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Customs Union

The “final phase” envisaged in the Ankara Agreement was to complete the establishment of a customs union between the EC and Turkey. On 6 March 1995, the Association Council adopted a “Customs Union Decision (Decision No 1/95)” on implementing the final phase of customs union between Turkey and the EC. Thus, 22 years of “transition phase” envisaged in the Additional Protocol ended as of 1st. January 1996 and the final phase was initiated on the way to accession of Turkey to EU.  

Decision No 1/95 of the Association Council imposed stronger obligations than the obligations stated in the definition of customs union in the Ankara Agreement. According to the Article 10 of the Agreement, customs duties on imports and exports and all charges having equivalent effect, quantitative restrictions and all other measures having equivalent effect which are designed to protect national production in a manner contrary to the objectives of this Agreement between the member States of the Community and Turkey shall be prohibited. Also, Turkey commits to adopt the Common Customs Tariff of the Community in its trade with third countries and approximate to the other Community rules on external trade.

According to Decision No 1/95 of the Association Council, customs union not only covers abolition of customs duties and all other measures having equivalent effect and adoption of Common Customs Tariff of the Community, but also stipulates the abolition of all distortive mechanisms that results unfair advantage over the other party. In line with this approach, Turkey is obliged to approximate its laws to the EU acquis in competition, intellectual property and common trade policy areas as well as free movement of goods area.

Decision No 1/95 of the Association Council comprises the following Chapters:

• Free movement of goods and commercial policy
• Agricultural products
• Customs provisions
• Approximation of laws
• Institutional provisions
• General and final provisions

Turkey’s obligations stemming from the Decision No 1/95 can be classified under two headings:

1-Obligations related to Free Movement of Goods

Turkey EU Customs Union covers only industrial products and processed agricultural products. Certain association council decisions are applied to agricultural products and for coal and steel products a preferential agreement is applied. According to free movement principle, products produced in the Community or Turkey, including those wholly or partially obtained or produced from products coming from third countries which are in free circulation in the Community or in Turkey,  products from third countries shall be considered to be in free circulation in the customs area of customs union (Community + Turkey) if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in the Community or in Turkey, and if they have not benefited from a total or partial reimbursement of such duties or charges. Based on free movement principle, obligations that Turkey should fulfill for the functioning of Customs Union are as follows:

• Import or export customs duties and charges having equivalent effect shall be wholly abolished between the Community and Turkey on the date of 31 December 1995
• On the date of 31 December 1995, Turkey shall, in relation to countries which are not members of the Community, align itself on the Common Customs Tariff.
• In relation to trade in processed agricultural products, by determining industry and agriculture proportion of products in Annex 1 of the Decision, duties on industrial part of total protection has been abolished.
• Within five years from the date of entry into force of the Decision, Turkey shall incorporate into its internal legal order the Community instruments relating to the removal of technical barriers to trade.
• Quantitative restrictions on imports and exports and all measures having equivalent effect shall be prohibited between the Parties.

2-Obligations related to Legislation Alignment

According to article 8 of Association Council Decision No 1/95, within five years from the date of entry into force of this Decision, Turkey shall incorporate into its internal legal order the Community instruments relating to the removal of technical barriers to trade. List regarding Community instruments was determined by Association Council Decision No 2/97 and thereby technical legislation adoption efforts started.

According to article 54 of Association Council Decision No 1/95, in areas of direct relevance to the operations of the Customs Union, Turkish legislation shall be harmonized as far as possible with Community legislation.  In the second paragraph of that article areas of direct relevance to the operation of the Customs Union are stated as follows:

• community commercial policy and preferential trade agreements with third countries
• legislation on the abolition of technical barriers to trade in industrial products
• competition
• industrial and intellectual property law
• customs legislation.

As of 1 January 1996, Turkey started to abolish customs duties on industrial goods and adopted the Common Customs Tariff of the Community in its trade with third countries. Certain exceptions foreseen in the Decision are eliminated eventually and for the processed agricultural products, duties on industrial part of total protection have been abolished. Besides, due to the obligations stemming from the Association Council Decision No 1/95, Turkey’s foreign trade regime is aligned with the EU Customs Code to a large extent. In this context, EU acquis on technical legislation, intellectual and industrial property rights, competition policy as well as EU legislation on free movement of goods and common commercial policy is taken into consideration and reflected in our foreign trade regime. Studies carried out within the framework of the obligations stemming from the customs union can be summarized as follows: 

• Alignment to trade policy and preferential trade agreements with third countries

According to article 12 of Association Council Decision No 1/95, Turkey has aligned to common rules for import, common rules for import from certain countries, rules for administration of quantitative restrictions, rules for measures against  unfair commercial practices, common rules for export, determination and administration of quota and tariff quota on export, quantitative restrictions imposed to third countries in textile sector, inward and outward processing regime rules since 1 January 1996. According to article 16 of Association Council Decision No 1/95, in order to align Common Trade Policy, Turkey started to sign Free Trade Agreements (FTA) with the countries that EU concluded FTA.

• Abolition of technical barriers to trade in industrial products

Important steps have been taken related to EU technical legislation alignment, so far a significant part of technical legislation has been aligned. Number of Turkish Notified Bodies that make certification of products in the scope of legislation required CE marking is gradually increasing.

• Alignment to competition policy and intellectual property law

Approximation of laws in the competition and intellectual property rights area started before the establishment of customs union, in this context Turkish Competition Authority and Turkish Patent Institute were established.

As regards competition policy, level of alignment with the acquis is advanced in the anti-trust and mergers area. Regarding the state aids which is the other element of the competition policy, alignment process accelerated during the talks to open the Competition Policy chapter to the negotiations. In this context, Law No: 6015 on “Monitoring and Supervision of State Aids” was adopted. The Law No 6015 also established a competent authority and a unit within the Undersecretariat of Treasury for the monitoring and supervision of state aids.

Concerning intellectual property rights, Turkey acceded to certain multilateral conventions on literary and artistic works, performers, broadcasting organizations etc. in order to align with the international norms. Also, a variety of regulations were enacted for the approximation of laws to the EU acquis in this area. Besides, in order to ensure effective protection for industrial property rights in compliance with the EU acquis, international norms and especially with the TRIPS (The Agreement on Trade-Related Aspects of Intellectual Property Rights), various regulations on trademarks, designs and patents were entered into force.

• Alignment to customs legislation

Turkey aligned to EU customs legislation to a large extent. Thus alignment has been achieved in the following areas that require common implementation for the proper functioning of customs union: origin, customs value, entrance of goods into customs area, customs declaration, free movement right, customs regimes with economic impact, movement of goods, customs debt/obligation, and right of objection. Since 1996 when customs union was put into effect, as a result of alignment efforts Turkey has reached to an advanced level on legislation alignment in this field.

Update of the Customs Union

Owing to the economic developments and changes realised both in Turkey and the world trade since its introduction and the problems stemming from implementation, revision of the Customs Union has become a necessity. In this context, upon the agreement of Turkish and EU sides on the revision at Ministerial level, a series of technical meetings were held and a framework was adopted. It is essential that the revision process should proceed without creating an alternative path to Turkey’s EU membership.

The negotiations are expected to start within the last quarter of 2016. Until then the parties will conduct their internal preparations.

Source: http://www.ab.gov.tr/index.php?p=46234&l=2

To view problems faced and solutions prposed also check the World Bank's Report (Rapor No. 85830-TR) published on  March 8, 2014 at : 

For the report see : http://www.worldbank.org/content/dam/Worldbank/document/eca/turkey/tr-eu-customs-union-tr.pdf