City view of Istanbul, in Turkey

What you Need to Know About the UK-Turkey Trade Agreement

This guest blog is brought to you by Chamber International focusing on the new opportunities for UK businesses arising from the UK-Turkey Trade Agreement. Chamber International provide international trade support for businesses of all sizes throughout the UK. Enterprise Growth Solutions work with several Chambers of Commerce across the Yorkshire and Humber Region. To find out more about your local Chamber of Commerce can support your business here.

Key market opportunities for UK businesses

Turkish Flag in front of blue sky waving in the windAs the UK is no longer part of the EU Customs Union, or EU-Turkey Customs Union, the requirements for British companies trading with Turkey have changed radically since 1 January 2021.
However, a Trade Agreement (TA) regulating UK and Turkey trade with preferential import tariff arrangements for goods originating in either country, was negotiated between the UK and Turkey and took effect on the same day.

This has led to increased opportunities for businesses to collaborate on projects not only in Turkey but also across in wider regions such as the Middle East and North Africa (MENA) and the Eastern Europe and Central Asian Network (EECAN).

The UK-Turkey TA is based on arrangements in the EU-Turkey Customs Union and preferential EU agreements with Turkey on coal, steel and agriculture. Both countries have transferred these into the UK-Turkey TA by combining provisions in several distinct EU-Turkey arrangements into one modernized TA. This has created a more straightforward, easily understood agreement, which better reflects modern trading practices.

UK-TR trade has grown by 70 per cent during the last decade, and in 2019, before the Covid-19 pandemic, was worth nearly £19bn will now be bolstered by this new Trade Agreement
The UK-Turkey TA is just a first step with both countries wanting to work towards a more comprehensive, ambitious TA which is likely to include, among other sectors, agricultural goods, services, investment and the digital economy.

Many different sectors of the Turkish economy present real opportunities for British exporters including healthcare, advanced manufacturing, financial services, IT and automotive and it is anticipated that a second phase of the TA, proposed in the near future, will play an even more important role in bilateral trade between the two countries.

Businesses should monitor closely technological developments and integration to other industries such as digital manufacturing, agri-tech, smart cities and renewable energy which will also be critical trade areas.

A new era for UK-Turkey  trade and documentation

When the UK was in the EU and hence the EU-Turkey Customs Union, goods could move freely between the two countries using an A.TR certificate, showing that the goods were in ‘free circulation’ in the EU or Turkey whatever their country of origin.

Now that the UK has left the EU, it is no longer enough for goods to be in free circulation in one of the countries, and an A.TR certificate cannot be used, as there is no legal basis for them. Therefore they will not be accepted as proof of origin and will not provide access to preferential treatment. Instead, the onus is on businesses to present proofs of origin for preferential trade between the UK and Turkey.

One matter that must be addressed under this new regime is determining the origin of the goods in question. To be classed as originating in the UK or Turkey, goods must be ‘wholly obtained’ or have undergone ‘sufficient transformation’ in one of the two countries.
‘Sufficient transformation’ can be regarded as:

  • a change in tariff classification between the imported, non-originating ingredients, or components, used in creating the final product;
  • value being added in one of the countries through the inclusion of parts or ingredients, which do not originate in either country, being incorporated into the finished product;
  • a specific manufacturing stage being carried out in either country, or a combination of these.

The specific rule of origin for each product is listed in the UK-TR TA and exporting and importing businesses must check if their own good complies can be judged as originating.

The UK-Turkey TA allows for ‘cumulation’ during manufacturing with several countries listed in the agreement. This means that components, parts or ingredients originating in specific countries can be used in production in the UK or Turkey as if they already originated there. The materials do not have to undergo sufficient working or processing as per the product specific rules.

When importing goods that originate in the partner country, businesses can claim a preferential treatment based on an origin declaration issued by the exporter. The origin declaration is written on the invoice, or other commercial document, with a detailed description of the goods. This can be based on text included in Annex 3 of the TA.

Generally, Trade agreements contain a direct transport rule, an administrative requirement to ensure that the imported goods match those that were exported. This aims to reduce the risk of goods eligible for preferences under a Free Trade Agreement of being manipulated or mixed with ineligible goods during transportation.

However The UK-Turkey TA allows for goods not being directly transported between the exporting and importing country provided that “they shall not have been altered, transformed in any way or subjected to operations other than to preserve them in good condition or to add or affix marks, labels, seals or any documentation to ensure compliance with specific domestic requirements of the importing party carried out under customs supervision in the country or countries of transit or splitting prior to being declared for home use. Storage of products or consignments may take place provided they remain under customs supervision in the third country or countries of transit.”

To ensure that the origin of imported goods can be proved in case of the need for a subsequent verification by customs administration, exporters must keep the origin declaration and all relevant documents for a minimum three years after completion.

Verifications are initiated if the custom authority in the importing country has doubts about the origin of the imported goods, but will be carried out by customs officials in the exporting country. They will contact the exporter for documentation and evidence of the origin of the goods including by visiting their premises.

The new Trade Agreement will open up new opportunities for UK businesses and due to its geographical location and heritage, Turkey can act as a gateway to the Middle East as well as Europe.

To find out more about Chamber International services, visit www.chamber-international.com and follow them on Twitter @ChamberInt and Facebook.

If you need support with any of the new documentation or requirements please contact your local Chamber of Commerce.

To find out more about the UK’s Trade Agreements visit: www.gov.uk/government/collections/the-uks-trade-agreements or get in touch today to find out how EGS can support your business with accessing new market opportunities.