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Ordinance of the Cabinet of Ministers of the Republic of Azerbaijan On stimulation of export of certain activities in the Republic of Azerbaijan from July 26, 2006, # 185

In order to implement comprehensive measures to ensure the development of oil and gas areas, which are one of the main objectives of the oil strategy of the Republic of Azerbaijan, including work of existing infrastructure in its full capacity and creating favorable conditions for oil and gas operations being conducted in foreign countries with the active participation of this infrastructure, determining the prospects of employment for the specialists engaged in this area, creating attractive economic regimes for investment by foreign oil companies in the relevant production areas of the Republic of Azerbaijan, increasing the production of petroleum machinery and equipment of this kind, occupying the leading position by the Republic of Azerbaijan in the international export markets in this area, the Cabinet of Ministers has decided:

1. To approve the "Regulations for the provision of preferences on import transactions in oil and gas activities for the purposes of export" (attached).
2. To supplement the Decision of the Cabinet of Ministers of the Republic of Azerbaijan dated April 22, 1998, № 91, "On rates of customs duties for export-import transactions in the Republic of Azerbaijan" with subparagraph-4.11 of the following content:
"4.11. equipment and materials associated with oil and gas activities for the purpose of export (in case of submission to the customs authorities of the approved list of equipment and materials imported into the Republic of Azerbaijan by the State Oil Company of Azerbaijan Republic for oil and gas activities in order to export)."
3. To supplement the Decision of the Cabinet of Ministers of the Republic of Azerbaijan dated January 31, 2005, № 11, "On the list of goods exempted from VAT on importation into the territory of the Republic of Azerbaijan", with subparagraph 1.12 of the following content:
"1.12. equipment and materials associated with oil and gas activities in order to export (in case of submission to the customs authorities of the approved list of equipment and materials imported into the Republic of Azerbaijan by the State Oil Company of Azerbaijan Republic for the oil and gas activities in order to export").
4. To supplement paragraph 1 "The amount of customs charges for customs clearance", approved by the Cabinet of Ministers of the Republic of Azerbaijan on April 12, 2001, № 80, with the following paragraph:
"For the customs clearance of equipment and materials imported for the oil and gas activities in order to export, customs duties are levied on the amount provided by law, but not exceeding 275 (two hundred and seventy five thousand U.S. dollars).
5. The Ministry of Economic Development of the Republic of Azerbaijan, Ministry of Industry and Energy of the Republic of Azerbaijan, Ministry of Finance of the Republic of Azerbaijan, State Customs Committee of the Republic of Azerbaijan and State Oil Company of Azerbaijan Republic should solve within their competence issues related to the implementation of this Decision.
6. This Decision shall enter into force upon signature.

The Prime Minister of the Republic of Azerbaijan
A. Rasi-zade
Approved by the Cabinet of Ministers of the Republic of Azerbaijan on July 26, 2006 # 185
Regulations for the provision of preferences on import transactions in oil and gas activities for the purposes of export"

1. 1. These Regulations govern the provision of preferences to operations carried out outside the Republic of Azerbaijan for exploration of crude oil and natural gas, assessment, development, production, stabilization of production, stimulation, pressure feed, collection, storage, placement, loading, transportation, sale and (or) and the liquidation and import-export operations connected with any activity related to these operations (hereinafter - the oil and gas activities for the purposes of export), to ensure development of oil and gas industry in the Republic of Azerbaijan, including work of existing infrastructure in its full capacity, creating favorable conditions for oil and gas operations being conducted in foreign countries with the active participation of this infrastructure, determining the prospects of employment for the specialists engaged in this area after completion of oil and gas projects, creating attractive economic regimes for investment by foreign oil and gas companies in the relevant production areas, increasing the export potential of petroleum engineering and works and services for the production and commissioning of equipment of this kind.
2. These Regulations apply to legal persons having a contract signed with a foreign customer (hereinafter - the Contractor), legal persons and individuals, providing goods in connection with oil and gas activities in order to export under a related agreement (hereinafter - the Subcontractor). For purposes of these Regulations, a contract with a foreign customer means a contracting agreement, signed by persons engaged in oil and gas operations outside the Republic of Azerbaijan, and having legal effect, direct contract means a contract concluded between the Contractor and Subcontractor in connection with oil and gas activities in order to export, related contract implies a contract signed between the subcontractors in connection with oil and gas activities in order to export.
3. Contractors shall apply to the State Oil Company of Azerbaijan Republic with a request to receive benefits for oil and gas activities in order to export and register a list of equipment and materials to be imported into the Republic of Azerbaijan, specifying the amount per years (quarters) (hereinafter - the list of imports). The application should be accompanied by the following documents:
3.1. contract entered into with a foreign customer, and being an integral part of the list of imports in 3 (three) copies specifying the codes in accordance with the commodity classification of foreign economic activity; 3.2. signed contract on the potentials of enterprises of oil and gas industry of Azerbaijan Republic, including about the use of infrastructure;
3.3. letter of guarantee indicating the employment prospects for local experts.
4. To register the list of imports attached to the application filed by a Subcontractor, it is necessary to attach in addition to the documents referred to in paragraph 3 of these Regulations, a copy of the notarized direct or related contract, signed by the appropriate Contractor and Contractor's letter, addressed to the State Oil Company of Azerbaijan Republic, confirming Subcontractor’s participation in the oil and gas activity of the Contractor with the purpose of export.
5. Upon receipt of documents mentioned in paragraphs 3 and 4 of these regulations by the State Oil Company of Azerbaijan Republic, the compliance of these documents with the purposes of these Regulations is studied. If no shortcomings are identified in the submitted documents, the State Oil Company of Azerbaijan Republic, within 15 (fifteen) working days after receipt of the documents, shall endorse the same by making entries on every page of the list of imports, indicating the signature and title of the responsible official. During this period, the State Oil Company of Azerbaijan Republic has the right to obtain further information and references regarding the documents referred to in paragraphs 3 and 4 of these Regulations, from the contractor, subcontractor and other related businesses and organizations.
6. If the contractors or subcontractors fail to submit all the documents prescribed by these Regulations, or non-compliance of documents with the purposes of these Regulations is revealed, the State Oil Company of Azerbaijan Republic shall refuse to register the list of imports, and submit a refusal letter to the contractor or subcontractor stating the reasons. Simultaneously, a copy of the refusal letter, sent to the Subcontractor, shall also be forwarded to the Contractor under a contract made with a foreign customer.
In case of refusal to register the list of imports, the Contractor or Subcontractor has the right to appeal in the manner prescribed by law.
7. The State Oil Company of Azerbaijan Republic shall send within 10 days of one (1) copy of the list of imports after endorsement with the entries mentioned above to the State Customs Committee of Azerbaijan Republic with a cover letter for customs clearance. The list of imports, attached to the cover letter and signed by the governing body of the State Oil Company of Azerbaijan Republic, must state that specified equipment and materials relate to oil and gas activities with the purpose of export, and they are exempt from import duties and taxes. The State Customs Committee of Azerbaijan Republic upon receipt of these documents shall make necessary arrangements. The State Oil Company of Azerbaijan Republic shall send one of (2) the two remaining copies of the list of imports with endorsements along with a covering letter to the Contractor or Subcontractor, and retain the other one. When the State Oil Company of Azerbaijan Republic submits 1 (one) copy of the list of imports to the Subcontractor under a contract made with the foreign subcontractor, it shall also notify the appropriate contractor. Contractors and subcontractors after receiving the letter from the State Oil Company of Azerbaijan Republic on the registration of the list of imports have the right to appeal to the customs authorities with the request for customs clearance of equipment and materials registered in the list of import in accordance with these Regulations, and get an official answer.
8. Within 10 (ten) days after registration of the list of import a copy of this list shall be sent by the State Oil Company of Azerbaijan Republic with the appropriate cover letter to the Ministry of Fuel and Energy of the Republic of Azerbaijan, Ministry of Economic Development of the Republic of Azerbaijan, Ministry of Finance of the Republic of Azerbaijan and Ministry of Taxes of the Republic of Azerbaijan.
9. If addenda and amendments are made to the list of imports during the term of the contract, these addenda and amendments need to be registered in accordance with these Regulations.
10. In the event of a reorganization of contractors and subcontractors in accordance with the law, after the submission of relevant documents, the list of imports shall be registered in the State Oil Company of Azerbaijan Republic in accordance with these Regulations and reported to the relevant structures.