Today's economic system, where many restrictions and prohibitions have been vitiated considerably, enables almost every product to be imported and exported on a global scale. The customs tariff, one of the most important elements of the external economy, is a list that provides a definite specification of taxes to be applied to each and every product that is subject to international trading. The essential objective of the customs tariff is to track, identify and distinguish tens of thousands of different products in order to properly carry out the customs rules in their defined, correct and precise way. Customs duties and operations in relation to imported goods are determined and calculated in accordance with the classifications in the mentioned customs tariff.
In Turkey, these classifications are being implemented by the customs authorities through a tariff system called the Customs Tariff Statistics Positions ("GTIP") which is a modified form of the World Customs Organization's standardized tariff system, Harmonized System ("HS"). The GTIP employs a twelve-digit coding for identification and classification of imported and exported goods for the purpose of compiling trade statistics and determining customs tariff.
Such classification is also critical in terms of customs restrictions and exemptions in the customs regime of Turkey to which imported goods are subjected. However, since classifying imported goods, which consist of many different fundamental components, is sometimes difficult; the classification can itself become misleading and cause several tax obligations for tax payers. The accuracy of the classification is deemed a significant factor in terms of tax liabilities due to the fact that any misclassification can impose tax obligations on the importers which then will cause importers to incur substantial damages. Furthermore, in the event that a tax deficiency occurs as a result of the misclassification of the imported goods, the taxpayers then will be subject to criminal investigations in relation to what would be perceived as a purported smuggling event.
On the other hand, even if tax evasion does not take place as a result of misclassification, the tax payers can be confronted by tax irregularity fines as well. It may be argued that the tax irregularity fines per customs declarations will not be exorbitant amounts. However, for international companies that import a high volume of products through multiple custom declaration forms, , the potential damages could be substantial.
Therefore, to ensure that the holders are not confronted with such problems and the imported goods are classified properly and correctly, the importers and exporters in Turkey are given the right to ask, in advance, for official information regarding the correct tariff classification for their goods from the General Directorate of Customs. After submitting their declaration form, they will be able to securely carry out their importation activities in accordance with this information.
The procedure helping the importers having difficulties in classifying the goods is called a "Binding Tariff Information" ("BTI") which is regulated under Article 9 of the Customs Law numbered 4458. It is an administrative tariff classification decision which is given upon written request by the Undersecretariat of Customs (the "Undersecretariat") and intended to give assurance about the correct tariff classification of the goods imported and exported. The BTI is legally binding on all customs administrations for up to six years from the date of issue.
The main benefit of obtaining a BTI is that it provides certainty of the correct code for the goods to be imported under. In addition, a BTI provides the holder with information as to his legal obligations with respect to the correct tariff classification and ensures that his liabilities and rights for tax related duties are known in advance. Furthermore, a BTI is also an informative tool for educating/enlightening the holder about any licensing requirements, quotas or other quantitative restrictions that are applicable to his goods.
This is why we suggest the importers and exporters obtain a BTI in order to avoid any legal and criminal obligations that may arise in the future due to false classification. In fact, even in the case where the classification made in accordance with the obtained BTI is false, this will not impose any sanctions on the importers because they will be under the protection of the binding character of a BTI.
Moving on from the legal nature and purpose of a BTI, there is another tool the customs authorities use for the correct classification of goods under Turkish law that is called the Customs Laboratory Analysis Report ("CLA"). In some cases, the importers are given the right to obtain an official analysis report from the customs laboratories. In several special cases, however, the importers are obliged to apply for the CLA to carry out examinations on the classification of the imported goods in accordance with the Turkish customs regulations.
According to Article 6 of the Regulation Concerning the Activities of the Customs Laboratories published on the Trade Registry Gazette numbered 27392 on October 31, 2009 (the "Regulation"), the primary duty of the Customs Laboratories is to determine the identity and the class of the imported goods within the scope of the Turkish Customs Tariff and to specify the customs tariff positions of the imported goods. The purpose of the laboratory analysis is to determine the content of the imported goods and to confirm the compliance of the content and the composition with the local regulations.
In fact, The control certificates of the relevant customs authorities are also taken into consideration in the CLA reports regarding several products such as pharmaceutical products and food products. However, even if the main objective of the CLA is the determination of the content and the confirmation of the content per the regulations, it also sets forth which GTIP class the analyzed product must correspond to in consideration of its content and its composition. Therefore, it can simply be stated that the CLA has content confirmation and GTIP determination functions.
To that effect, it is clearly stated in the relevant regulations that importers cannot make any applications for a BTI for the products which must be subject to a CLA. In fact, according to the communiqués published by the Directorate of Customs (Communique Serial No. 9 regarding the Amendment to the Customs General Communiqué published on the Official Gazette No. 26554 on 16.06.2007 and Article 8 of the Amended Customs General Communiqué Serial No. 1), it is stated that it is not possible to apply for a Binding Tariff Information for goods which are listed in the Appendix of the Customs Regulation. The foods which are deemed out of the scope of a BTI application are listed in Annex 23 of the Customs Regulation published in the Official Gazette dated October 7, 2009 numbered 27369.
In fact, Article 196 and the following articles of the Customs Regulation states "a laboratory examination should be performed for the goods mentioned or the type, category and qualification of the goods, namely its position within the Turkish Customs Tariff cannot be determined by the examination officer, such good must be sent to the Customs Laboratory for laboratory examination." Considering that apart from some exceptions, counted under Appendix 23 of the Customs Regulations, it is beyond dispute that the Customs Laboratory should define the product in accordance with the tariff terminology apart from examining their content. Having reviewed Appendix 23 of the Customs Regulation, products such as sugar, honey, pastry products and several chemicals cannot be subjected to any BTI application.
The fact that importers who should put their goods under lab analyses cannot apply for a BTI suggests that CLA reports have the same effect as a BTI. That means simply that: firstly, the Customs Laboratory Analysis reports are deemed to be as binding as the BTI and secondly, in terms of several products, the importers have no other alternative but to comply with the Customs Laboratory Analysis Report, which is also the administratively determining factor for classification of goods.
However, in contradiction to what the customs laws and regulations clearly indicate in Turkish customs practice, the customs authorities do not consider the Customs Laboratory reports as legally binding documents from a classification perspective as opposed to BTIs.. Accordingly, when they find classification failures in relation to the imported goods which were passed through the CLA they directly impose, without considering that a CLA has the same effect as a BTI, additional tax assessments, tax fines or tax irregularity fines on the importers and even file criminal complaints due to smuggling if and when necessary.
While the Turkish customs authorities regard the issues of the practice and function of the CLA and BTI in respect to classification as mentioned above, it should also be borne in mind that the administrative and tax courts have not set any precedents on the issue yet.
Therefore, the importers whose products are going through the CLA should be very careful and make their own thorough evaluations without relying on the determinations made in the CLAs in respect to the classification of the goods imported because, against the clear wording of the customs laws and regulation in place, the customs office interprets the CLA's classification quite narrowly which may give rise to retrospective additional tax liabilities, fines and criminal implications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.