest by the fact that getting to Gyumri is quite problematic. Car dealers do not want to travel to Gyumri or Meghri for customs clearance of cars, as this increases their costs and takes away their extra time.

“Most imported cars cannot move, or they are wrecked. We have to deliver them to Gyumri by a tow truck, stand in line for days to complete customs clearance, and then deliver a tow truck back to Yerevan,” one of the protesters said.

The protesters explained their dissatisfaction with the fact that at the customs point in Gyumri there are not even basic facilities. In addition, it is difficult to get here, since the roads are in poor condition, and most cars reach importers without wheels at all.

On the windows of automobiles there were posters with inscriptions: “We don’t want to go to Gyumri!”

According to the protesters, 320-330 cars stand in line at the customs in Gyumri every day. Due to the slow customs clearance procedure, people are forced to abandon their other affairs.

“When new customs buildings are ready and work will be organized in shifts, such queues will not be formed. However, this decision was made, although the corresponding conditions were not created. The building and roads should have been ready by this time, but nothing is ready yet. And when the day came for the implementation of the decision, we were simply sent to Gyumri,” said one of the car dealers indignantly.

Timing for the construction of customs in Gyumri

The idea that the automobile customs checkpoint should be moved to Gyumri was launched by the Prime Minister of Armenia in April. On August 1, the Armenian government decided to transfer the point of customs clearance of cars from Noragavit, that is, from the outskirts of Yerevan, to the second largest city of Armenia Gyumri.

The authorities explained their decision by activating economic life in the northern capital of the country.

By the way, before that, Chairman of the State Revenue Committee David Ananyan promised that the construction work at the customs checkpoint would be completed on October 11. But already on October 16, in an interview with reporters, he admitted that he had set the deadlines himself, without taking into account the volume of construction work.

Ananyan promised that customs in Gyumri will be put into operation in November, which happened, despite all the shortcomings.

Exploiting the queues for capital gain

On November 9, Armenian media reports that the residents of Gyumri had come up with a way to make money on the lines to the automobile customs.

They take up positions in the lines at customs, and then sell these places for 20,000 drams (about $40) – at the beginning of the line, and for 10,000 (about $20) – in the middle.

This situation arose due to the fact that owners of cars for customs clearance have to spend several days in Gyumri. And since hotels often do not have free places, people are forced to spend the night right in their cars.

True, information has already appeared that the city authorities have already begun to identify those citizens who have decided to earn money in such a situation.

Customs duties will not increase immediately

Initially, it was assumed that customs duties on cars would increase from January 1, 2020.

However, on October 15, it became known that in January car dealers will still be able to import cars at December’s prices.

The colonel of the customs service, deputy chairman of the State Revenue Committee Shushanik Nersisyan explained this by the fact that they were able to “circumvent” the law.

“In the law, we found a loophole that can dispel the concern of those people who import cars into Armenia and are afraid that with late delivery the cars may not be in time with clearance until December 31. I assure almost 100 percent that we will be able to give citizens the opportunity to arrange these cars in January at the rates applicable in December,” she explained.

Some statistics

National Assembly deputy Michael Melkumyan presented statistics on car imports in Armenia on November 12:

• 34,000 cars were imported in 2017,

• in 2018: 64,000,

• in 2019: as of November 1, 140,000

It is expected that by the end of the year the figure will reach 180-185 thousand.

“At the moment, the state budget has received about $150 million in customs duties and VAT, and will receive $250 million by the end of the year,” Melkumyan said.