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Hüseyin Cahit SOYSAL
Board Member
We are spending 2020 and 2021 in a severe economic depression caused by the coronavirus at the global level. Since businesses were unable to pay their taxes or pay their social security premiums, the "tax peace" regulation, which we have frequently encountered in recent years, was re-enacted by a law.
In such an environment, company managers feel like they have to count even a penny in order to survive.
While even the government is making move after move to prevent companies from closing, employment not to fall, and the economy to revive, is there nothing the bureaucracy can do?
I think it should be.
If the payment method for import is not CIF, the customs administration requests a freight receipt or insurance policy from the importer, depending on the payment method. This is a practice that has existed since the "Convention on the Customs Value of Goods" signed by Turkey in Brussels on December 15, 1950 came into force.
In paragraph (e) of the 1st paragraph of Article 27 of the Customs Law No. 4458, which is currently in force, it is stated that "Without prejudice to the provision of paragraph (a) of Article 28, transportation and insurance expenses incurred for the imported goods to the port or place of entry in Turkey and the cost of the goods" It is stated that the "loading and handling expenses incurred for transportation to the port or place of entry" will be included in the customs value.
The 9th paragraph of Article 51 of the Customs Regulation is regulated as follows: "In cases where the presentation of the freight receipt and/or insurance policy is impossible and not acceptable, by notifying this situation with a petition to be submitted by the obliged party stating the reasons; Exemplary freight and/or insurance expense is added to the price actually paid or payable. "If there is no tax loss and the obligor requests it, 10% of the FOB value of the imported goods can be added as freight and 3% as insurance cost to the actually paid or payable price of the imported goods."
Although this is the provision, in practice no customs administration accepts the receipt for comparable freight or insurance expenses; If the freight invoice or insurance policy for the import goods is not submitted, the precedent is based on the 10% freight and 3% insurance application.
So why doesn't the importer submit the freight invoice he paid or the insurance policy he took out to the customs? We must be sure that if the importer has these documents at the actual import stage, he must submit them to the customs. No business person takes any initiative to increase the tax base unnecessarily. However, in the ordinary course of life and in the nature of trade, there is a possibility that the transporter sends his invoice one month after the actual import, the paper copy of the insurance policy cannot be accessed immediately, and even if these documents are presented to the importer, the documents may burn, get wet and become tattered, or be lost. While it is possible for the importer to have his goods transported free of charge by a familiar carrier, it is also possible that the goods will not be insured separately.
For this reason, in order to determine the customs value of the goods, the customs bureaucrats of the 1950s initiated the practice of "10% freight, 3% insurance". This rule remained in effect unchanged until the 2020s.
These rates could be considered realistic in the Turkey of the 1950s. Indeed, when foreign trade data is examined, it is seen that in those years, goods with relatively low prices per kilogram such as oil, chemical raw materials, steel sheet, copper ingot were imported to Turkey. Therefore, since the freight is determined based on the weight of the goods, it may be reasonable to take the precedent as 10% for the said type of goods. Likewise, when insuring goods sent to Turkey in the 1950s, 1960s and 1970s, where the closed economy model was implemented, 3% insurance premium collection may be considered normal for this country, which insurance companies consider "risky".
So, does the Turkey of 2021 draw such a profile? Let's examine it together.
- A hundred years ago, products with an added value of 50 cents per kilogram were produced in the world. Industrial developments have led to the production of products with high added value per kilogram. Today, Japan, from which we import heavily, produces value-added products at 4 dollars per kg, Germany at 3.7 dollars per kg, South Korea at 2.54 dollars per kg, the USA at 2.53 dollars per kg, and China at 1.59 dollars per kg. Therefore, imported products turned into products that were light in cargo but heavy in price.
- The 20th century was a century in which vehicles developed and accelerated with technological developments, and therefore transportation costs decreased. The same century was a period in which combined transportation modes developed and global competition in the field of transportation intensified. Compared to the 1950s, transportation costs have fallen by seventy percent.
- Thanks to the "export-based open economy model" implemented in Turkey since 1983, foreign exchange freedom and a banking system that allows private banks to open foreign currency deposit accounts have developed. Thanks to this banking system integrated with the global financial world and the spread of theoretical businesses, insurance companies have become able to issue policies by collecting lower insurance premiums.
Customs tax rates on agricultural products were already high in Turkey. As a result of the Customs Union established with the EU in 1996, the customs duty rates of industrial products were determined between 1 and 6 percent, while many taxes such as anti-dumping duty, compensatory duty, additional customs duty, additional financial liability were put into effect in later years. Due to this, taxes incurred by importers increased. Therefore, tax base elements that were not much emphasized before began to be examined.
As a result of these developments, today, a kilogram by road to Turkey costs 1 dollar from the Netherlands, 25 cents from Germany, 1 dollar from France, 1.5 dollars from Norway, 20 cents from Serbia, 45 cents from Italy, and 45 cents from Bulgaria. It has now become possible to transport goods from Iran to 10 cents and from Iran to 2 cents.
Freight to Turkey by sea: 1.5 dollars per kilogram from China, 2 cents from Bangladesh, 1.5 cents from Sri Lanka, 50 cents from Malta, 1.1 dollars from Mexico, 27 cents from the USA It can be moved.
Again, by air to Turkey, a kilogram costs 5.5 dollars from the USA, 9 dollars from Japan, 20 dollars from Madagascar, 17 dollars from Romania, 12 dollars from Portugal, 9 dollars from Germany, 31 dollars from Singapore. It is possible to transport cargo from China for 43 dollars.
This being the case, if 10% freight is taken, the price per kilogram to Turkey by land is 127 dollars from England and 47.5 dollars from Norway; per kilogram to Turkey by sea: 626 dollars from South Korea, 10 dollars from China, 21 dollars from the USA, 14.5 dollars from Singapore; The absurd result is that a kilogram is transported by air from Indonesia for 112 dollars and from the USA for 46.7 dollars. Especially, there is an example that is festive for homes: the net weight of the item is half a kilogram, the gross weight is one kilogram. When you take a 10% equivalent on the FOB value, a strange result emerges that this half kilogram of goods must be transported to Turkey for 9,388 dollars!
However, when these invoices, which are real freight invoices and submitted to customs, are examined, the percentage of these invoices as the FOB value of the goods is listed as follows:
The freight amount is 5% of the FOB value of the goods brought to Turkey by road, 5% for the Netherlands, 5% for France, 4.7% for the UK, 2% for Serbia, 4.6% for Italy. , it reaches 4.4% for Hungary, 2.3% for Norway, 3.2% for Spain, 1.3% for Iran and 0.9% for Bulgaria.
The freight amount reaches 5.2% for Bangladesh, 3% for Sri Lanka and 10% for Mexico of the FOB value of the goods brought to Turkey by sea. The values we found separately for China are 2.1%, 5.6% and 8.1%.
The freight amount can reach 5.2% of the FOB value of the goods brought to Turkey by air, 5.2% for Belgium, 2.7% for Germany, 4% for Japan and 2% for the USA. Since air transportation is more expensive, this rate increases as the kilogram value of the goods decreases.
These statistics, which we produce manually, can be accessed by Ministry of Commerce employees who have access to the GÜVAS System in a short time.
In the light of this information, it can be said that freight charges, which depend on many factors such as transportation mode, distance to Turkey, value of the goods, frequency of transportation by the customer, never reach 10% of the FOB value of the goods, except for air transportation, which is considered "special cases". Based on the FOB value of the goods, the average of these rates does not exceed 2% by road, 3% by sea and 5% by air.
As a matter of fact, the first sector to rebel against the "precedent 10% freight, 3% insurance" regulation was the jewelers trading in "gold"; With the amendment to the regulation published in the Official Gazette No. 27369 dated 07.10.2009, the following phrase was added to the 9th paragraph of Article 51: “However, if the insurance policy or freight invoice of the goods (gold) in tariff heading 71.08 cannot be submitted, provided that there is no tax loss. "The transactions are completed based on the delivery method specified in the invoice of the goods."
When all these issues are evaluated together, it would be appropriate to change the "10% precedent freight" regulation to "5% precedent freight" in order to prevent further victimization of Turkish entrepreneurs who import products with high added value per kilogram.
The issue is even more tragicomic in terms of "impact insurance". In this regard, we will need to dive into quarters, half cents and cents to calculate the insurance expense per kilogram. For this reason, we will only give the ratio of the real amounts in the insurance policies submitted to the customs administration to the FOB amount of the goods. But first, it is useful to look at a few examples of how much insurance per kilogram is purchased when 3% equivalent insurance is purchased for existing imports.
Based on 3% equivalent insurance, it is necessary to insure per kilogram by road for 48 dollars from England and 5.2 dollars from Norway; It is necessary to insure by sea for 187 dollars from South Korea, 3 dollars from China, 6.5 dollars from the USA, 4 dollars from Singapore, and 3 dollars from the United Arab Emirates; The result is that airline insurance should be purchased for 33.8 dollars from Indonesia and 14 dollars from the USA. Therefore, the question that comes to mind is “Did I choose the wrong profession? “Should I be an insurer?” questions are coming.
However, when we look at the insurances made in the real world and the policies submitted to the customs authorities, the insurance amount is 0.1% of the FOB value of the goods brought to Turkey by road, 0.1% for France, 0.9% for Norway and 0.2% for Germany. 0.1% for Italy, 0.01% for the Czech Republic, 0.2% for Spain, 0.3% for Norway, 2% for Luxembourg, 0% for the Netherlands, 08%, 0.01% for Sweden, 0.7% for Slovakia and 0.8% for Bulgaria.
The insurance amount can reach up to 0.13% of the FOB value of the goods brought to Turkey by sea, 0.13% for China, 0.7% for Taiwan, 7% for Sri Lanka and 0.4% for Malta.
Likewise, the insurance amount can reach 0.1% of the FOB value of the goods brought to Turkey by air, 0.1% for China, 1% for Romania, 0.2% for Belgium and 0.2% for Myamar.
In other words, except for goods with very special characteristics, premiums related to freight insurance do not reach even 1% of the FOB value of the imported goods, and can be at the level of one thousandth or one ten thousandth of this value. In this regard, it is thought that it would be appropriate to change the "precedent 3% insurance" regulation to "precedent 1% insurance" regulation.
In short, in order for foreign traders to get out of the vortex of economic difficulties even for a moment and breathe easily, the 10% comparable freight rate in the 9th paragraph of Article 51 of the Customs Regulation will be reduced to 5% and the 3% comparable insurance rate will be reduced to 1%. The reduction stands in the middle as an industry expectation.
