GUARANTEE

Hüseyin Cahit SOYSAL
Board member

 Recently, the General Directorate of Customs published a savings article. In the letter numbered 58341131 dated 20.10.2020, the new regulation was clarified by stating that in case of doubt about the customs value, the reality and accuracy of the value declared by the obliged party will be investigated by the customs administration within the framework of the procedures in Circular No. 2012/29.

Accordingly, declarations that are likely to be of low value will be identified using scientific methods and will be directed to value research, and risk-based value research will be implemented in the BİLGE system for some specified goods. Regarding the declaration assigned as "low value" in the system, the block cannot be removed unless the "Value search" box for the relevant item is checked by the inspection officer on the Inspection Control screen, and a value search will be carried out and a guarantee will be taken for the difference value in accordance with Circular No. 2012/29.

When reading the article, one cannot help but think, "To what extent is it correct to obtain collateral for a possible receivable?"

Open the customs legislation and put it on the table; You will see that a significant portion of the transactions carried out are not carried out without collateral. Guarantee for opening a temporary storage place, guarantee for opening a warehouse, guarantee for transporting transit cargo, guarantee for temporary importation, guarantee for receiving inland processing permission, guarantee for benefiting from the processing regime under customs control, guarantee for benefiting from end use, guarantee for carrying out on-vehicle transactions, removing the goods from customs within the content of the disputed declaration. You wanted to withdraw collateral, you looked to the right for collateral, you looked to the left for collateral!

So how does this guarantee have to be? It must be in the form of cash or bank letter of guarantee. Doesn't this cost anything? Of course there is no way. In economics, the best alternative given up to obtain something is called "opportunity cost" or "abandonment cost". The cost of giving up cash collateral, in its simplest form, is the loss of interest income that would be earned if this money was kept in a forward account or in the securities market. When obtaining a Bank Letter of Guarantee, the company's credibility in the eyes of the bank comes to the fore. Although it varies from customer to customer, banks apply a commission rate of 0.1% to 3% on letters of guarantee. Commission rates are pronounced annually and are collected quarterly, semi-annually, or annually. The 0.1% rate is applied to very prestigious companies whose names I will not mention here; I would also like to point out that the general market commission rate varies between 1.5% and 3%.

In summary, providing assurance means additional costs and additional resources for businesses. In times when the economy is going through major difficulties like today, these costs can put businesses in even greater trouble.

In this regard, in order to make an assessment, it is necessary to first take a look at the current legislation provisions.

Articles 3 and 4 of Article 69 of the Customs Law No. 4458 contain the following provisions:

3. The registration of the declaration, if it results in a customs obligation, is a matter of utmost importance. Goods within the scope of the declaration cannot be delivered until the customs duties are paid or secured. However, this provision does not apply to the temporary import regime subject to partial exemption.

4."If the declared customs regime provisions require a guarantee, the goods cannot be delivered without the guarantee."

Article 202 of the Customs Law is regulated as follows:

• "one. By customs legislation, in cases where a guarantee must be given to ensure the payment of customs duties and other public receivables, this guarantee is provided by the person who is liable or is likely to be liable for the amount of such taxes and other public receivables.
• Customs administrations may accept another person to provide security instead of the person asked to.
• The Ministry is authorized to accept as collateral the letters of guarantee given by public institutions included in the general and annexed budget, municipalities, public economic enterprises whose capital is entirely owned by the state, and foreign mission heads in Turkey.
• The President is authorized to determine the situations in which no guarantee will be required, and partial guarantee will be applied."

In the first paragraph of Article 189 of the Common Customs Code No. 2913/92 of the European Union, where we have to adopt common customs rules due to the Customs Union, it is stated that "In accordance with the customs rules, if the customs administrations request the provision of guarantee to ensure the payment of a customs debt, This guarantee will be provided by the person who is responsible or may be responsible for this debt. In other words, it was said "if requested" and it was left to the discretion of the member states whether to request a guarantee or not.

In the second paragraph of Article 56 of the European Union Common Customs Code No. 450/2008, which is in force today, it is stated that "Customs administrations may request that a guarantee be given to ensure the payment of the amount of import or export taxes corresponding to a customs obligation." The new EU Code also made the guarantee optional.

It can be said that "Türkiye is not obliged to adopt the provisions of the Common Customs Code on the collection and guarantee of taxes." It is true. However, if securing taxes is optional in EU countries, why do we not have a national provision in this regard? If we are going to pit Turkish entrepreneurs against EU entrepreneurs in a competitive environment, shouldn't we provide the same opportunities to both parties? While the European entrepreneur does not bear these additional costs, why does the Turkish entrepreneur have to?

Let's examine how the issue of "guarantee" has become so deeply embedded in the DNA of the customs organization.

Until the 1980s, the unregistered economy was at a very high level in Turkey. It was possible to produce fake identity cards and establish a company with these identity cards or the identity card of a deceased person. Registering and closing a company in the Trade Registry was carried out through local personal relationships. The so-called "under-the-radar companies" were countless. These companies had invoices printed by the printing houses that printed business cards, and could issue high, low or fictitious invoices to anyone. 60% of the economic wheel was turning with these invoices defined as "Nylon Invoices". After a year, you could not find anyone when you knocked on their door because they would be charged customs tax. For this reason, customs administrations did not deliver any goods to the importer for which they had not collected taxes or secured them.

The point we have reached today is this:

• Population identification information was moved to an electronic environment. Each citizen was given a separate identification number. Identity cards have become intelligent cards that are difficult to copy.
• Trade Registry Gazette was moved to an electronic environment. Establishing and closing a company was recorded. To follow up on the receivables of the creditor public institutions and private legal entities or individuals in the company to be closed, upon request, the companies were allowed to immediately convert to the "Company in Liquidation" form, where the companies were not closed, and to be closed after this process was completed.
• Every citizen has been enabled to access the Trade Registry Gazettes, which have been transferred to the electronic environment on the web.
• Each established company was given a "Tax Number" by the Ministry of Treasury and Finance. With a tax number, the company could operate and issue invoices.
• Printing of paper invoices was allowed in printing houses authorized by the Ministry of Treasury and Finance, and these printing houses were obliged to report the number of invoices and serial numbers they printed to the relevant tax offices.
• Not enough, the "e-invoice" regulation was started. Companies whose annual gross sales revenue exceeds a certain amount must issue "e-invoices."
• Article 8 of the Import Regime Decision No. 95/7606 states that "Any real and legal person who is given a tax number by the provisions of the Tax Procedure Law and partnerships of persons who do not have legal entity status but are authorized to make legal dispositions by the provisions of the current legislation can carry out import transactions." Edited.
• In 2000, the infrastructure for producing customs declarations electronically was established. Thanks to the BİLGE System, the GÜVAS System was created to enable the customs administration to evaluate all declaration information together and reach various results. Those who will make a customs declaration are now allowed to sign the declaration with an e-signature.
• The new software developed for all customs transactions not included in the BİLGE System allows all customs transactions to be carried out and monitored electronically. Thus, the administration's control and surveillance capacity was improved.
• By placing a "blockage" on the BİLGE System with a click, the business of companies or customs consultants deemed objectionable can be stopped and controlled.
• Areas such as sea ports, airports, railway stations, TIR parks, and all customs warehouses, called "customs areas," have been scanned with camera systems where records are stored for one year.
• Likewise, highways, city main arteries, and streets can be monitored with "mobile camera" systems, and instant operations can be performed using retrospective scans.
• In short, Turkey in the 2020s is not Turkey in the 1970s and 1980s. Everything is recorded, and every activity is under public scrutiny. Should the state, with such a robust infrastructure, consider "guaranteeing" itself in every field?

In short, Turkey in the 2020s is not Turkey in the 1970s and 1980s. Everything is recorded, and every activity is under public scrutiny. Should the state, with such a robust infrastructure, consider "guaranteeing" itself in every field?

It is also necessary to look at what the customs administration does with these guarantees it receives from customs taxpayers. "Cash Collateral" can be spent on budget items and is easily monitored in budget records. However, it is evident that more than 95% of the guarantees received as "bank letters of guarantee" cannot be used for any payment.

Moreover, to convert the collateral received into cash, it is necessary to wait for the following process to be completed:

• Completion of valuation research
• Binding of additional accruals and related fines to an "Additional Accrual Decision" or "Fine Decision."
• Notification of the said decisions to the customs duty bearer
• Objection of the obliged party to the Regional Directorate
• Regional Directorate's rejection of the objection
• Upon this decision, the Customs Officer may file a lawsuit before the Tax Court.
• The Tax Court rejected the case and found the administration justified
• The obliged party may appeal this decision to the Regional Administrative Court.
• Regional Administrative Court rejects the appeal and finds the administration right.
• This time, the customs obligor appeals to the court of appeal.
• The court of appeal found the administration justified and rejected the appeal application.
• Applying to the Council of State for additional accrual or penalty decisions over specific amounts
• The Council of State found the customs duty unfair and accepted the tax court decision.
• Notification of the decision of the court of appeal or the Council of State to the customs obligor
• The administration sends a "payment order" to the obligor
• Notification of the "payment order" by the obliged party
• Filing a lawsuit against this payment order to the Tax Court
• The court rejects the case
• This time, the customs officer appealed the rejection decision to the Regional Administrative Court.
• Rejection of appeal request
• Application of the obliged party to the court of appeal
• Rejection of the Customs Officer's appeal application
• Notification of the rejection decision to the obligor.

Unless the transactions listed above are completed, the customs administration has no authority to dispose of the "guarantee" it receives. Only after this process is completed does the administration have the opportunity to convert the guarantee into cash. Moreover, most of the time, the judicial process ends in favor of the customs obligor. The guarantee taken unjustly from the obligor is returned after 2-3 years. During this period, the customs officer unnecessarily pays the bank letter of guarantee commission.

Therefore, when the customs administration has the most vital position, the additional tax accrual or fine becomes final. At this stage, the administration no longer even needs collateral. Because it has the opportunities provided by the "Law on the Collection Procedure of Public Receivables" numbered 6183, this Law, which turns all customs directorates at the Turkish level into "collection administrations," allows the said directorates to act as an "enforcement office."

As we have seen in the examples we have experienced, due to a finalized customs tax receivable or OK, customs managers can, with a paragraph-sized letter, put a "not for sale" note in the Aircraft Registry for an airplane, a "not for sale" entry for a ship in the Ship Registry, and traffic control of TIR trucks. It is seen that a similar annotation can be made on the record. Likewise, it is not uncommon for the same customs managers to block company accounts worth 1,500,000 TL to collect a finalized customs receivable amounting to 35,000 TL.

In short, while Law No. 6183 provides the customs administration with strong enforcement authority regarding the collection of finalized public receivables, I do not understand the public benefit provided by the Ministry of Commerce seeking collateral for a "valuation survey."

It can be said that "we do not want to receive guarantees for every transaction, but the provisions of the Law tie our hands."

Can't an attempt be made to amend the Law to soften articles 69 and 202 of the Customs Law No. 4458 and other guarantee provisions? Are these articles fixed provisions, such as the unchangeable and unchangeable provisions of the Constitution?

If we force our entrepreneurs to compete globally and support them, we must also provide them with opportunities similar to their competitors. In this context, we should also consider areas for improvement regarding "customs assurance."