Explainer: Iraq’s updated customs tariffs, legal dispute, and market impact

Shafaq News

In early 2026, Iraq started enforcing sweeping changes to its customs and import regime under Cabinet Decision No. 957, approved in late October 2025. The move revised tariff schedules, altered collection procedures, and accelerated the shift toward electronic customs clearance, sparking reactions from lawmakers, traders, and market actors.

The controversy is centered on whether the cabinet merely enforced existing tariff laws through new administrative mechanisms, or whether it effectively imposed new taxes without parliamentary approval.

What Cabinet Decision No. 957 Changes

Cabinet Decision No. 957 applies revised customs tariff rates ranging from 0.5% to 30% across multiple brackets. The measures cover the full national customs tariff schedule, which includes 99 chapters and approximately 16,400 tariff items used in international trade.

The government said the decision applies to all border crossings and customs centers and will remain in force unless the cabinet issues an amendment or suspension.

The tariff structure itself is based on the Customs Tariff Law No. 22 of 2010 and its subsequent amendments, which classify goods by category and assign rates accordingly. Essential food items are generally subject to tariffs of 0.5% to 5%, while industrial raw materials face rates of about 0.5% to 2% to support domestic production. Electrical appliances and household goods typically fall between 10% and 15%, luxury items between 20% and 30%, and vehicles are taxed according to engine size and year of manufacture, usually between 8% and 15%. Tobacco and alcohol are subject to significantly higher duties.

All imports are classified under the International Harmonized System (HS Code), which determines the applicable tariff rate for each product.

Automation and Customs Reform

The enforcement of Decision No. 957 is closely tied to a broader customs reform program launched in 2024–2025. The government has sought to modernize customs administration, unify procedures between the federal authorities and the Kurdistan Region, and reduce paper-based transactions.

A central pillar of this effort is the rollout of the ASYCUDA electronic customs system, a United Nations–supervised platform that automates customs declarations, enforces electronic payment of duties, and limits discretionary practices at border crossings.

Under the new framework, traders are required to submit declarations electronically and settle customs duties through the banking system. Authorities argue that this ensures uniform application of tariff rules and guarantees that revenues are transferred directly to the state treasury.

Government Position: No New Taxes

The government and the General Customs Authority reject claims that the decision introduces new taxes, as the tariffs themselves are already established under existing law, and that the current measures simply enforce those rates through automated procedures.

Read more: Delayed reform or fiscal shock? Iraq’s tax measures test state capacity

They describe the collected amounts as “tax deposits” that will later be reconciled electronically and attribute public confusion to misinformation and the circulation of outdated videos that do not reflect the current customs system.

Legal Objections And Parliamentary Challenge

Opponents of the decision, including several lawmakers and trade groups, present a different legal interpretation. Members of parliament have begun gathering signatures to cancel what they describe as an unlawful cabinet decision issued by a caretaker government. They cite Article 28 of the Iraqi constitution, which stipulates that taxes and fees may not be imposed, amended, or collected except by law. Critics also refer to Article 1 (Third) of the Customs Tariff Law No. 22 of 2010, which treats customs duties as an integral part of the law and restricts the cabinet’s authority to temporary adjustments only in cases of economic necessity or protective measures.

From this perspective, altering tariff rates through an administrative decision exceeds the cabinet’s mandate and could be challenged in parliament or before the courts.

Market Reaction And Economic Impact

The dispute quickly spilled into the market. In the initial phase of enforcement, some traders continued importing goods but left shipments stockpiled at ports and border crossings, delaying their entry into the domestic market to avoid compliance with the revised procedures.

The resulting supply disruptions contributed to price increases, market volatility, and pressure on the exchange rate. When these tactics failed to produce a policy reversal, traders organized protests in several provinces, including Baghdad and Duhok, and signaled further escalation through the possibility of coordinated shop closures scheduled for February 08.

Now What?

For now, Cabinet Decision No. 957 remains in effect nationwide. Any change would require a new cabinet decision, parliamentary legislation, or a successful legal challenge. Until then, Iraq’s customs system is operating under a framework that blends long-standing tariff laws with newly enforced electronic controls, leaving the final legal outcome unresolved.