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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Mongolia Expels Hundreds of Chinese Truck Drivers

Jun. 17 – 2point6billion.com has unconfirmed reports from Mongolia’s South Gobi region, home to much of the nation’s mining industry, that hundreds of Chinese truck drivers have been turned back to the China border.

There has been no official commentary on the issue, however we understand that it is linked to three main aspects concerning cross border transport and China-Mongolia relations. At the heart of the matter is the current status of both nations concerning their recognition of cross border transport protocols as determined by the international organization Transports Internationaux Routiers (TIR).

In brief, Transports Internationaux Routiers (International Road Transport) is an international customs transit system and is the only universal transit system that allows goods to transit from a country of origin to a country of destination in sealed load compartments with customs control recognition along the supply chain. This minimizes administrative and financial burdens and customs duties, and taxes that may become due are covered by an international guarantee.

The crux of the matter relates to the key fact that Mongolia is a member and China is not. One aspect of the treaty relates to haulage operators and the drivers of such trucks. Mongolia permits the access to Mongolia’s road system by licensed foreign drivers, while China does not. To date, goods vehicles from China have been using Mongolian facilities with local Chinese drivers, while Mongolian vehicles and drivers are denied direct access to China past a certain point.

The situation has also flared up we have learned due to the perception that allowing Chinese drivers to transport haulage across Mongolia is damaging to Mongolia’s unemployment issues, and is affecting the ability for Mongolian drivers to find work. That is fast becoming a political issue as Mongolia has national elections next year.

Also impacting on the issue is the “general attitude” of Chinese drivers in Mongolia, many of whom apparently seem to regard the nation as a vassal state to China and have been known to treat the Mongolians poorly. This is a side effect of the Chinese education system which has often claimed Mongolia as Chinese territory. Additionally, the incident in China’s Inner Mongolia Autonomous Region last month, in which a Chinese truck driver ran over a killed a Mongolian herder, has again impacted on the way in which Chinese drivers are seen to behave towards ethnic Mongolians.

While there is no doubt that the current status, if correct, of Chinese truck drivers being expelled from Mongolia is undeniably politically motivated, it does call into question the failure of China to join organizations such as the TIR that seek to better manage and monitor cross-border trade. China’s refusal to cooperate with such entities may now start to come under pressure from other nations that in the past have turned a blind eye to Chinese drivers operating overseas. The spirit of reciprocity has yet to extend to permitting foreign drivers to operate in Chinese territory, and that stance may now come under pressure.

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