low flash
April 25, 2024
This LawFlash summarizes key points from the Kazakh government's recent amendments to the formula for calculating the share of a product's domestic value.
On April 9, the Ministry of Trade Integration of Kazakhstan issued Order No. 169-Нɚ (Order) on amending the rules for determining the country of origin of goods, the status of goods of the Eurasian Economic Union or foreign goods, the issuance of traded goods . Issuance of certificates of origin of goods and their cancellation, establishing the format of certificates for determining the country of origin of goods as approved by Ministerial Decree on Trade Integration No. 454-Нɚ dated July 13, 2021, and the following changes: will be introduced. formula. This order goes into effect on April 28, 2024.
According to the regulations, this formula serves as the basis for calculating the percentage of domestic value (local content) of goods manufactured in Kazakhstan. Local content requirements are generally adopted to promote national policies regarding import substitution and localization. Percentage of local content is one of the requirements for obtaining CT-KZ and sets a certain threshold of local content depending on the type or nature of the product. CT-KZ certification is important for Kazakh manufacturers. This provides a variety of competitive advantages in procurement, including exemptions from surrendering securities, higher upfront payments, and guaranteed prequalification.
The current formula before the changes take effect is:
where:
C Foreign matter This is the cost of foreign raw materials and products.
C Finished product This is the ex-factory (EXW) price for the finished product.
Importantly, when applying the above formula, the EXW price of the final product includes Value Added Tax (VAT, applicable only to VAT payers) and the producer's margin.
Subject to modification of the calculation formula based on the order, the EXW price of the finished product will be replaced by the cost of the product as follows:
where:
C Foreign matter This is the cost of foreign raw materials and products.
C.P. This is the manufacturing cost of the product. The manufacturing cost of the product does not include value added tax and margin.
The new calculation, based on the revised formula, effectively means that the local content of products produced in Kazakhstan can be significantly reduced, thereby making the products of Kazakh manufacturers CT- You will be ineligible for KZ certification.
Furthermore, although we have not analyzed the financial or economic rationale behind this modification of the formula, we have not analyzed the profit on sales of goods manufactured in Kazakhstan (including goods whose final processing takes place in Kazakhstan). We believe that this may affect the sales potential of our products. Such a product.
