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Details of Monitoring of Russia-Georgia Trade Released

By Ernest Petrosyan
Monday, November 21
After years of fruitless negotiations, several repeated blocks of Russia’s WTO entry since 2008, and recent intense international pressure, Russia and Georgia have finally agreed on the WTO issue, thanks to a Swiss compromise proposal. Hence the agreement was signed by Russia, Georgia, and the entire international community, the EU in particular will have breathed a sigh of relief, as can be seen by the positive statements of various high level officials.

The sides came to the agreement and each side is satisfied with the outcome of these tough negotiations. However, details of the agreement remained unclear. Below the general gist of the document is given.

The Russia-Georgia WTO agreement envisages some sophisticated systems for cargo tracking and audit as part of international monitoring of trade, which will be implemented by a neutral - supposedly Swiss - private company, which will be hired by Georgia and Russia and which will be accountable to the Swiss side.

The proposal, brokered by Swiss mediators, includes an agreement between Georgian and Russian governments “on the basic principles for a mechanism of customs administration and monitoring of trade in goods”; the document also includes “Terms of reference for the activity of the neutral private company” as defined by the Swiss mediators and a memorandum of understanding in which Switzerland confirms “to serve as a neutral third party."

According to the agreement, it sets three trade corridors. One crossing point is in Georgia's breakaway region of Abkhazia, another one into so-called South Ossetia [Tskhinvali region] and the third on undisputed segment of the Georgia-Russia border. International officers are not yet selected, but according to the agreement, they will be monitoring trade at both ends of each corridor.

As the agreement reads, the Swiss side will draw up a list of private companies “with sufficient international standing and expertise” and consult the list with Russia and Georgia. “On the basis of the results of this consultation Switzerland will select a neutral private company,” the agreement says.

The document says that both sides will separately contract a selected company for the work it will have to perform in the respective countries and Switzerland will act as “a witness” in each case. The company's activity will be financed by Georgia and Russia equivalent to the costs of the work performed by the company in the respective countries. Installments will be paid by Georgia and Russia on a yearly basis into this fund.

The company will not be eligible to hire either Russian or Georgian citizens “for the main tasks of the implementation of this agreement, in particular onsite operations,” according to the terms of reference for the activity of the neutral private company as defined by the Swiss mediators.

As for trade corridors, they are defined by their geographic coordinates and there is no mentioning of any name in the agreement in an attempt to keep a status-neutral approach. All the grid points of each trade corridor are defined according to the Universal Transverse Mercator (UTM) coordinate system. In this system a crossing point is referred to by the UTM code, for example UTM 37T 576170 E / 4817809 N. The three corridors are as follows.

Trade Corridor One into Abkhazia runs through a narrow strip along the breakaway region’s shoreline, it starts from an area close to Adler (which is within Corridor 1), located in Russia's Krasnodarski Krai, near Sochi. The area is less than twenty kilometers away from the Abkhaz section of the Georgian-Russian border.

Trade Corridor Two towards South Ossetia is a zigzagged strip running through the mountain road, known as the Transcaucasian Highway or Transkam, linking Russia’s North Ossetia with breakaway South Ossetia via the Roki Tunnel.

Trade Corridor Three is located on the Zemo Larsi-Kazbegi border crossing point on the undisputed section of Georgia-Russia border, outside the breakaway regions.

Regarding the mechanism of customs administration and monitoring of trade, this consists of two components – Electronic Data Exchange System (EDES) and International Monitoring System (IMS).

EDES will serve as an electronic exchange platform through which Russian and Georgian customs services will have to share information with the private company on all customs and trade transactions. EDES will also incorporate advanced cargo information - a component that will be a web-based portal designed to ensure the advance submission of trade data, ahead of cargo’s arrival at a terminal, to a centralized database, accessible to the private company. This component is designed to allow the private company to carry out risk management prior to the entry of cargo into trade corridors.

The sides [Georgia and Russia] will have to provide the private company with a standard set of data on all goods that enter or exit the trade corridors, among them detailed information about the cargo, the name and address of a consignee, country of export, country of origin and final destination of cargo, invoices, information on means of transport crossing the border. This information in addition will also be sent on monthly basis by Georgia and Russia to the WTO’s Integrated Data Base, which will also be audited by the private company

As for the International Monitoring System, this is “electronic seals on all cargo entering trade corridors at the terminals” and GPS/GPRS monitoring system for tracking the movement of cargo after its entry into the trade corridors.

It will be up to Georgia and Russia, “to ensure that electronic seals are applied” and GPS/GPRS-operated cargo tracking system is used for each trade cargo entering the trade corridors, according to the agreement

The agreement further states that the sides also assume liability to send “all information related to trade that enters or exits the trade corridors, including information obtained through electronic seals and GPS” to a private company.

“Based on this information, the neutral private company will perform risk management and audit the data,” the agreement says, adding that the company has to treat received data “in a strictly confidential manner."

According to the agreement, both sides will have to invite Swiss representatives on a regular basis “to make on-site visits” at their respective terminals in order to discuss lessons learned and best practices based on recommendations of the neutral private company.

There is some lack of clarity concerning the arrival of goods into Abkhazia by sea. The breakaway region has the capacity to accept cargo ships at a number of ports along the Black Sea coast but it is not clear how this will be monitored, if at all. There is a similar lack of information concerning cargo arriving by air into Georgian territory from Russia.

The document will come into force upon Russia’s accession to the WTO in the middle of December, and will be reviewed triennially and remains open for amendments by mutual consent between Georgia and Russia.