Turkish New Law Concerning Steel Fasteners Import

Dear Sir/Madam,

I regret to inform you about a very recent law enacted in Turkey on March 25th, 2009, concerning the import of steel fasteners. The aim of this letter is to explain how the law will be applied and to explore its consequences both in Turkish and Chinese markets. 

Since 2004, ALL steel fasteners imported from ANY country (irrespective of origin) are subject to SAFEGUARD duties which are implemented by the government in order to protect the domestic manufacturer. Therefore, since 2004, Turkish fasteners importers had already been paying high duties on fastener imports. The initial safeguard duty rate issued in 2004 was CIF 2,500 USD/ton for BOLTS and CIF 2,000 USD/ton for screws, nuts and other types of fasteners. Beginning on March 25th, 2009, the new safeguard duties have been raised to 3,500 and 3,000 USD/ton, respectively. In other words, the duties have been increased by 40% on fasteners. However, the real effects of the new law will be higher than the nominal increase.

Let me explain how the policy is practically applied. Let us assume that a Chinese exporter ships one container of DIN 931-933 Gr.8.8 Plain finish Hexagon bolts to its customer in Turkey with the Gross weight of 20 tons and a CIF value of 20,000 USD as in the original Commercial Invoice. When the container arrives at the Turkish port, the customs weighs the container first. In our example, it is 20 tons. With the safeguard duty, the government assumes the CIF value of this container as 3,500 USD * 20 tons = 70,000 USD. Even if the CIF is 20,000 USD originally, it will be disregarded. The golden rule in our case says that:

GROSS WEIGHT * 3500 OR 2750 USD = CIF VALUE (irrespective of the original C/I)
Even though, the real CIF ton price in our example is 1,000 USD (20,000 USD/20 tons), the government assumes it as 3,500 USD and charges you with an extra of 2500 usd per ton. The heavier the container is, the higher will be the CIF value. In Turkey, an importer pays 18% for VAT and 3.7% as customs duty. So the importer will be charged with the VAT and customs duty based on this incredibly high CIF value of 70,000 USD.

Can you imagine the great difference on the tax bases (20,000 USD vs. 70,000 USD) that an importer will be charged with? The outcome will definitely affect the cost of fasteners in a very adverse way for the importer. Turkish fastener importers had been already paying safeguard duties on fasteners since 2004 and now, this will increase even more. As a result of this law, the importer will lose its profit margin; moreover, the buying price will exceed the domestic selling price, which in turn will make importers jobless in near future. Under this condition, Turkish companies cannot continue importing fasteners.

Another important point is that the law applies to ALL STEEL FASTENERS. Therefore, even if the grade is 6.8 or 8.8 or above or if the material is stainless steel, importers will be charged with this duty. Unlike the Antidumping duty in EU which will be valid for five years and only applied for Chinese products, in the Turkish case, the new law has NO TIME AND COUNTRY LIMIT. It is an open-ended policy which will be enforced ruthlessly on importers. One should be aware of the much deeper and severe effects it will bring compared to ADD which also aroused great opposition in China.

Under such policy, the imports of screws and other steel fasteners will slow down and may even vanish. How will then the demand for chipboard screws or self drilling screws or concrete screws, for example will be satisfied? There is no factory in Turkey which can manufacture all these items on its own. Even if it manufactures, it cannot demand the demand at all. In other words, the new law is very illogical and it can only serve for a monopolistic trade. What is worse is that the safeguard duties have been raised with the reference to one company’s request. 

The Turkish government hasn’t carefully examined the import commodity structure, domestic market demand, and total yearly production capacity of Turkish factories. The Turkish government with a target of more and more revenues with the help of this policy, will actually help monopolistic behaviors survive and strengthen. This ill-fated policy DEFINITELY WILL NOT HELP the Turkish manufacturers increase their capacity and thus their sales because they will not be able to cover the total demand for fasteners. Blocking imports with the intention of strengthening the domestic industry will only help a few companies become richer and richer. The rest will gain nothing and yet our government doesn’t want to see this fact, at all.

Especially when the world is getting more integrated economically, the implementation of such policies will ruin the mutual benefits of the countries. The Chinese fasteners exporters will lose their share in the Turkish market because this policy will prevent us from importing. Such unreasonable and protectionist policies will only cause more people to lose their jobs and more companies shut down engines. The greediness of the government to seek for more revenues can not be justified because it disregards the outcome brought by the policy. Unfortunately, this law is enacted in a very short with the reference of one company and without any investigation of such commodities in the domestic industry.

After all said and done, what is more crucial to you as Chinese exporters and to us as a Turkish importer is TO TAKE ACTION. WE MUST TAKE ACTION IN ORDER TO STOP THIS UNJUST WAY OF TRADE. As we are importers, we are an essential part of the economy supplying many fasteners in order to manufacture finished goods. As you are the exporters, you supply us the goods and thus employing people and help your country’s well being. If the Turkish government really wants to strengthen their manufacturers, it rather helps them invest in technology and gain power to compete with other manufacturers in the world. Blocking imports at the age global economy will reach nowhere. 

In conclusion, the aim of this letter is to explore the meaning of the policy and what it will bring in the long run. We ask you to unite as Chinese exporters and oppose this law. Please push the Chinese government not to accept this unrealistic policy. We, together with other importers in Turkey, will oppose this law and work hard for its abolishment. If we all unite together, we will not lose our jobs and you will continue making sales to Turkey. Your strong cooperation is appreciated and I hope we will overcome such unrealistic policies hand in hand.