Several issues related to transportation

Since its independence in 1991, the transportation to and from Armenia has been complicated. The primary reason for that is the transport blockade of Armenia by Azerbaijan and Turkey and the international sanctions imposed on Iran. All these factors led, on the one hand, to reduction of Armenian transportation volume because of the decline of economy and (as a consequence) increase of transportation costs on the other. These, in their turn, led to longer transit time as compared to that in the neighboring countries, thus constituting a vicious circle.

Speaking about the airfreight, it is considered to be the most expensive mode of transportation, but it has a significant advantage – very short time in transit of up to 1-2 days worldwide. To Armenia the airfreight is done mainly via passenger aircrafts of few airlines, due to which the cargo arrivals are often delayed as priority is always given to passenger luggage. Besides, on the one hand, the existing frequency and directions of the passenger flights cannot meet the demand for cargo transportation, and, on the other hand, the passenger aircrafts have limitations in terms of cargo dimensions and transportation of dangerous cargoes.

For the most affordable ocean-freight shipments, Armenia is mainly limited to the Georgian ports of Poti and Batumi, while sanctions are still imposed on Iran. These ports have their natural restrictions in terms of limited access and small capacity, so delays are usual for these ports conditioned by both factors. In addition, the available rail communication (which is usually considered as the cheapest mode of land transportation) between these seaports and Yerevan is not able to lessen substantially the transportation costs and is approximately equal to alternative trucking costs.

Trucking is more or less efficient in terms of cost versus transit time parameters, particularly according to Unitrans International Freight-Forwarder experience. The trucking service covers the major trade directions of Armenia: Europe, the western and central parts of CIS, Iran. However, this mode of transportation cannot be considered as a rescue considering its features: a comparatively high consumption of fuel, dependence on the weather conditions, the vulnerability to changes in international relations and transport regulation, etc.

Effective January 2015 Armenia has become a member of the EEU[1]. Supposedly, the trade within the EEU is expected to increase. However, transportation within the EEU, which is to serve the trade, has actually become more complicated in some ways, as described below.

Direct transportation within the EEU is possible via air. However, transit airfreight to Armenia via the EEU airports is being delayed by 3-5 days at the minimum due to the additional paperwork required by the EEU transit regulation.

Another mode of transportation between the EEU and Armenia is trucking, which is done in transit via Georgia. And for this purpose customs transit declarations are made on the EEU-Georgia border. The declarations are issued by customs officers, and often have errors and misprints, which affect the further tax reports of consignees in Armenia.

Moreover, the trucks have to be registered in an EEU member country: transportation within the EEU with non-EEU trucks is subject to additional payments, and sometimes it is even impossible to be executed in practice. This artificially limits the service supply market, which, by definition, leads to operational inefficiency.

Additionally, there are the EEU certification requirements, which are much more complicated as compared to the Armenian regulation prior to the EEU membership. Among these certificates are Certificates of Origin, Certificates and Declarations of Conformity, Expert Reports, Safety Certificates and Declarations, etc. Although they refer to the cargo being transported, they non-directly complicate the process of transportation, thus causing risks and delays. And the longer is the period of transportation, the higher is the transportation cost.

And finally, the international transportation with the EEU countries is supposed to be VAT-imposed in Armenia, which increases the transportation cost by 20% higher than previously.

Summary: Armenia encounters new problems and obstacles in terms of transportation within the EEU in 2015. And progress is assumed to be possible during the process of their consistent discussion with the state bodies, continuous investigation of new possibilities and implementation of new solutions, thus leading to shorter transit time and significant cost savings.

09.07.2015

Heghine Armenyan

Business Development Manager
Unitrans Ltd. International Freight Forwarders

[1] The Eurasian Economic Union.