Customs Tariff as the Legal Structure for Customs Duties on Imports

The customs tariff represents the legal structure of customs duties imposed on imported goods. Iraq had enacted Customs Tariff Law No. 22 of 2010, which constitutes the legislative framework for customs duty tariffs in Iraq and the legal basis upon which the processes of collecting “customs import duties” on imported goods are built.

Article (1) and the Legal Basis for Collection

Article (1/First) decided that collection is carried out according to the rates prescribed in the customs duty tariff schedules and the agricultural calendar (seasonal schedule) attached to the law.

Article (1/Second) confirmed that what is meant by these schedules is that technical arrangement which includes:

• Subheadings and their digital codes
• Sections and chapters
• Notes

This is in accordance with the World Harmonized System (HS) adopted by the World Customs Organization (WCO), in a manner that ensures uniformity of classification and reduces اختلافات التفسير (differences in interpretation) during application.

Article (1/Third) further strengthened the binding nature of these schedules by considering them an “integral part” of the law, which grants them direct legislative authority when imposing duties and resolving disputes related to classification and rates.

Flexibility of Amendment Powers and Temporary Measures

Article (2/First): Emergency Adjustment Authority

In return, Article (2/First) granted the Council of Ministers—based on a request from the Federal Minister of Finance—the authority to amend the customs duty in emergency cases imposed by economic or monetary necessities, and for the purpose of taking:

• Protective measures
• Measures of reciprocity (reciprocal treatment)

This reflects a legislative flexibility that allows rapid intervention to regulate the market, protect the national product, or manage imbalances in the trade balance.

Article (2/Second): Duties on Goods Not Listed in the Schedule

Extending from that, Article (2/Second) decided the imposition of a duty on goods not included in the tariff schedule at a rate not exceeding (20%) of their value, with the possibility of amending this rate for the same reasons.

Article (2/Third): Temporary Character of Increases

Article (2/Third) confirmed that an increase in the customs duty is considered a temporary measure that ends when its causes end, which restricts the amendment authority by the controls of purpose and necessity, and prevents exceptional measures from turning into permanent rules outside their proper context.

Previous Delays and Disruptions in Application

However, the application of this law witnessed postponement and suspension in previous periods for economic and political reasons, including:

• Differences in implementation between the Federal Government and the Kurdistan Region
• The security and economic conditions after 2014

As a result, low unified or symbolic duties continued for a long time on many goods, and most provisions of the law were not activated until recently.

With the Introduction of ASYCUDA: Accurate and Unified Implementation

With the introduction of the ASYCUDA system, it became possible to apply the legal customs tariff accurately and uniformly across all border outlets.

The system contains a database of all tariff items, including:

• Harmonized System (HS) codes
• The duty rates specified for each item according to the law

Cabinet Decision No. 957 of 2025 and the Removal of Previous Exceptions

Cabinet Decision No. 957 of 2025 led to the removal of previous exceptions, such as the flat-fee system on containers, which was determined by a fixed amount for:

• A 20-foot container (for example, 2 million Iraqi dinars)
• A 40-foot container (3 million Iraqi dinars)

This applied regardless of the contents of the container.

Although this simplified system provided a “predictable cost” for importers, in practice it contradicted the principle of tax justice and led to a major disparity in actual duties, where those who paid a flat fee on a container containing high-value goods benefited at the expense of the public treasury.

After the Amendment: Transition to Item-Based Duty Calculation

After the amendment, the transition was made to a system of individual calculation for each item within the shipment (“Item-Based Duty Calculation”). This means that each good in the consignment is subject to its specific duty as a percentage of its value, according to its own HS code.

Minimum and Higher Duty Rates

Duty rates start from 5% as a minimum and may rise to higher categories depending on:

• The type of good
• The extent of protection considerations
• Whether the good is considered luxury or has a local equivalent

For example:

• Essential goods and raw materials may have duties of 5% or 10%
• Luxury goods or goods with a local equivalent may reach 20% or 30%, as stipulated by the law

Practical Outcome: More Complex, but Fairer and Internationally Aligned

This new structure made the mechanism of collecting the tariff more complex, but it is more just and more aligned with international standards. Iraq has become applying a customs system similar to what most countries apply within the framework of the World Customs Organization.

ASYCUDA and the Government’s Ability to Update Tariff Schedules and Apply Additional Fees Automatically

The ASYCUDA system allows the government to update tariff schedules easily if Parliament enacts new amendments. It can also automatically incorporate additional charges (such as fees for protecting local production) issued under Law No. 11 of 2010 (Protection of Iraqi Products), as well as reductions (customs exemptions), without the need for manual, case-by-case discretion in each transaction.

Electronic and Advanced Calculation of the Dutiable Value

The calculation of the value subject to duties is carried out through an advanced electronic method. The system supports the recognized customs valuation methods, whether:

• By relying on the purchase invoice submitted by the importer, or
• By referring to a database of standard benchmark values (the estimated value from tariff books/schedules) in cases where the accuracy of invoices is doubted.

The final decision on selecting the valuation method remains with the customs authority, but the presence of reference values within the system reduces the opportunity to manipulate the declared value of goods.

Unified Tariff Implementation via ASYCUDA and Harmonizing Policy Between Baghdad and the Kurdistan Region

Applying the unified tariff through ASYCUDA is also considered an important step toward unifying customs policy between the federal government and the Kurdistan Region. The central government demanded that the same duty schedules approved in Baghdad be adopted at the Region’s northern border outlets, as a condition for connecting them to the ASYCUDA system.

In fact, 1 January 2026 was set as the final deadline for unifying the tariff and implementing ASYCUDA at the Region’s border outlets, under the threat of financial punitive measures.

Warnings of Financial Restrictions and Impact on Access to Official USD and Transfers

The Central Bank of Iraq and the Ministry of Finance warned that if the Region’s border outlets do not comply with the unified duties and the electronic system, those outlets will be blocked from the Central Bank’s financial platform. In practical terms, this means preventing traders using those outlets from:

• Accessing the US dollar at the official exchange rate
• Conducting commercial financial transfers

ASYCUDA as a Tool for Fees, Financial Oversight, and Preventing Circumvention of Banking Controls

This development highlighted the importance of ASYCUDA as a tool not only for regulating duties, but also for:

• Monitoring the movement of funds
• Preventing evasion of banking restrictions

This includes practices such as:

• Currency smuggling
• Financing imports through the parallel market rather than through official banking channels

Immediate Results of Applying the Legal Tariff Through ASYCUDA

Noticeable Increase in Customs Revenues

Official reports indicated an almost doubling of collected revenues after the system was applied and the full legal tariff was activated. The General Authority of Customs confirmed that implementing ASYCUDA since October 2023 contributed to raising revenues by 100% over two years, as a result of:

• Faster auditing procedures
• Reduced human intervention
• Limiting corruption

Customs revenues in 2025 exceeded IQD 2.2 trillion, a figure described as historically unprecedented.

Improved Compliance and Transparency

It became more difficult for importers—or for certain employees—to circumvent duties through:

• Misclassifying goods
• Concealing their true value

Each transaction is tracked electronically, and any attempt to bypass the system becomes visible to the oversight bodies connected to it. Analysts noted that tighter procedures and electronic monitoring pushed some of those who had been seeking US dollars for illegitimate purposes toward the parallel market, compensating for the reduced ability to manipulate official channels. This indicates that the system closed loopholes related to:

• Smuggling
• Forgery of documents that had previously been exploited

Reduced Average Customs Clearance Time (After the Initial Adaptation Phase)

In the long term, the electronic system is expected to reduce the time required to complete customs procedures because many steps have become automated and can be carried out in advance, such as entering information before the shipment arrives.

The Central Bank’s strategy indicated that one of the objectives of shifting to ASYCUDA is to shorten clearance periods and speed up the release of goods. At the current stage, although some delays have occurred due to staff and customs brokers adjusting to the new requirements, the average processing time is expected to improve gradually as experience increases and procedures stabilize.

Provision of Accurate and Real-Time Statistical Data

This helps decision-makers better understand:

• The trade balance
• Import patterns

This also has legal aspects, as the data can be used to design future policies such as:

• Setting duty policies
• Banning the import of certain goods based on reliable information rather than estimates.

Side Effects and Challenges in the Tariff Aspect

Shock to Some Traders Due to Higher Import Costs

Some traders experienced a sudden shock in import costs when moving abruptly from reduced or flat fees to the full legal duties. For example, the clearance cost for some goods increased by up to 15% or more.

A local official stated that commercial activity through the Trebil border crossing with Jordan fell to about 15% of what it had been before 1 January 2026, due to the increased duties and the implementation of the pre-declaration system. Many traders preferred to reroute their goods through the border outlets of the Kurdistan Region (which had delayed implementing the new tariff) to avoid higher duties.

Calls for Gradual Implementation Instead of Immediate Full Enforcement

This economic shock prompted analysts to call for a gradual implementation approach rather than applying all measures at once. Some argued that the process should have started by applying automation and pre-calculation to goods of higher value and impact, and then expanding gradually to include the remaining goods, instead of imposing ASYCUDA, pre-calculation, tax deposits, quality controls, and related measures simultaneously.

Experts also proposed the need to reconsider duty rates for certain materials—especially electronic and electrical devices—and not apply a single unified rate to them without taking into account:

• Their importance to consumers
• The possibility of local manufacturing in the future

Parliamentary Legal Debate Over Higher Duties and the Scope of Government Authority

From a legal perspective, a parliamentary debate emerged regarding the rise in duties, and some members of parliament attempted to pressure for cancelling Cabinet Decision No. 957 of 2025.

Based on our practical experience as one of Iraq’s major law firms, and as a result of our direct engagement with leading investment companies on files related to importation and customs and tax compliance, it is necessary to highlight a core legal point that is often misunderstood in public debate:

The customs tariff rates themselves are originally set by a legislative text issued by the legislative authority—specifically Customs Tariff Law No. (22) of 2010—and are not merely an administrative government decision.

Accordingly, what the government did in essence should not be characterized as “imposing new duties”, but rather as activating and enforcing existing rules under a valid and enforceable law, through executive tools (such as schedules, mechanisms, and instructions) to ensure collection in accordance with the prescribed classification.

As for amending duty rates or restructuring them entirely, that can legally occur only through new legislation issued by the Council of Representatives. Meanwhile, the role of the Council of Ministers—fundamentally—is limited to implementing the law and activating its regulatory tools within the limits of the legislative delegation.

Specialists emphasized this meaning, explaining that blaming the government for higher duties is not legally sound when the matter relates to applying an enforceable legislative text. If economic interest requires reducing burdens or redistributing them, the correct path is to direct the debate toward amending the law through the legislative authority, within proper constitutional and financial frameworks.

Another Key Challenge: Unifying Implementation Across All Border Outlets, Including the Kurdistan Region

Another challenge lies in unifying implementation across all border outlets, including those of the Kurdistan Region. Non-compliance by any outlet with the system or with the same duty rates creates market distortions and encourages:

• Smuggling
• Shifting trade routes

Therefore, this requires continuous coordination and reaffirming that all crossings are subject to the authority of the state in this regard. The recent steps to compel the Region by linking it to the federal financial system were decisive measures to ensure this outcome, but ongoing follow-up is required to prevent new loopholes from emerging.

Conclusion: ASYCUDA Reinforced the Rule of Law in the Customs Sphere

As a result, it can be said that ASYCUDA’s impact on the customs tariff in Iraq amounted to a reassertion of the rule of law in the customs domain. The system strengthened the fair and transparent application of the legally prescribed tariff and increased the contribution of customs to the public treasury, despite the accompanying transitional challenges that should be addressed through complementary policies, such as:

• Temporary support packages for adversely affected importers
• Amending certain duty rates if necessary

If your business needs support with customs compliance, tariff classification, or ASYCUDA-related disputes, contact Osama Tuma for Legal Services and Advisory, a trusted law firm in Iraq, for tailored legal guidance.