13-1078  JOB/ACC/31/Rev.2           27 February 2013 
	
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Working Party on the             O r i g i n a l :   E n g l i s h  
Accession of Kazakhstan  
 
 
WORKING PARTY ON THE ACCESSION OF 
KAZAKHSTAN TO THE WTO 
SUBMISSION BY THE REPUBLIC OF KAZAKHSTAN 
Revision 
 The following submission is being circulated to  Members of the Working Party, at the request 
of the Delegation of the Republic of Kazakhstan.  
 
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 JOB/ACC/31/Rev.2 
 
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- Trade-Related Investment Measures (TRIMs) 
1. The representative of Kazakhstan noted that Kazakhstan applied local content requirements, 
in the form of preferences for purchase of locally produced goods, with a view to diversifying the 
national economy. In accordance with Kazakhstan's legislation, local content requirements applied 
in procurement of subsurface users within the framework of investment contracts in the oil and 
gas and mining sectors; in the automotive sector  and in the procurement of the National Welfare 
Fund "Samruk-Kazyna" (referred to in the Chapter on State-owned and State-controlled enterprises). 
2. In the oil and gas and mining sectors, the requirement for local content was regulated by 
Law No. 291-IV "On Subsurface and its Use" of 24 June, 2010 (hereinafter:  Law No. 291-IV), 
which had replaced Law No. 2828 "On Subsurface and its Use" of 27 January 1996.  
Law No. 291-IV contained a requirement for subsurface users and their contractors to use in 
subsurface operations domestically produced goods provided that they met the requirements of 
project documentation and legislation of the Repub lic of Kazakhstan on technical regulation.   
3. In accordance with Article 77 of Law No. 291- IV, the purchase of goods for conducting 
subsurface operations could be carried out by one of the following methods:  (1) open tender; 
(2) price offers request; (3) from a single source; (4) through the electronic procurement system; 
or (5) through commodity exchanges.  Article 78 of Law No. 291-IV stipulated a local content 
requirement and established that, when identifyin g an open tender winner, the tender organizer 
had to conditionally reduce by 20% the price of goods produced in Kazakhstan. 
4. The procedure on the purchase of goods was specified in the Government Resolution 
No. 1139 "On Approval of Rules for Purchases of G oods, Works and Services in Performance of the 
Subsurface Use Operations" of 28 November 2007.  In a tender process, the winner of competitive 
bid was determined on the basis of the lowest price in accordance with Paragraph 62 Article 3 of 
this Resolution.  Preferences were granted to loca l producers of goods only when they fully met all 
the requirements of the bidding process and subm itted documents that confirmed the local origin 
of goods.  The representative of Kazakhstan clar ified that local content in goods was defined as a 
percentage value of domestic materials and inputs used in the value of finished goods produced on 
the territory of Kazakhstan
1.  The local origin of goods was verified with certificate "CT-KZ" issued 
by the Chamber of Commerce of Kazakhstan.  Tender procedures had to take place in Kazakhstan. 
Both national and foreign investors were equally entitled to participate in the bidding process.  
In her view, such provisions were non-discriminatory and introduced an opportunity for imported 
                                               
1  The goods of Kazakhstan's origin were determined according to the Rules on Determining the Country of 
Origin of Goods, Drafting and Issuing Expertise Acts on Origin of Goods and Issuing a Certificate of Origin of 
Goods adopted by the Resolution of the Governme nt of the Republic of Kazakhstan No. 1647 of 
22 October 2009.  
 JOB/ACC/31/Rev.2 
 
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  goods. For example, in 2011, the share of loca lly produced goods in the total value of goods 
procured by sub-surface users within the framew ork of investment contracts did not exceed 11%2. 
5. In response to a question on the changes introduced by Law No. 291-IV, the representative 
of Kazakhstan said that inter alia  Law No. 291-IV "On Subsurface and its Use" of 24 June 2010 
incorporated all the provisions relating to local content requirements contained in Law No. 2828 "On Subsurface and its Use" of 27 January 1996.  She further added that Law No. 291-IV "On 
Subsurface and its Use" of 24 June 2010 provided clar ification on the definitions of local content in 
goods, services and workforce.  Particularly, two new terms had been introduced:  (i) "register of 
goods, works and services used in subsurface operations and their producers", which was a state 
information system established to control and monitor the purchase of goods, works and services 
used in subsurface operations and their producers, and (ii) a uniform methodology for calculation 
of Kazakhstan content by organizations procuring goods, works and services, which was the 
procedure approved by the Government of Kazakhstan applicable to calculation of Kazakhstan 
content in the procurement of goods, works and services.  According to Article 76 of Law No. 291-
IV, a subsurface user was required to submit an annual procurement programme and report on 
goods, works and services purchased for implementation of the investment contract.  
6. The representative of Kazakhstan noted that amendments made to Law No. 291-IV in 
January 2012 introduced the requirement for re search and development (R&D) funding by a 
subsurface user with the purpose to develop knowledge-based industries producing high 
value-added goods and services. She further clarified that according to the amendments:  
(i) a subsurface user's annual funding of R&D would not be less than 1% of aggregate annual 
income within the contractual activity; and (ii) funding would be channelled to Kazakhstan's 
producers of goods and services.  
7. The representative of Kazakhstan further explained that, Kazakhstan's economy was 
dominated by the production of hydrocarbon and mineral resources, and the oil sector was the 
most attractive sector for both foreign and local investors.  Forecasts showed that the volume of 
foreign investments in oil production was continuously increasing, while other sectors of the 
economy remained underdeveloped.  Hence, her Government had introduced the local content 
requirement to encourage the use of domestically  produced goods in order to:  (i) ensure the 
rational restructuring of subsurface use; (ii) achieve sustainable economic development through 
economic diversification and reduction of the economy's high dependence on volatile world prices 
for exports of mineral resources; and (iii) create an environment conducive to development of 
processing industries and production of high va lue-added goods.  She emphasized the importance 
of the diversification programme for Kazakhstan's economy, and added that creating a favourable 
climate for development of processing industries was a priority for her Government. 
8. She added that during the period of economic adversity in the early 1990s, in order to 
attract foreign direct investments and to develop Kazakhstan's unexplored oil fields, her 
                                               
2 In 2011, the total procurement of goods made by sub-surface users was equal to 516.2 billion tenge, 
including goods of Kazakhstan's origin in  the amount of 56.6 billion tenge. JOB/ACC/31/Rev.2 
 
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  Government had signed long-term (up to 40 years) investment contracts with major multinational 
oil companies, on terms which granted VAT and cu stoms duty exemptions for imported goods used 
in oil operations.  Since the terms of signed contracts could not be changed retroactively 
(i.e., pursuant to a contract stability clause), the representative of Kazakhstan stated that the 
provisions of Law No. 291-IV were aimed at offsetting the discriminatory effects of those earlier investment contracts which created a disadvantage for domestically produced goods, which 
remained subject to the payment of VAT. 
9. Pursuant to Article 69 of Law No. 291-IV, contracts were concluded for a period determined 
in the project documentation for carrying out extraction works and contained provisions for the 
possibility to extend their term.  These contracts were required to contain commitments for 
subsurface users to use domestically produced goods provided that they were compliant with the 
requirements in the project documentation and legislation of Kazakhstan on technical regulations.  
Amendments to signed contracts were subject to negotiations between the authorised body and 
the subsurface user, and could be introduced on the basis of consensus between the parties. 
10. The representative of Kazakhstan noted that, local content provisions were established 
individually in each sub-surface use contract depe nding on the specifics of the goods required for 
its implementation.  Currently there were 565 contracts signed between the Government of 
Kazakhstan and sub-surface users:  203 of whic h on crude hydrocarbons and 362 in the mining 
sector.  Of 203 contracts on crude hydrocarbons, 94 would expire by 2020 and 109 in the period 
from 2021 to 2053.  Of 362 contracts in the mining sector, 144 would expire by 2020 and 218 in 
the period from 2021 to 2060.  She further added that, of 203 contracts on crude hydrocarbons, 
193 contained numerical local content commitments set in percentage and 10 contained textual 
local content commitments.  Of 362 contracts in the mining sector, 351 contained numerical 
commitments set in percentage and 11 contained textual local content commitments.  The typical 
textual commitment on local content in subsurface use contracts was as the following:  "To use equipment, materials and goods produced in the Re public of Kazakhstan provided that they meet 
the requirements of the project documentation and legislation of the Republic of Kazakhstan".  
Typical numerical commitment text on local content was as the following:  "Size of the local 
content under the contract each fiscal year shall no t be less than (...) % with respect to goods, not 
less than (...) % with respect to works and not less than (...) % with respect to services in 
conducting operations on subsoil". 
11. Regarding the automotive sector, the representative of Kazakhstan stated that the legal 
basis for preferential tariffs or tariff exemptio ns for imports of parts and components used for 
assembling motor vehicles and parts and components thereof under "industrial assembly" regime was established by the CU Common External Tari ff (CET) (as approved by the Decision of the 
Inter-State Council of EurAsEC No. 18 of 27 November 2009 and put into effect through the CU 
Commission Decision No. 130 of 27 November 2009) and in the relevant national legislation. 
12. In Kazakhstan, industrial assembly agreements were concluded in accordance with the 
"Rules on Concluding the Agreement on Industrial Assembly of Motor Vehicles" approved by Order JOB/ACC/31/Rev.2 
 
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  of the Deputy Prime Minister and Minister of  Industry and Trade" No. 113 of 11 June 2010 
(hereinafter: Order No. 113). According to these rules, industrial assembly of motor vehicles 
meant a system of serial production based on technological processes providing for project 
production capacity under two-shift operation of no less than 25,000 pieces per year and featuring 
the following technical operations: 
- welding, assembly and painting of the body; 
- installation of cabin equipment; 
- installation of a power train, steering mechanism, and exhaust system; 
- installation of electrical equipment, suspension components; 
- installation of exterior elements; and 
- conducting control tests of finished motor vehicles. 
13. Juridical persons that signed an agreement on industrial assembly qualified for preferential 
tariffs (from 0 to 5%) on the import of parts and components used in the assembly of automobiles 
under tariff lines of the CU Commo n External Tariff (CET) "for the industrial assembly of motor 
vehicles under headings 8701-8705, their components and assemblies" provided they met the 
following conditions: 
(1)  to have productive assets of at least 2 billion tenge as of the agreement signing date; and 
(2) to have an obligation in a period not exceeding 84 months from the signing date of the 
agreement: 
- to launch the industrial assembly of at least one model of the motor vehicles of CU HS 
heading 8703; 
- to import car parts originating from countries not party to the Customs Union under the 
tariff lines of the CU Common Ex ternal Tariff (CET)"For the Industrial Assembly of Motor 
Vehicles under Headings 8701-8705, their Components and Assemblies" in volume of no 
more than 70% of the total value of the auto-components used in the production, taking into account the cost of the body, bein g classified in CU HS heading 8707. 
14. The representative of Kazakhstan noted that in the automotive sector in accordance with 
Order No. 113, to date four companies had concluded agreements on industrial assembly with the 
Ministry of Industry and New Technologies. Th ese companies were:  "AgromashHolding" JSC, 
"SAUR" JSC, "SaryarkaAvtoProm" LLP and "AziaAvt o" JSC.  The contracts were signed in 2010 for 
a term of 8 years with the possibility of further extension.  In response to a Member's question, 
the representative of Kazakhstan clarified that Order No. 113 provided only for the assembly of 
automobiles under CU HS heading 8703.  These Rules did not envisage industrial assembly of 
other types of motor vehicles or agricultural machinery. 
15. Some Members considered that the requirement to use domestically produced products was 
inconsistent with the WTO TRIMs Agreement.  These Members added that this requirement also 
appeared to constitute prohibited export subsid ies under Article 3.1 of the WTO SCM Agreement. 
These Members asked Kazakhstan to explain how it  intended to bring existing legislation and 
existing contracts into conformity with WTO re quirements.  These Members sought a commitment 
from Kazakhstan that, from the date of WTO accession, it would not maintain measures that would 
be in conflict with the WTO TRIMs Agreement. JOB/ACC/31/Rev.2 
 
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  16. The representative of Kazakhstan emphasized that taking into account the importance of the 
application of the local content requirements for diversification of the economy in investment 
contracts concluded prior to Kazakhstan's accession to the WTO under the provisions of the Law 
No. 291-IV and Order No. 113, a transitional period was required to phase out these measures.  
17. [The representative of Kazakhstan confirmed that, from the date of the accession of 
Kazakhstan to the WTO, Kazakhstan would ensure that all laws, regulations and other measures 
applied in Kazakhstan that were related to issues covered by this section, whether adopted by 
Kazakhstan or the competent bodies of the CU, woul d be consistent with the provisions of the WTO 
Agreement, including the WTO Agreement on Trade-Related Investment Measures, except for 
measures applied under investment contracts concluded prior to [the date of accession of 
Kazakhstan to the WTO] under the provisions of Law No. 291-IV, and under the provisions of 
Order No. 113.  The representative of Kazakhstan also confirmed that from [the date of accession 
of Kazakhstan to the WTO], Kazakhstan would not conclude any new investment contracts with 
investors in any sector, or renew any existing in vestment contracts, that contained provisions 
inconsistent with the WTO Agreement, including the TRIMS Agreement.  The Working Party took 
note of these commitments.] 
18. [The representative of Kazakhstan confirmed that all WTO-inconsistent measures applied 
under investment contracts concluded prior to [the date of accession of Kazakhstan to the WTO] 
under the provisions of Law No. 291-IV would cease to be enforced [by xxxx] [after the expiration 
of the initial duration of the contracts or after expiration of the [10]-year transitional period 
starting from the date of accession to the WTO, whichever takes place sooner.]  She further 
confirmed that all WTO-inconsistent measures applied in accordance with investment contracts 
concluded prior to [the date of accession of Kazakhstan to the WTO] under the provisions of Order 
No. 113 would be eliminated by [1 July 2018].  [T he representative of Kazakhstan confirmed that 
with respect to measures applied pursuant to Order No. 113 and [Law No. 291-IV], Kazakhstan would engage in consultations with interested WTO Members no later than [1 July 2016] and [[X 
date], respectively], regarding WTO consistent measures that could be applied, and notify WTO 
Members of any measures planned to replace WTO-inconsistent measures at least six months prior 
to the adoption of any new measures.]  The Working Party took note of these commitments.] 
 
 
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