One of the eight regimes listed in the Customs Law is the "External Processing Regime." The outward processing regime is the regime in which the provisions regarding the temporary export of goods in free circulation from the Customs Territory of Türkiye to be subjected to outward processing activities and the re-entry of the products obtained as a result of these activities into free circulation with full or partial exemption from import duties are applied.

Although the general rule is to grant this permission to those who apply for it, according to Article 138 of the Customs Law No. 4458, permission to benefit from the regime is not granted in the presence of a situation that will seriously damage the basic economic interests of the producers in Türkiye.

As a matter of fact, in the first article of the External Processing Regime Decree No. 2007/11864, it is stated that "This decision is prepared to temporarily export the goods in free circulation to be processed, repaired or renewed and to ensure that the processed product enters free circulation by benefiting from full or partial exemption and to encourage the sale of export goods, provided that the basic economic interests of the producers in Türkiye who produce the same or similar to the imported processed products are not adversely affected."

In the current practice, External Processing Permits are issued by the Ministry of Trade General Directorate of Export through the "Support Management System (DYS)." the external processing permits for the smelting and processing of mineral ores and concentrates and mining exporters' associations issue the processing of precious metals and stones. The external processing permits goods to be sent abroad for repair purposes, by warranty provisions, or due to the relevant customs directorates issuing a manufacturing defect.

Exclusion processing permits issued by customs directorates for repair purposes, for goods in breach of warranty provisions, or due to a manufacturing defect are processed by the requirements of the sales contracts. In other words, there are situations like repairing an item previously purchased and paid for abroad or renewal due to a manufacturing defect. For this reason, it is obligatory to send the products above abroad by the sales contract. In this respect, customs directorates will continue issuing external processing permits.

On the other hand, in cases where domestic enterprises operating in mining ores and concentrates do not have sufficient capacity, the ore or concentrate products in this group have to be sent abroad to realize the smelting process. Therefore, the exporters' associations will continue to issue exclusion processing permits for this group of goods.

However, the Ministry of Trade seems to have halted the issuance of outward processing permits issued by the General Directorate of Export for sending raw materials, auxiliary materials, semi-finished products, finished products, and packaging materials abroad for further processing.

These permits will only be granted to perform some artistry on semi-finished products using inputs previously brought into the country within the scope of the Inward Processing Permit. Semi-finished products that are entirely domestic production or contain third-country inputs that have entered free circulation will not be allowed to be sent abroad for complementary processes.

The foreign exchange bottleneck and the decline in capacity utilization rates have prompted the Ministry of Trade to take such a decision. On the merits, it can also be argued that Türkiye has a comparative advantage in labor compared to neighboring countries, as the minimum wage in Türkiye is around $525 due to the rise in the exchange rate.

The External Processing Regime, mainly used to take advantage of low labor costs abroad, is unlikely to be a way out for Turkish entrepreneurs in the short term. Nevertheless, the state sends a message to those trying to produce under this regime: "Apply to the country's enterprises for a while."

We must hope that these difficult days will be overcome and that the economy will improve in all its aspects in the coming period.