2. Statistics and Development Trends 678.1 Import, million USD 300 20002003 1269.4 20002003 840 Railway cargo transportation is increased by 5.3 % against 2002 and made up 2125.5 thous. tones Export, million USD Railway cargo turnover is raised by 17.1% against 2002 and totaled 529.2 million tones/km 17 % growth in cargo turnover in 2003 –the highest indicator among CIS countries

3. SIMPLE Transit Customs Declaration (TCD) /3copies Exit Customs Point Verification of data If Yes: Export If No: Transit Banned Time of Transit Shipment (10 days) Transit Procedures in Armenia Simple Change By Transport Mode Complicated Armenia permits unimpeded and tax free transit of goods

4. Transit Procedures in Armenia TRANSIT Complicated Shipment Manifest (Customs sequrity) Intermediary Customs House Simple Transit Shipment Declaration for Cargo subject to transit (3 copies) By Changing of Transport Mode Entry into free Warehouse RE-export Entry into Free Customs Re-export For customs convoy of goods via the territory of the Republic of Armenia the Customs Fee is collected at 10,000 drams per 100 km. In the event that the vehicle of transit shipment and customs safeguard is broken, the customs convoy of goods is compulsory, while in the other cases it is performed at the forwarder's request in writing

5. Transit Achievments TRACECA Common Legal Basis for Transit Transportation Modern technical standards for road vehicles and operations Transit Fees and Tariffs Road transit fees, commercial analysis, cost accounting methodology Harmonization of Border Crossing Procedures Model documents, training, Institute of Customs Brokers Legal: Transit shipment of goods and means of transportation via the RA is regulated by Articles 27, 28 of the RA Customs Code and by the RA Government Decree N 887, which are in full conformity with Article V of the GATT 1994 on Freedom of Transit Institutional: The RA joined TIR International Convention in September 1993; Full Membership of European Conference of Transport Ministers (April 2003) Infrastructure: Construction of Kajaran Tunnel; Opening of new transport terminal at the Iranian- Armenian border (v. Norduz) in 2004; construction of Bagratashen-Marneli road is under construction Development of PPP in transport sector: Establishment of Business Council chaired by Prime Minister, ArmPro Committee for TTF, Armenian International Road Carries Association (AIRCA)

6. Transit Bottlenecks via Armenia Problems Legal 12 Infrastructure 34 Finance 56 Capacity Building 78 2.Weak legal environment for Freight Forwarders 3.Shortage of tracks meeting international standards 4.Absence of modern information system 5. Lack of state budget funding to maintain and recover physical infrastructure 6. Poor record in traffic safety 7. Lack of management skills 8. Weak institutional capability in all levels of public administration 1. Armenia is not signatory to International Convention on Freight, Convention on trade transit of land locked countries, Convention on free transit status, etc.

7. Transit Bottlenecks via Georgia Not providing with MFN and National Treatment status to Armenia; filer of bilateral interstate auto-transport agreement for exemption of customs duties in Georgia within specified quotas Mistreatment of transportation means under the TIR carnet Mandatory announcement of data in Commercial invoice Application of two types of transit customs declarations Excessive paperwork for Phytosanitary and Veterinary control procedures for Armenian imports takes about 2-3 days with extra payments Special permission for transit of double-purpose goods Special permission for excise goods Various approaches in identification of excise goods across Georgia Unclear approach in identification of overloaded tracks, which lead to additional payments totaled $ 250-300 Numerous checking points, extensive delays while customs procedures, Mandatory Convoy Service and Georgian Insurance, unofficial payments Freight-forwarding companies pay CCD fees and port charges in USD instead of lari. Backlog in maintenance, absence of modern information system PROBLEMS LEGAL PROCEDURS INFRASTRUCTURE  Georgian Interstate Road Status  Bagratashen-Marneli 30- km poor road

8. Transport Problems  Unresolved political and border disputes  Weak local and regional legal framework for transport sector along with weak execution of existing Laws and regulations  A severe shortage of funds to maintain and improve infrastructure, especially technical re-equipment of Railway  Very high logistics cost ( the highest in the region and in average twice higher than in the rest of the world)  Underdeveloped Multimodal transport, due to the lack of economy of scale, imperfect legal environment, absence of logistics centers, complicated border crossing procedures  Non trade barriers

9. Transport Development Policy The market economy dictates new directions toward development of comprehensive Transport policy: To set up legal environment (currently new transport Law package is under consideration in the Government ) To further develop transport infrastructure (Construction of railway line Vanadzor-Fioletovo (21 km) Capacity Buliding in Transport sector INFRASTRUCTURE & FINANCE CAPACITY BUILDING LEGAL

10. From National Development to Regional Integration  Establishment of the necessary political will as a foundation stone upon which all other factors have to rest Perfection of transport and trade legal framework across region Construction and upgrading of roads and railway lines and installation of related combined transportation Harmonization of Customs Procedures across borders Improvement in coordination of international organizations (ECMT, UN ECE, UC, WB, EBRD, and others) to maximize synergy and minimize overlapping activities in the region Human capital development, constant coordination of educational programs in all levels across region  Conclusion: We have to work toward evaluation of mutual benefits and come up with solutions targeted at further transport integration by enlarging our scope of work considering harmonized customs procedures within the unified legal environment along with growing demand for combined shipment, multimodal transport and international logistics.