G/SCM/Q2/TUR/38  
 
14 April 2016  
(16-2121)  Page: 1/4  
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES 
REPLIES TO ADDITIONAL QUESTIONS POSED BY THE UNITED STATES1 
REGARDING THE SUBSIDIES NOTIFICATION OF TURKEY2 
The following communication, dated 13 April 2016, is being circulated at the request of the 
Delegation of Turkey. 
_______________ 
 
 1  QUESTIONS REGARDING PROGRAM INCLUDED IN THE NOTIFICATION (N/253) 
Export Subsidy Programme for Agricultural Products (Decree Nos.2012/2 and 2013/4) 
 
a. In a recent reply (G/SCM/Q2/TUR/32, November 14, 2014 ("TUR/32")) to U.S. 
questions (G/SCM/Q2/TUR/30, 31 July 2014 ("TUR/30")) regarding this 
program, Turkey explained that exporter s' liabilities to various governmental 
agencies –such as taxes, social security premiums, etc.– are "covered by the Central Bank" via the exporters' bank accounts with the Central Bank. Please 
provide further clarification as to ho w exporters obtain benefits under the 
program, by providing responses to the following additional questions: 
1. What does "covered by the Central Bank" mean? How are the funds in these Central 
Bank accounts applied to the exporters' liabi lities for taxes, social security premiums, 
etc.? 
 2. Do the exporters deposit any of their own funds into these accounts? 
 
3. If these accounts are funded by other th an the exporters themselves, what are the 
sources of the funds and how are the deposit amounts determined? 
 
4. For any deposits into these accounts that  are not sourced from the exporters' own 
funds, what are the exporter's obligations, if any, in terms of repayment of those 
deposits? 
 
5. What limits, if any, are there under this  program in terms of the maximum amounts of 
exporters' liabilities that may paid out of these accounts? 
 
b. Has Turkey notified its inward processi ng scheme for wheat? If not please 
explain why. 
Inward Processing Regime (IPR) is not a subsidy under the Agreement on Subsidies and 
Countervailing Measures. For the details of the im plementation of the IPR, please refer to our 
responses for the questions of the United Stat es submitted on 20/05/2015, ID 77071, at the 
77
th meeting of the Committee on Agriculture. 
 
                                               
1 G/SCM/Q2/TUR/33. 
2 G/SCM/N/253/TUR (11 March 2014), Notification ("N/253"). G/SCM/Q2/TUR/38 
 
- 2 - 
 
  1. The Subsidies Agreement  requires that any domestic product that is substituted for an 
imported product under an inward processing scheme be of comparable quality and that 
a verification system aimed at tracking ho w much product is imported and exported 
under the system be maintained. Can Turkey de scribe the verification system it has in 
place? 
 Turkey has a system in place to confirm which inputs, and in what amounts are consumed in 
production of the exported products under Inward Processing Regime (IPR). To be more precise, 
companies should apply to Ministry of Economy (MoE) electronically with their e-signature to 
register for the IPR System. After registration, some documents, such as inward Processing Project Form, table of raw material, capacity report prov iding information about the production facilities, 
trade registration journal, signature circular should be submitted via the system correctly. 
MoE evaluates HS Code of import goods and processed product (primary and auxiliary processed 
products), product def ınition, its quantity to be determined according to the rate of productivity, 
the term of certificate/authorization. Then MoE either issues an IPR certificate or rejects the 
application. Decisions (acceptance or rejection) are based on whether a set of possible legal conditions and economic criteria are fulfilled. Companies are subject to heavy sanctions in case of 
noncompliance with the relevant IPR legislation. 
In fact, the US is totally aware of the working mechanism of Turkish IPR, and in several 
countervailing duty investigations and reviews, the competent US authorities identified that IPR does not confer countervailable benefits.
3 The US recently repeated its findings on Turkish IPR 
in 2013 administrative review for Circular Welded Carbon Steel Pipes and Tubes from Turkey. In 
its Decision Memorandum for the Preliminary Results of Countervailing Duty Administrative Review: Circular Welded Carbon Steel Pipes and Tubes from Turkey, dated 31 March 2015
4, DOC, 
similar to earlier findings, clearly found that "the GoT has a system in place to confirm which 
inputs, and in what amounts, are consumed in th e production of the exported product, and that 
the system is reasonable for the purposes intended". 
All in all, the US authorities scrutinized IPR with all its aspects in a certain number of CVD 
proceedings. In this regard, Turkey kindly invite s the US authorities to take a glance at DOC's 
previous findings in countervailing duty administrative reviews, especially for Turkish pasta imports.
5 
Having in mind the above-mentioned evaluation, Turk ey, once again, would like to stipulate that it 
has a verification system, which was also examined by the US, in place to confirm which inputs, and in what amounts are consumed in the production of the exported products under IPR.  
 
2. How does Turkey ensure that the rela ted imports and exports of wheat under the 
inward processing scheme are of comparab le quality, and that the value of the 
certificates received upon export does not exceed the value of the duties that would 
have otherwise been paid?  
 Turkey, once again invites the US authorities to examine the previous findings of DOC in the 
pertinent CVD proceedings. Statistics are collect ed and compiled on the basis of HS codes. 
No particular statistical data is available for the quality.  
In the abovementioned Decision dated 31 March 2015, The DOC also decided that "the exemption 
granted on certain methods of payments used in purchasing imported raw material under this program does not constitute a subsidy ...because the tax exempted upon export does not exceed 
the amount of tax levied on like products when sold for domestic consumption ". 
 
                                               
3 See Issues and Decision memorandum: Final Results of Administrative Review of Countervailing Duty 
Order on Certain Welded Carbon Steel Standard Pipe from Turkey, 25 July 2006 http://enforcement.trade.gov/frn/summary/turkey/E6-12227-1.pdf  
4 See Decision Memorandum for the Preliminary Resu lts of Countervailing Duty (CVD) Administrative 
Review: Circular Welded Carbon Steel Pipes and Tubes from Turkey, 31 March 2015 http://enforcement.trade.gov/frn/summary/turkey/2005-08123-1.pdf 
5 See Federal Register Volume 66, Number 153/  Wednesday, 8 August 2001 and DOC's Preliminary 
Results of Countervailing Duty Administrati ve Review for Certain Pasta From Turkey 
http://www.gpo.gov/fdsys/pkg/FR-2001-08-08/html/01-19777.htm  G/SCM/Q2/TUR/38 
 
- 3 - 
 
  2  QUESTIONS REGARDING PROGRAMS PREVIOUSLY NOTIFIED AND OTHER PROGRAMS 
We note that TUR/32 did not provide any replies to a number of other U.S. questions 
posed in TUR/30, which Turkey's subseq uent supplemental notifications do not 
address.6 Could Turkey explain when we may ex pect replies to those questions? For 
reference, the questions were in regards to the following programs: 
 1. Energy Support under Law 5084, as amended by Laws 5350 and 5615 
2. Special Zones 
3. Free Zones 4. Income Tax Deductions for Export Revenue 5. Tax Incentives for Employer's Share in Insurance Premiums 
 
Please refer to TUR/30 for the specific questions posed by the United States in TUR/30 as to each of these programs. 
 
"Energy Support" programme was applicable under "Law No. 5084 on Encouragement of Investments and Employment and Amendment of Certain Laws" which then was amended by Law 
No. 5350 and Law No. 5615. The authority responsible for administering the program was Ministry 
of Economy, General Directorate of Incentives, Implementation and Foreign Investment.  Energy Support Measure was implemented for a maximum period of 5 years for each company, 
which shall not exceed 31 December 2012 in any case . The last date for the implementation of law 
was 31 December 2012. In other words, Turkey maintains no such specific support programme 
anymore. 
 
Free Zones which have been in place in Turkey si nce 1985 are one of the three types of zones in 
which additional incentives are provided to attract foreign investors through certain advantages. 
Free Zones are considered outside the customs territory of Turkey. 
 There are currently 19 FZs operating in Turkey in which exemptions from customs control, duties, 
corporate income tax for manufacturing, VAT and consumption taxes are applied. The aim of all 
these exemptions is to attract foreign direct investment. Please refer to G/SCM/N/284/TUR for 
further information on the Investment Incentive Programme which was notified to the Committee on Subsidies and Countervailing Measures on 18 September 2015. 
 
Technology Development Zones are the zones speciali zed in developing high technology sector in 
Turkey. Among others, they aim to create investment opportunities in technology intensive 
areas whereas Organized Industrial Zones are intended to provide an investor friendly 
environment with established infrastructure for businesses. The benefits being provided for companies established in these zones mainly include certain tax exemptions such as exemptions from income tax, VAT, environmen tal taxes and taxes for R&D etc.  
 
While each type of zone mentioned above has particular provisions that gives advantages to firms or investors, a company cannot enjoy the benefits under the zones, if it is also a beneficiary of tax 
advantages accorded under investment scheme.  
 Turkey does not consider that the benefits bein g provided for firms operating in the Free Zones, 
OIZ's and Technology Development Zones can be deemed a subsidy within the meaning of the 
paragraph 1 of Article 1 of the Agreement on Subsidies and Countervailing Measures.   In accordance with the Income Tax Law No. 193, Article 40, (Addendum 4108), net business 
income is determined by deducting expenses re lated to the operating of the business from the 
gross income. Expenses incurred in the course of the business are generally deductible.   
In the same manner, exporters and the enterprises' overseas activities in construction, 
instauration, installation and transportation earning foreign currency can be deducted up to 0.5 percent of such income from the tax base.  
 
                                               
6 G/SCM/N/253/TUR/Suppl.1 (20 November 2014) and G/SCM/N/253/TUR/Suppl.2 (14 January 2015). G/SCM/Q2/TUR/38 
 
- 4 - 
 
  Income Tax Law does not require tax deductions solely from export revenues but rather refers it 
as a one possible element of foreign currency earnings.   It should also be noted that the real intention with the Addendum 4108 was to overcome 
difficulties that exporters and enterprises acting in foreign countries face with in documenting their 
incurred expenses.  
"Tax Incentives for Employer's Share in Insurance Premiums" programme was applicable under 
Law No. 5084 on Encouragement of Investment s and Employment and Amendment of Certain 
Laws" which expired by 31 December 2012.  
Turkey maintains no such specific support programme anymore. 
  
__________