Changes to Customs Law to ease trade and meet European Union rules

Dunya Executive - - BUSINESS BY LAW - SERCAN BAHADIR EY Global Trade Leader

The Customs Law, in force since 2000 in Turkey, is being amended as a whole in parallel with the new European Union Customs Code. The draft bill, published on the Ministry of Customs and Trade’s website on Nov. 22, 2016, will now be presented to non-governmental organizations.

So what are the basic changes in the code? What opportunities do they create for companies doing business with Turkey? What do the business community and non-governmental organizations think of the draft? Sercan Bahadir, EY Global Trade Leader, evaluated the new draft of the Customs Code for Dunya executive.

Main changes in the draft Customs Law:

• The draft version offers significant advantages for companies, as well as opportunities for innovation. Firstly, a business located anywhere in Turkey can undertake import transactions at the nearest customs administration office that works with the centralized customs clearance.

• Payment of customs duties can be postponed up to 30 days, and if the firm holds an Authorized Economic Operator (AEO) certificate, the transactions can be completed by the customs office.

• Additionally, the monthly declaration will allow firms to pay customs duties for their imports the following month, similar to VAT declarations. This measure will reduce bureaucratic processes.

Opportunities for companies doing business in Turkey

• “Importation with registration,” the primary subject of the draft Customs Code, will make the customs clearance process more convenient. The customs offices complete the transactions by taking into account the records of companies holding AEO certificates in particular, and it leads to a decrease in bureaucratic processes.

• The requirement for “electronic data processing technology” for all customs procedures may force companies to upgrade electronic hardware and software.

• The basic aim of the draft law is to make trade easier and faster for reliable companies that have an AEO certificate. Therefore, the number of firms with AEO certificates are likely to increase. Companies already holding AEO certificates will start to work with logistics companies that also have the certificates to ensure the security of supply chains. This will boost competition among companies and provide new work opportunities for local and foreign firms in Turkey.

• “Centralized customs clearance” stands out among the new measures. This makes it possible for AEO firms to carry out customs clearance with the authority nearest to where they maintain commercial records, regardless of the goods’ point of arrival. For example, an AEO firm located in Istanbul can conduct customs procedures at the Haydarpasa office for the goods it has brought into Turkey at the town of Iskenderun.

• Completing customs procedures with “registration” should prove to be advantageous. The aim of using “electronic data processing” in all customs procedures is likely to require firms to integrate their electronic hardware and software systems. Furthermore, this will also cause customs offices and brokers to upgrade their electronic hardware and software in parallel with these developments.

How do the business world and NGOs view the draft?

• Reform of the Turkish Customs Code in parallel with the European Customs Code is welcomed by non-governmental organizations, such as the Customs Brokers Association and the Union of Chambers and Commodity Exchanges (TOBB). These groups see this as an opportunity to solve persistent problems.

• The guidelines covering the putative procedures that gov- ern the administrative fines changed with the introduction of a new approach that differentiates between the prescription periods for customs duties and the administrative money (only applying administrative fines) not related to customs duties (irregularity fine, e.g. Article 241 of Turkish Customs Code) , and the administrative fines related to these taxes (imposition of tax penalty, e.g. Article 234 of the Turkish Customs Code).

• Tax-related penalties are based on a three-year statute of limitations in the Customs Code, but the period of prescription in non-taxable administrative penalties is based on eight years in relative cases and three to five years in fixed cases, according to the Law of Misdemeanors.

• When we look at the draft Customs Law, we notice that 15% of the administrative fines imposed in case of “self-declaration” cases are covered. In fact, if the company has failed to fulfill its tax liabilities, but has submitted a “self-declaration,” the customs authorities calculate an administrative fine amounting to 45% of the unpaid taxes.

• The cost of compensating for the undeclared taxes make up almost half of the principal tax. Even when the buyer is not passively or actively involved in the failure to declare, a certain amount of administrative fines will still be imposed.

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