VI. TRADE REGULATIONS AND STANDARDS TARIFFS AND IMPORT TAXES Turkey is a member of the GATT and regulates its customs practices in line with GATT requirements. In 1989, Turkey, along with the United States, converted to the new GATT Harmonized System. Trade with the United States is based on the Treaty of Commerce and Navigation of 1929. It provides for the mutual unconditional most-favored-nation treatment in the application of all import and export duties and restrictions. However, European Union (EU) and EFTA countries are assigned a lower duty rate under Turkey's association agreement with the EU and its free-trade agreement with EFTA countries. Scheduled duty reductions outlined in Turkey's 1964 EC association agreement were enumerated in the 1993 and 1994 Import Regimes. Duty rates are higher for some U.S. products and other non-EU/EFTA countries, even though overall duties have been reduced. Turkey will have complete customs-union with the EU by the end of 1995 and all goods imported from the EU will be duty free. Most goods, except textiles and some agricultural goods exports from Turkey to the EU, are already free from duties. CUSTOMS VALUATION Import duties are calculated exclusively on C.I.F. prices. Importers are also responsible for paying the VAT. The VAT is calculated on a C.I.F. basis and has a ceiling of 23 percent; however, most industrial products are charged a rate of 15 percent. VAT is also charged to locally produced goods. Capital goods, some raw materials, imports by government agencies and enterprises, and products for investments with incentive certificates are exempt for import fees. IMPORT LICENSES All importers must obtain a general import license valid for one year from the Undersecretariat of Foreign Trade (UFT). The general license specifies two-digit H.S. numbers, or chapters of products, that the importer is allowed to import. There are no restrictions on obtaining a general import license. All importers are required to obtain an import permission certificate for each type of item to be imported. Without an import permission certificate, a bank cannot issue foreign exchange for payment. Import certificates are obtained from the Central Bank, commercial banks, or from the UFT (or other appropriate government agency). Goods cannot be cleared through Customs without a separate certificate for each eight-digit customs tariff code product. An import certificate is valid for the periods specified by the importer and can be extended if necessary by banks. The country from which goods are being received, the country of origin, the country where payment is to be transferred, and the importer's name must be stated on the import permission certificate. For imports of motion pictures, full-video cassettes and their brochures, and advertisements, an import certificate is issued by banks. Only the actual cost of the item is considered, not the royalty costs. As a general practice, parts not specified on the import certificate that need to be transported with a machine due to technical concerns are permitted by Turkish Customs without any duty charge. EXPORT CONTROLS Turkey was a member of COCOM and has actively participated in the planning discussions for a COCOM-successor regime. Since Turkey is not a major producer or exporter of dual-use or other sensitive technologies, the country's export control inspection and licensing infrastructure is dispersed and only loosely linked, involving the Ministries of Foreign and Industrial Affairs, Customs and the Treasury, and participation by expert scholars and technicians from academia on an ad hoc basis. However, talks are underway within the government to consolidate appropriate export control and nonproliferation experts from the various ministries into one nonproliferation agency attached to the Ministry for Foreign Affairs. Legislation has been drafted to this effect, but not yet submitted to Parliament. IMPORT/EXPORT DOCUMENTATION Turkish documentation procedures follow the European Union system. All commercial shipments must be accompanied by a commercial invoice, a certificate of origin and a bill of lading or air waybill, depending on the method of shipment used. Commercial Invoice: The commercial invoice must be submitted in triplicate, including the original copy; it must contain a complete description of the goods and all required payment terms. The original must be signed by the exporter as follows: "We hereby certify that this is the first and original copy of our invoice, the only one issued by our firm for the goods herein mentioned." It must be certified by the Turkish Embassy or Consulate in the United States. The charge for certification is .004 percent of the shipment's value. At least one copy of the invoice should travel with the goods, and the original should be sent to the importer through the correspondent bank. Certificate of Origin: The certificate of origin is to be prepared in duplicate. No corrections are permitted on this document, which is to be prepared in English by a local chamber of commerce. The certificate of origin must be certified by the Turkish Embassy or Consulate in the United States. One copy of the document must be surrendered to the customs authorities at the time of importation. Bill of Lading: Details in the bill of lading should correspond exactly to those given in other shipping documents. Pro-forma Invoices: The pro-forma invoice, which supports an import permit application, must be no more than six months old at the time of application, contain an unexpired option (if it is optioned), indicate freight and insurance charges separately, and bear the importer's name. TEMPORARY ENTRY A material may be temporarily imported into Turkey without payment of duties and tax if it is to be used in the production or manufacture of a product that is to be exported. The importer gives security in the form of a bank guarantee in the amount of applicable duties and taxes. Upon exportation of the finished product, the guarantee is released. Temporary admission of goods intended for reexport in their original is permissible free of import duties and taxes with the approval of the Undersecretariat for Foreign Trade. Books, newspapers, magazines, catalogs, pamphlets, brochures, and similar advertising materials are exempt from customs duty. Samples of no commercial value are admitted duty free. Samples with commercial value may be imported into Turkey under the temporary importation system. For samples imported under this system, a letter of guarantee is required by the customs authorities. The letter of guarantee should be prepared to reflect the value of the samples as if they were actually being imported. At the end of the temporary importation period, generally six months and extendable for another six months, or when the samples are reexported, the letter of guarantee is returned by the customs authorities. U.S. traders may also wish to consider a more simplified procedure in the form of a carnet. Carnets are customs documents permitting the holder to temporarily import products as samples without paying customs duties or posting bonds. In the United States, carnets are sold by the U.S. Council for International Business at the following locations: in New York, NY, (212) 354- 4480; Long Beach, CA 90010, (310) 420-2777; Schaumburg, IL, (708) 490-9696; San Francisco, CA (415) 956-3356; Miami, FL (305) 592- 6929; Timonium, MD (301) 561-0438; boston, MA (617) 737-3266; and Houston, TX (713) 847-5693. LABELING, MARKING REQUIREMENTS All packages, cases, and bales must bear shipping marks, numbers, dimensions, and the gross weight of the merchandise. Packages and the bills of lading that are to be shipped through Turkey should be marked "In Transit." All goods entering Istanbul or any other entry port in Turkey (Izmir, Mersin, Iskenderun, Sinop, Samsun, and Trabzon) will be cleared through customs, and full payment of duty will be required unless the packages and bills of lading are marked "In Transit." If so marked, the goods may be cleared for entry and reshipped. PROHIBITED IMPORTS Products which are currently prohibited include weapons and narcotics. However, under certain conditions the Ministry of the Interior, Security General Directorate will provide clearance to import shotguns, hunting rifles, and explosives. The 1994 Import Regime also prohibits the importation of products containing fluorocarbon-type materials from countries that have not signed the Montreal Protocol. STANDARDS (e.g., ISO 9000 USAGE) The metric system is used for weights and measures. Electrical current is 220 volt, 50 cycles. Time in Turkey is seven hours earlier than Eastern Standard Time. From April through October, Daylight Saving Time is used. The Turkish Standards Institution (TSE), established in 1954, sets standards in Turkey and keeps abreast of standards in other countries. TSE, an accredited agency in the international markets, issues the guarantee certificates. Almost all the major companies seek TSE's certification for their products. This certificate helps to ensure manufacturers fair competition and ensures the consumer of the quality of goods purchased. Correspondence to the TSE should be addressed as follows: Turk Standartlar Enstitusu, Necatibey Caddesi, Ankara, Turkey. Turkey has around 11,000 standards, 95 percent of which are compatible with ISO/IEC standards. Turkey ranks third among European countries in terms of number of standards. Around 900 of the 11,000 standards are obligatory, i.e., the manufacturers are forced by law to have their products certified by TSE. The obligatory standards cover goods ranging from foodstuffs to medical equipment. Importers must receive TSE's approval on imports of goods covered by obligatory standards. Following Turkey's resolution to implement the ISO 9000 Quality Management Standards in 1988, the TSE prepared the compatible TS- ISO 9000 Turkish Standards. Since then 300 companies have applied and more than 20 companies have been issued TS-ISO 9000 certificates. FREE-TRADE ZONES/WAREHOUSES In June 1985, Turkey passed Law 3218, which authorized the establishment of free-trade zones in Turkey in order to assist investors and traders wishing to benefit from Turkey's location relative to the markets of the Middle East, and Western and Eastern Europe. The first two zones opened in 1987 in Mersin and Antalya. Currently, there are five free-trade zones operating: Antalya, Mersin, Ege (Gaziemir-Izmir), Istanbul Ataturk Airport, and Trabzon. Permits are being issued for an additional four zones: Istanbul Atakoy Offshore Banking, Adana-Yumurtalik, Istanbul-Trakya, and Aliaga-Izmir Free Zone. Yumurtalik will accept heavy industry, Mersin and Ege (Gaziemir) light industry, and Antalya only "clean industry." The Turkish Government hopes to attract foreign investment, increase employment, and market Turkey as a stepping stone to the Middle East and the Newly Independent States. Goods of foreign and domestic origin may be brought into the free trade zones without payment of customs duties. Goods may be stored, assembled, repaired, tested, or repackaged for export in the free-trade zones. Various incentives also exist to encourage investment in free- trade zones. Strikes and lockouts are prohibited for a period of 10 years after the opening of the zone. Foreign investors operating in zones are allowed to transfer their corporate earnings as well as foreign personnel to or from Turkey without payment of any taxes or other charges and without any sort of permit. There are no corporate taxes or withholding taxes on wages, interest incomes, or dividends. Foreign nationals may own 100 percent of the zone investment. In addition to these benefits, investments may qualify for incentives offered by the foreign investment incentive regime managed by the Investment Office of the Undersecretariat for Foreign Trade. The Turkish Government issued a new operations regulation for free-trade zones on March 10, 1993. According to the new regulation, the period of license was increased to 99 years, and import restrictions for products manufactured in the zones have been lifted. In addition, it is now possible to obtain a certificate enabling third-country firms to export to EU and EFTA countries duty free and to pay EU and EFTA country tariff rates when bringing products into Turkey. Operating licenses and additional information are available from the Directorate General of Free-Trade Zones, Undersecretariat for Foreign Trade, Tel: 90-312-212-5887, Fax: 90-312-212-8906. SPECIAL IMPORT PROVISIONS There are a number of other products that can only be imported by specific government agencies or preapproved organizations. Alcohol can only be imported by the government monopoly enterprise, TEKEL. Cigarettes can only be imported by TEKEL and cigarette producers which are permitted by the government under a special decree (such as Philip Morris, R.J. Reynolds, British Tobacco, etc.). X-ray film can only be imported by the Red Crescent Association (similar to the Red Cross). Precious metals and stones, excluding diamonds, can only be imported by commercial banks authorized by the Central Bank (Decree No. 93/4143, March 21, 1993). Import permission certificates must be obtained from the Directorate General of Curative Care Service in the Ministry of Health and Agriculture to import the following products: organic chemicals, especially those used to produce medicines and medical products; chemicals used in the cleaning and food industry; vaccines for both human beings and animals; live animals and plants; and grains, plant seeds, and hormones. Products requiring after-sales service such as motor vehicles, household electrical goods, office equipment, heaters, gas-fired burners, lathes, and wireless equipment require an import permission certificate from the Ministry of Industry and Commerce. In order to obtain such a certificate, importers must guarantee that they will establish a spare-parts network and maintenance capability in each of the seven geographic areas of Turkey. Telecommunications equipment such as automatic data processing machines, electrical apparatus for line telephony or telegraphy, and telephone answering machines need type-approval of the Turkish PTT; frequency-related products require the approval of the Wireless Affairs General Directorate (TGM). Under the 1994 Import Regime, importers need to obtain a control certificate from the Ministry of Environment for materials which are detrimental to the environment, such as hard coal, lignite, petrocoke, arsenic, mercury, lead sulphides and carbonates, fluorocarbons, etc. MEMBERSHIP IN FREE-TRADE ARRANGEMENTS Turkey will complete a customs union with the European Union by end of 1995; it currently has a free-trade agreement with the European Free-Trade Association (Austria, Finland, Iceland, Norway, Sweden, and Switzerland). As part of the EU customs union process, Turkey's trade agreements with third countries must be identical to those that exist between those countries and the EU. As part of this effort, Turkey is currently negotiating free-trade agreements with the Visegrad countries (Hungary, Poland, the Czech Republic and Slovakia). Turkey is also negotiating a free-trade agreement with Israel. Free-trade agreements with both the Visegrad countries and Israel are scheduled to be signed by the end of 1994.