TURKEY Rules of Origin REPUBLİC OF TURKEY MINISTRY OF CUSTOMS AND TRADE Directorate General of EU and External Relations TURKEY Rules of Origin Muzaffer KÜÇÜK EU Expert

RULES OF ORIGIN IN GENERAL Trade Preferential System among the member states of the OIC (TPS-OIC) is one of the most important projects of the COMCEC to foster intra-OIC trade. The System was constructed on three pillars which are the Framework Agreement, the Protocol on Preferential Tariff Scheme (named PRETAS) and the Rules of Origin.

Originating in TURKEY ORIGIN = ECONOMIC NATIONALITY OF THE GOODS vegetable products grown and harvested in Turkey - live animals born and raised in Turkey - mineral products extracted from the soil or seabed in the Turkey Originating in TURKEY Trade Preferential System among the member states of the OIC (TPS-OIC) is one of the most important projects of the COMCEC to foster intra-OIC trade. The System was constructed on three pillars which are the Framework Agreement, the Protocol on Preferential Tariff Scheme (named PRETAS) and the Rules of Origin.

Why do we need the concept of origin? Calculation of customs duties while importing the goods - Implementation of trade policy measures (surveillance and safeguard measures, quotas, anti-dumping duties etc.) - Statistical data for External Trade

TURKEY Country of export is not always the country of origin! EUROPEAN UNION COUNTRY OF ORIGIN SWITZERLAND COUNTRY OF EXPORT Goods produced and originating in EU are exported to Switzerland and then reexported to Turkey. Even if the country of export is Switzerland, the origin of the goods is still the EU. When a good/material is imported from third countries by paying customs duties, which refer to free circulation of the good, it does not mean that the good will gain originating status directly. Change of tariff heading of the material which is on the free circulation and used in the production of the good exported, does not always provide originating status. TURKEY

TURKISH LEGISLATION ON THE RULES OF ORIGIN

surveillance and safeguard measures, quotas, anti-dumping duties etc NON-PREFERENTIAL RULES OF ORIGIN PREFERENTIAL RULES OF ORIGIN surveillance and safeguard measures, quotas, anti-dumping duties etc Certificate of Origin Customs Law and Regulation Reduction or exemption from customs duties EUR.1-EUR-MED Movement Certificate, Invoice Declaration, EUR-MED Invoice Declaration Form A and Origin Declaration Protocol on Rules of Origin Annex to FTA’s. Article 22 in the Customs Law Regulations related to Protocols on Rules of Origin. Council of Ministers’ Decisions for GSP and Kosova There are two main pillars in Turkish legislation on the rules of origin; preferential and non-preferntial. Nnon-preferential rules of origin are appllied for the trade policy measures, the necessary document is the certificate of origin annexed to our customs regulation. ALL non-preferential rules of origin inclluded in our customs law and the implementing provisions of the law. The main part of origin legislation is on the preferentail one. Because we are talking about preferential trade and reduction and exemption from customs duties.

ULTIMATE OBJECTIVE: CUSTOMS UNION TURKEY-EU CUSTOMS UNION ANKARA AGREEMENT 12 SEPTEMBER 1963 ULTIMATE OBJECTIVE: CUSTOMS UNION PREPARATORY PERIOD (1963-1973) TRANSITIONAL PERIOD (1973-1995) (Additional Protocol – 13 November 1970) FINAL PERIOD (31 December 1995-…) (Decision No. 1/95 of Turkey-EU Association Council – 6 March 1995) There is no provision on the preferential rules of origin in our customs law and regulation other than Article 22.

TURKEY-EU CUSTOMS UNION MAIN PROVISIONS OF TURKEY-EU CUSTOMS UNION Trading of goods between EU and Turkey without any customs duties and quotas Common external tariffs on imports from third countries (Community Common Customs Tariff) Basic principle Free Movement of Goods TR-EU Customs Union covers; industrial goods and processed agricultural goods For agricultural goods; Preferential trade regime based on rules of origin. Decision No.1/98 of Turkey-EU Association Council. For European Coal and Steel Community goods; ECSC- Turkey Free Trade Agreement of 1996 has been in force. There is no provision on the preferential rules of origin in our customs law and regulation other than Article 22.

TURKEY-EU CUSTOMS UNION WHICH GOODS ARE CONSIDERED TO BE IN FREE CIRCULATION? Goods completely obtained or produced in the Community or in Turkey. Goods coming from third countries if; -the import formalities are completed, - if customs duties are collected in Turkey or in Community, -if the goods in question have not benefited from a total or partial reimbursement of duties or charges There is no provision on the preferential rules of origin in our customs law and regulation other than Article 22.

CUSTOMS UNION + TURKEY-EU CUSTOMS UNION The framework of customs union established in 1996 goes far beyond the classical concept of a customs union. Alignment to common commercial policy (preferential trade agreements of EU and GSP) (Article 16) Alignment of Customs Provisions (Article 28) Approximation of Laws (in the area of intellectual property rights and competition, public procurements, indirect and direct taxes) Turkey signed 19 Free Trade Agreements in parallel to EU’s FTAs. (EFTA, Israel, Macedonia, Croatia, Bosnia and Herzegovina, Palestine, Tunisia, Morooca, Sryia, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Jordan, Lebonan, Mauritius ve South Korea) Turkey’s GSP system has been in harmony with EU’s system since 2004 Article 28 of Customs Union Decision (Turkey shall align its customs legislation with Community Customs Code and Community system of relief from Customs Duties Turkish Customs Law was prepared in line with CCC and published in 2000. With the amendment of 2009, Turkish Customs Law is harmonized with Council Regulation 648/2005 (safety and security regulations; risk management, electronic pre-arrival and pre-departure declarations and AEOs) A new Draft Customs Law is in the process of preparation which is compatible with Union Customs Code of EU.

EU-TURKEY PREFERENTIAL TRADE Industrial products and processed agricultural products Agricultural products Coal and steel products Decision No. 1/95 of Association Council Decision No. 1/98 of Association Council FTA of 1996 Free Movement (not based on rules of origin) Based on preferential rules of origin A.TR Movement Certificate EUR.1 and EUR-MED Movement Certificates Turkey signed 19 Free Trade Agreements in parallel to EU’s FTAs. (EFTA, Israel, Macedonia, Croatia, Bosnia and Herzegovina, Palestine, Tunisia, Morooca, Sryia, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Jordan, Lebonan, Mauritius ve South Korea) Turkey’s GSP system has been in harmony with EU’s system since 2004 Article 28 of Customs Union Decision (Turkey shall align its customs legislation with Community Customs Code and Community system of relief from Customs Duties Turkish Customs Law was prepared in line with CCC and published in 2000. With the amendment of 2009, Turkish Customs Law is harmonized with Council Regulation 648/2005 (safety and security regulations; risk management, electronic pre-arrival and pre-departure declarations and AEOs) A new Draft Customs Law is in the process of preparation which is compatible with Union Customs Code of EU.

INTERNATIONAL ARRANGEMENTS ON PREFERENTIAL RULES OF ORIGIN Mutual Concessions Free Trade Agreements Preferential Trade Agreements Decision No 1/98 on the preferential trade of Agricultural Products with EU Unilateral Concessions - Generalised System of Preferences(GSP) -Kosova

OUR FTA PARTNERS EFTA Countries (Iceland, Norway, Switzerland & Liechteinstein) Israel EU (ECSC and agriculture) Macedonia Bosnia-Herzegovina Morocco Palestine Tunisia Syria (suspended) Egypt Georgia Albania Montenegro Serbia Jordan Chile S. Korea Mauritius Lebanon, Malaysia(signed, not entered into force yet) Moldova, Ghana (initialed)

OUR PTAs IRAN (entered into force as of 1st January 2015) ECOTA (to be entered into force) TPS-OIC(to be entered into force) D-8(to be entered into force) Bangladesh (ongoing)

ONGOING FTA NEGOTIATIONS Mexico Singapore Peru Japan Ukraine Colombia Ecuador Faroe Islands Cameroon Congo D.R Seychelles Mercosur Gulf Cooperation Council

TURKISH LEGISLATON ON PREFERENTIAL RULES OF ORIGIN THERE ARE 7 REGULATIONS AND 2 COUNCIL OF MINISTERS’ DECISION AND 1 COMMUNIQUE RELATED TO PREFERENTIAL RULES OF ORIGIN IN OUR LEGISLATION

TURKISH LEGISLATON ON PREFERENTIAL RULES OF ORIGIN REGULATION ABOUT BILATERAL CUMULATION ON PREFERENTIAL TRADE SYSTEM(GEORGIA and PALESTINE) REGULATION ON PAN-EURO-MED PREFERENTIAL RULES OF ORIGIN(EU, EFTA, EGYPT, MOROCCO, TUNISIA, ISRAEL, SYRIA, JORDAN) REGULATION ON THE WESTERN BALKANS PREFERENTIAL RULES OF ORIGIN (EU, MACEDONIA, MONTENEGRO, SERBIA, ALBANIA, BOSNIA-HERSEGOVINA)

4) REGULATION ON THE BILATERAL CUMULATION WITH CHILE TURKISH LEGISLATON ON PREFERENTIAL RULES OF ORIGIN 4) REGULATION ON THE BILATERAL CUMULATION WITH CHILE 5) REGULATION ON THE PREFERENTIAL RULES OF ORIGIN WITHIN THE CONTEXT OF TURKEY-S.KOREA FTA 6) REGULATION ON THE PREFERENTIAL RULES OF ORIGIN WITHIN THE CONTEXT OF TURKEY-MAURITIUS FTA

TURKISH LEGISLATON ON PREFERENTIAL RULES OF ORIGIN 7) THE COUNCIL OF MINISTERS’ DECISION ON GSP RULES OF ORIGIN 8) COMMUNIQUE ON THE LIST OF BENEFICIARY COUNTRIES TO WHICH GSP SCHEME WILL APPLY 9) REGULATION ON THE IMPLEMENTATION OF THE BILATERAL CUMULATION UNDER GSP 10) THE COUNCIL OF MINISTERS DECISION ON THE GOODS TO WHICH PREFERENTIAL TARIFF MEASURES ADOPTED UNILATERALLY (Kosova) 11) REGULATION ON THE PREFERENTIAL RULES OF ORIGIN WITHIN THE CONTEXT OF TURKEY-IRAN PTA (TO BE ENTERED INTO FORCE SOON)

-BILATERAL CUMULATION CUMULATION OF ORIGIN -BILATERAL CUMULATION -DIAGONAL CUMULATION Cumulation allows products that have obtained originating status in one partner country to be further processed or added to products originating in another participating country as if they had originated in that latter country, without the finished product losing the benefit of preferential customs tariffs. It can only be applied between countries operating with identical origin rules.  The working or processing carried out in each partner country on originating products does not have to be ’sufficient working or processing’ as set out in the list rules.

Bilateral Cumulation S.KOREA TURKEY SHIRT EUR.1 FABRIC EUR-1 Bilateral cumulation operates between two countries where a free trade agreement or autonomous arrangement contains a provision allowing them to cumulate origin. This is the basic type of cumulation and is common to all origin arrangements For Example: Turkey-S.Korea Free Trade Agreement

PAN-EURO-MED(PEM) SYSTEM Diagonal Cumulation Pan-Euro Countries European Union Turkey EFTA Countries PAN-EURO-MED(PEM) SYSTEM Mediterranean Countries Egypt* Syria* Palestine Jordan * Morocco* Lebanon Tunisia* Algeria Israel* And Faroe Islands

EUR.1 Movement Certificate EUR-MED Movement Certificate PROOFS OF ORIGIN ON PEM SYSTEM EUR.1 Movement Certificate EUR-MED Movement Certificate Invoice Declaration EUR-MED Invoice Declaration Cumulation allows products that have obtained originating status in one partner country to be further processed or added to products originating in another participating country as if they had originated in that latter country, without the finished product losing the benefit of preferential customs tariffs. It can only be applied between countries operating with identical origin rules.  The working or processing carried out in each partner country on originating products does not have to be ’sufficient working or processing’ as set out in the list rules.

What is the difference between EUR.1 and EUR-MED? PAN-EURO SYSTEM; Same rules of origin for all parties. (NO drawback rule) Existence of FTAs between all parties 2. PAN-EURO-MED SYSTEM; Diffrent rules on bilateral trade. (Implementation of drawback rule on bilateral trade) Non-existence of FTAs between all the Parties.

(Pan-Euro-Med Preferential Rules of Origin) Diagonal Cumulation SWITZERLAND TURKEY EFTA EGYPT (Pan-Euro-Med Preferential Rules of Origin) EUR.MED Shirt Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between them. As with bilateral cumulation, only originating products or materials can benefit from diagonal cumulation. For Example: Pan-Euro-Mediterranean Cumulation Zone TURKEY Fabric EUR.MED EGYPT

VARIABLE GEOMETRY EUR.MED Fabric EUR.MED Shirt MOROCCO EU TURKEY The shirt can not be exported to Syria with a proof of origin under Syria-Turkey in the slide, there is a full network of FTA between the partner countries except Syria. Syria only has FTA with Tunisia. Each country states the country with which the cumulation is applicable. Since Syria has not an agreement with the countries of cumulation except Tunisia, it is not possible to re-export goods from Tunisia to Syria on cumulation basis. SYRIA

WESTERN BALKAN SYSTEM (SAP CUMULATION) Diagonal Cumulation WESTERN BALKAN SYSTEM (SAP CUMULATION) European Union Turkey Macedonia Albania Bosnia-Herzegovina Serbia Montenegro Efta countries not included. Moreover, Turkey is included as for the goods covered by the customs union.Therefore, ECSC AND AGRİCULTURAL PRODUCTS are out ıf the scope of this system in the context of trade between Turkey and the EU. Eur-1+invoice declaration

(Pan-Euro-Med Preferential Rules of Origin) Diagonal Cumulation (Western Balkans) MACEDONIA TURKEY ALBANIA MACEDONIA (Pan-Euro-Med Preferential Rules of Origin) Shirt EUR.1 TURKEY Fabric EUR.1 Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between them. As with bilateral cumulation, only originating products or materials can benefit from diagonal cumulation. ALBANIA

REGIONAL CONVENTION ON PAN-EURO-MEDITERRANEAN PREFERENTIAL RULES OF ORIGIN Western Balkans cumulation – TR, EU, Western Balkan partners PEM cumulation - 16 parties: EU, TR, Faroe Islands, EFTA States, Mediterranean Countries More than 60 Free Trade Agreements (FTA) between these partners • Each containing a Protocol setting identical rules of origin • Modifying rules of origin requires changing all the Protocols

REGIONAL CONVENTION ON PAN-EURO-MEDITERRANEAN PREFERENTIAL RULES OF ORIGIN The PEM Convention: A single text on RoO, which replaces each Protocol in each FTA diagonal cumulation of origin on a single legal instrument. No more separate protocols on RoO. easier revision and update of RoO. entire Western Balkan region into in the panEuro-Mediterranean zone of diagonal cumulation. accession of neighbouring countries in the panEuro-Mediterraneancumulation zone. extended opportunities for cumulation

Preconditions to Benefit from Preferential Regime Being within the scope of the Agreement, Being originating within the framework of rules defined by the Agreement Having a valid proof of origin showing originating status of the good, Being directly transported of the good from the Contracting Party. Efta countries not included. Moreover, Turkey is included as for the goods covered by the customs union.Therefore, ECSC AND AGRİCULTURAL PRODUCTS are out ıf the scope of this system in the context of trade between Turkey and the EU. Eur-1+invoice declaration

Products wholly obtained in Turkey: WHOLLY OBTAINED PRODUCTS Products wholly obtained in Turkey: - Mineral Products extracted from their soil or from their seabed - Vegetable Products harvested therein - Live animals born and raised therein UNDER ANY legislation in the world, without any doubt, these goods are originating in Turkey.

2. Using materials that have originating How is the originating status of the good determined when using non- Turkish originating materials ? 1. Using materials that have originating status of Contracting Party in the production of the good 2. Using materials that have originating status of third country in the production of the good UNDER ANY legislation in the world, without any doubt, these goods are originating in Turkey.

Bilateral Cumulation: Turkey-Chile FTA (only Turkey and Chile) Contracting/Non-Contracting Parties? Bilateral Cumulation: Turkey-Chile FTA (only Turkey and Chile) Diagonal Cumulation: Pan-Euro-Med Preferential Rules of Origin (Ex. Turkey-EU-Egypt) Non-contracting Party: all other 3rd countries excluded from the Cumulation UNDER ANY legislation in the world, without any doubt, these goods are originating in Turkey.

If only the materials originating in the contracting parties are used in the production Is working or processing made in Turkey beyond insufficient working and processings? Y Originating in Turkey N Is value added in Turkey the highest one compared to the value of the materials originating in each of the contracting parties? UNDER ANY legislation in the world, without any doubt, these goods are originating in Turkey. Y N Originating in the country materials of which have the highest value in the final product originating in Turkey

Insufficient Workings or Processings - preserving operations to ensure that the products remain in good condition during transport and storage; - breaking-up and assembly of packages; - washing, cleaning; removal of dust, oxide, oil, paint or other coverings; - ironing or pressing of textiles; - simple painting and polishing operations; - sharpening, simple grinding or simple cutting; - simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other simple packaging operations; - affixing or printing marks, labels, logos and other like distinguishing signs on products or their packaging; - simple mixing of products, whether or not of different kinds, - slaughter of animals. So, what are the insufficient workings or processings? They are stipulated in Article 7 of our Origin Protocols. Here also you can see the major workings or processings that can not be considered as conferring the originating status.

If the materials originating in a third country used in the production If the materials originating in a 3rd country satisfy working or processings stipulated in Annex II to Protocols on Rules of Origin of FTA’s? (sufficiently worked or processed) Y Originating in Turkey N The final products can not be exported from Turkey to the contracting party under FTA. Products obtained by non-originating materials should be sufficiently worked or processed in one party. The goods can not acquire originating status

ANNEX II (List Rules) Alternative rule HS heading Description of product Working or processing, carried out on non-originating materials, which confers originating status (1) (2) (3) or (4) Chapter 2 Meat and edible meat offal Manufacture in which all the materials of Chapters 1 and 2 used are wholly obtained 4407 Wood sawn or chipped lengthwise, sliced or peeled, of a thickness exceeding 6 mm, planed, sanded or end-jointed 8411 TurbojTurbo-jets, turbo-propellers and other gas turbines etler, Manufacture: - from materials of any heading, except that of the product, and - in which the value of all the materials used does not exceed 40 % of the ex-works price of the product Planing, sanding or end-jointing Alternative rule Manufacture in which the value of all the materials used does not exceed 25 % of the ex-works price of the product - Üçüncü ülke menşeli girdi kullanılmıyor ise EK II – Liste Kurallarına bakmaya gerek yok - Üçüncü ülke menşeli girdi kullanılıyor ise EK II – Liste Kurallarının MUTLAKA karşılanması gerekli Ex-works price means the price paid for the product ex-works to the manufacturer in whose undertaking the last working or processing is carried out, provided the price includes the value of all materials used, minus any internal taxes, which are or may be repaid when the product is exported

Ex-Works/Ex-Factory Price-Factory Gate Price Originating materials (proof of origin by suppliers declaration or own bookkeeping) - Non originating materials (the customs value at the time of importation) - Wages (Labour costs) - Profits - Overheads (e.g. administrative, selling, marketing expenses) - Costs regarding the IPR’s Ex-works price includes

Ex-Works/Ex-Factory Price-Factory Gate Price Ex-works price does not include; Internal taxes (repaid when the end-product is exported) - Costs of transporting the end-product to the customer I mean it does not include expenses incurred once the goods leave the factory. That’s why invoice prices that are quoted FOB or CIF are not true ex-works prices.

THANKS FOR YOUR ATTENTION +90 312 449 28 24 m.kucuk@gtb.gov.tr