Kazakhstan’s Accession To The WTO: What Has Changed In Local Content Requirements?

The accession of Kazakhstan to the WTO led to the changes in Kazakhstan laws and regulations. In this review, we would like to focus on local content in goods, works and services.

The accession of the Republic of Kazakhstan (‘RK’) to the World Trade Organization (‘WTO’) on 27 July 2015 led to the introduction of Law No. 365-V dated 27 October 2015, “On Amendments to Some Legal Acts of the Republic of Kazakhstan in connection with the Accession to the World Trade Organization”.

The Law amends 11 legal acts. In this review, we would like to draw your attention to the changes in local content requirements in goods, works and services.

As subsoil use is one of the main economic activities in the RK, matters related to local content in goods, works, and services (‘GWS’) in the sphere of subsoil use have been highlighted when discussing the terms of the RK’s accession to the WTO.

As a result, significant amendments to the local content in GWS and support of Kazakhstan manufacturers were enacted by the Law of the RK ‘On Subsoil and Subsoil Use’ dated 24 June 2010.

MAIN CHANGES

•\tThe notice of the tender or auction should contain requirements for a minimum amount of local content in works and services, which should not exceed 50%.

•\tThe contracts concluded before 1 January 2015 must be modified by removing obligations on local content in goods when amending the duration term of the contract, or such requirements will become invalid from 1 January 2021.

•\tRequirement on existence of obligation for the use of equipment, materials, and finished goods manufactured in the RK in concluded subsoil use contracts is excluded.

•\tObligations of the subsoil user for the use of equipment, materials, and finished goods manufactured in the RK in contracts concluded before 1 January 2015 are valid until the expiration of the contract (in case of amendments to the duration term of the contract, this requirement can be excluded) or before 1 January 2021, whichever event occurs first.

•\tIn employing managers and professionals under intra-group secondment arrangements, the number of citizens of the RK should be at least 50%, the number of managers and specialists employed under intra-group secondment arrangements should be no more than 25%, and from 1 January 2022, no more than 50% of the total number of employees in each category of workers.

•\tThe subsoil user who has concluded a subsoil use contract before 1 January 2015 and his contractors employed during the subsoil use operations are required to purchase goods from Kazakhstan manufacturers, provided they meet the requirements of the project documents and the legislation on technical regulations; this requirement is valid until 1 January 2021 or before the expiration of the contract, whichever event occurs first.

•\tFor contracts concluded before 1 January 2015, at purchase of goods the organizer of the tender conditionally reduces the price of the competitive bids of participants when determining the winner (by 20% for Kazakhstan manufacturers of goods); this requirement is valid until 1 January 2021 or until the expiration of the contract, whichever event occurs first.

PLEASE NOTE:

In the context of the changes above we would like to draw your attention to the following:

•\tKazakhstan manufacturers mean individual entrepreneurs and/or legal entities established in accordance with the laws of the RK and located in the RK, where RK citizens amount to no less than 95% of the total number of employees;

•\tDifference in regulation with respect to goods and works/services (specific terms and conditions);

•\tExclusion of requirement on local content in goods does not imply that this obligation cannot be set for a subsoil user, if the parties mutually agree on such;

•\tRequirement on application of conditionally reduced price to Kazakhstan manufacturers is set only for goods.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.