RESTRICTED
WORLD TRADE G/SCM/Q2/TUR/6
4April 1997
ORGANIZATION(97-1397)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byARGENTINA1,
CANADA2,JAPAN3,KOREA4,andtheUNITED STATES5
Regarding theNewandFullNotification ofTURKEY6
Thefollowing communication, dated 26March 1997, hasbeenreceived fromthePermanent
Mission ofTurkey.
_______________
Replies toquestions from Argentina
Q.1. Withregard totheincentives relating toenergy costs, doesTurkey intend toimplement this
subsidy mechanism again infuture? Ifso,forhowlong?
Reply
Turkey ceased toapply theenergy incentive.
Q.2. Turkey hasnotified aseries ofexport subsidy programmes under thetitle"Export credits,
insurance andguarantee schemes":
Q.2.1 Could Turkey specify whether itwillcomply withthetime-limit provided forin
Article 27.4oftheSubsidies Agreement forthephasing outofthese programmes?
Q.2.2 Does Turkey haveatimetable forphasing outthese export subsidies inaccordance
withArticle 27.4oftheSubsidies Agreement?
Q.2.3 Does Turkey intend toincrease thelevelofitsexport subsidies infuture?
Q.2.4 Does Turkey seeaneedtocontinue applying anyexport subsidy programme beyond
theeight-year limitestablished inArticle 27.4oftheSubsidies Agreement?
Reply
By1996 theexport credits, insurance andguarantee schemes arefullyincompliance with
Annex 1,paragraph (k)oftheAgreement onSubsidies andCountervailing Measures.
1G/SCM/Q2/TUR/4,2G/SCM/Q2/TUR/2,3G/SCM/Q2/TUR/3+Rev.1,4G/SCM/Q2/TUR/1,
5G/SCM/Q2/TUR/5.
6G/SCM/N/3/TUR+Corr.1+Corr.2.G/SCM/Q2/TUR/6
Page2
Q.2.5 What aretheeligible products?
Reply
There isnodiscriminatory implementation fortheproducts ofagriculture, mining andindustrial
sectors irrespective ofthecountry ofdestination.
Q.3. Turkey hasnotified anexport credit programme:
Q.3.1 What isthecostofthere-discount rateoftheBank ofTurkey forpreshipment credit?
Reply
Untiltheendof1995, theinterest ratecharged forshort-term export credits hadbeendetermined
inaccordance withtheCentral Bank ofTurkey 's"re-discount rate". Thisratenotonlyserved asa
benchmark totheinterest rateofTurk Eximbank 'sshort-term TLloans butalsoprovided alinkage
between theBank'sandthemarket interest rates. After January 1996, these rates aredetermined
independently byTurk Eximbank inaccordance withthedevelopments inmoney markets andvary
according torepayment period.
Short-term export credits ofTurkEximbank aredisbursed through theintermediation ofTurkish
commercial banks ordirectly tothecustomers against bankcollaterals. Asfarasexport credits are
concerned; since default riskoffirms areundertaken bycommercial banks, these institutions askfor
additional charges and/or guarantees soastosecure themselves. These requirements ontheaverage,
bring anadditional fourpoints totheinterest ratescharged tofirms. Also, intermediary banks are
permitted toaddamaximum of3%totheinterest ratesastheircommissions. Thesituation isalmost
thesame forforeign currency credits.
Inaddition tothese operations, since applicant firms toTLcredit programmes areobligated
tobeTurk Eximbank Short Term Whole Turnover Export Credit Insurance Policyholders, theyare
responsible todeclare alltheirshipments foraduration of360days. Inother words, under theShort-
Term Whole Turnover Export Credit Insurance Programme, allshipments tobemade byanexporter
withinoneyear,withpaymentsdeferredupto360days,areinsuredunderasinglepolicyagainstpolitical
andcommercial risks.
Q.3.2 What aretheeligible products?
Reply
Theproductsofagricultural,miningandindustrialandindustrysector,irrespectiveofthecountry
ofdestination areeligible products forthepre-shipment export credit programme ofTurkEximbank.
Q.3.3 Istheexport guarantee covering political riskinsurance paidbytheStatewithout cost
totheexporter?
Reply
Export guarantee covering political riskinsurance isnotpaidbytheState. Fortheexport
guarantee covering political riskinsurance, theexporter ischarged anamount ofpremium according
tothecountry destination, payment terms andtypeofthebuyer.G/SCM/Q2/TUR/6
Page3
Q.4. Ingeneral, nodataareavailable toknow subsidy perproduct, incidence ormargin ofsubsidy,
ortrade effects.
Reply
Itisverydifficult tocalculate thetradeeffect, incidence ormargin ofexport credit, insurance
andguarantee schemes astheyarenotapplied onproduct basis.
Replies toquestions from Canada
Export Credits, Insurance andGuarantee Schemes
Q.1. Towhatextent doesTurkey consider programmes under the"Export Credits, Insurance and
Guarantee Schemes", toconform totheOECD consensus guidelines?
Reply
Fortheexport credits witharepayment termoftwoyears ormore relating tocontracts for
salesofgoods and/or services, Turk Eximbank complies withtheprovisions oftheArrangement on
Guidelines forOfficially Supported Export Credits oftheOECD.
Turk Eximbank isafullmember oftheBernUnion which isaninternational association of
export credit insurers. Turkey asanobserver since 20July1994 isattending totheOECD Export
Credit Group. Theobserver status willturnintofullmembership afterone-two years. Eximbank
reports tothese institutions periodically, notonlyonitsexport finance volume, butalsoontheterms
andconditions ofitsprogrammes. Eximbank hasalsosigned cooperative financing agreements with
EDC ofCanada, IFTRIC ofIsrael etc.Intheco-financing oftheprojects tobecarried outunder these
agreements, bothparties obviously actaccording totheprovisions oftheOECD Arrangement on
Guidelines forOfficially Supported Export Credits.
Credit Programmes
Q.2. CanTurkey clarify thebasis forinterest ratecharged under the“Pre-Shipment Export Credit
Programme ”compared tothebasis fortheinterest rateavailable under the“Target Market
Credit Programme ”?Intheformer, onashorter-term loantheinterest rateislinked toshort-
termdiscount rates; while thelatter programme appears toprovide aninterest ratethatis
inversely related tothematurity oftheloan.
Reply
Atthebeginning of1996, Turk Eximbank made newarrangements initsshort-term export
credit programmes inorder tocomply withtheWTO andother international rules andregulations.
Inthiscontext, theTarget Market Credit Programme (effective since April 1993) wasabolished.
Therefore, itisnotpossible tomake acomparison between thebasis forinterest ratescharged under
the"Preshipment Export Credit Programme" andthe"Target Market Credit Programme".
Replies toquestions from Japan
Q.1. Energy incentive
Paragraph (b)ofthenotification states thatthefirms manufacturing thefinalproducts tobe
exported canpurchase electricity, natural gasandliquified petroleum (LPG) consumed inthe
production oftheexported finalproducts, atdiscounted prices thataredetermined bytheMoney
andCredit Board, andthatalsoforfuel-oil, anexemption fromcustoms dutyandallfundleviesG/SCM/Q2/TUR/6
Page4
collectedonimportsisbeingimplemented.Inthisconnection,couldTurkeyanswerthefollowing
questions?
- Does thisprogramme constitute anexport subsidy?
- HasTurkey already notified thisincentive under Article 28.1oftheSCMAgreement?
- WillTurkey modify thisprogramme tobring itintoconformity withtheSCMAgreement?
- HasTurkey increased theleveloftheexport subsidies since itjoined theWTO?
Reply
Theenergy incentive hasceased toapply, bytheCouncil ofMinisters Decree published in
theOfficial Gazette dated 31December 1995.
Q.2. Export credits, insurance andguarantee schemes
Could Turkey explain iftheschemes usetheinterest rateunder "aninternational undertaking"
provided forinAnnex I(k)oftheSCM Agreement?
Reply
Theexport credit, insurance andguarantee schemes implemented byTurkey fromthebeginning
of1996 areinconformity withtheWTO provisions.
Fortheexport credits witharepayment termoftwoyears ormore relating tocontracts for
salesofgoods and/or services, Turk Eximbank complies withtheprovisions oftheArrangement on
Guidelines forOfficially Supported Export Credits oftheOECD.
Untiltheendof1995, theinterest ratecharged forshort-term export credits hadbeendetermined
inaccordance withtheCentral Bank ofTurkey 's"re-discount rate". Thisratenotonlyserved asa
benchmark totheinterest rateofTurk Eximbank 'sshort-term TLloans, butalsoprovided alinkage
between theBank'sandthemarket interest rates. After January 1996, these rates aredetermined
independently byTurk Eximbank inaccordance withthedevelopments inmoney markets andvary
according torepayment period. Turk Eximbank determines theinterest ratescharged forshort-term
export credits inlinewiththeprovision (k)setintheIllustrative ListoftheAgreement onSubsidies
andCountervailing Measures.
Q.3. TheTarget Market Credit Programme inCredit Programmes of2.
Could Turkey answer thefollowing questions?
- Whyistheprogramme targeted atJapan, NAFTA countries andSouth Africa?
- Whyaretheproducts covered bythisprogramme restricted within textile, clothing and
leather products?
- Iftheprogramme willcontinue?
Reply
Thisprogramme wasabolished atthebeginning of1996.G/SCM/Q2/TUR/6
Page5
Replies toquestions from Korea
Q.1 Actionable subsidies
Article 25oftheAgreement onSubsidies andCountervailing Measures prescribes thatMembers
shallnotify allspecific subsidies, asdefined inArticles 1and2,granted ormaintained within
theirterritories.
However, asthenotification states, Turkey notified theCommittee ofonlytheexport subsidies.
DoesTurkey notgrant ormaintain anyspecific subsidy liketheactionable subsidies other than
thenotified export subsidies?
Reply
Turkey doesnotgrantormaintain anyotherspecific export subsidy, otherthansubsidies granted
toagricultural products, inaccordance withtheWTO Agricultural commitments.
Q.2. Energy incentive
Turkey 'snotification states thatthissubsidy isnotcurrently being implemented duetothefact
thatthediscount rates havenotbeendetermined since August 1994. When isitexpected to
beinforce again, oristhere anyschedule tophase thissubsidy outinconformity withthe
Agreement?
Reply
Turkey ceased toapply theenergy incentive bytheCouncil ofMinisters Decree, published
intheOfficial Gazette dated 31December 1995.
Replies toquestions from theUnited States
Section I.-General
Please provide information concerning thefollowing programmes which didnotappear tobe
included within Turkey ’snotification, yetmaymeetthenotification requirements ofGATT 1994and/or
theSCMAgreement. Ifthese programmes areencompassed elsewhere inTurkey ’snotification, please
explain. Ifnot,please include information relevant totheelements requested inthenotification format,
orexplain thebasis onwhich Turkey determined thateachprogramme didnotmeetthenotification
requirements referenced above:
(NOTE: Certain ofthefollowing programmes havebeenfound tobecountervailable subsidies inUS
countervailing dutyproceedings involving products ofTurkey, including certain drypasta and
acetylsalicylic acid(aspirin).)
Replies
A. Pasta Export Grants
Pasta exports weresubsidized between 1October 1995and31December 1995withtheDecree
oftheMoney-Credit andCoordination Council No.95/12. Thissubsidy programme isinconformity
withTurkey 'sWTO commitments onagriculture andwasnotified totheCommittee onAgriculture.G/SCM/Q2/TUR/6
Page6
Other export subsidies granted toagricultural products which areinconformity withTurkey 's
WTO commitments onagriculture, werepublished intheOfficial Gazette dated 29September 1995.
AsTurkey notified itssubsidy programmes totheCommittee onSubsidies pursuant toArticle 25of
theAgreement onSubsidies andCountervailing Measures before 30June1995, thesesubsidies granted
toagricultural products were notnotified totheCommittee.
B. FreeWheat Programme
TheFreeWheat Programme wasestablished byDecree No.93/4534 andadministered bythe
Turkish Grain Board (TMO). Companies signed contracts withtheTMO committing toexport acertain
amount oftheirproduct inreturn forapredetermined amount ofdurum wheat. After theexportation,
thecompany provided invoices andother export documentation totheTMO. Upon examination and
approval ofthedocuments bytheTMO, wheat wasdelivered tothecompany. Thefreewheat
programme wasnotapplied in1995 andwasterminated atthebeginning of1996.
C. Payments forExports onTurkish Ships/State AidforExports Programme
Such aprogramme doesnotexist.
D. Various Measures under theGeneral Incentives Programmes (GIP), including:
1. Resource Utilization Support Fund
Reply
Resource Utilization Support Fund wasabolished withDecree No.91/1468 which was
published intheOfficial Gazette dated 23February 1991 issue No.20795.
2. Incentive Premium onDomestically Obtained Goods
7. Rebate ofVATonDomestically-Sourced Machinery andEquipment
Reply to2and7
"Incentive Premium onDomestically Obtained Goods", and"Rebate ofVAT on
Domestically Sourced Machinery andEquipment" were eliminated andreplaced by:VAT
Support forPurchases ofMachinery andEquipment. Anamount determined byadding ten
points tothepre-paid Value Added Taxamount ofthenewmachinery andequipment
manufactured locally, approved onaproject basisbytheUndersecretariat forTreasury, ispaid
inthelongruntoinvestors from "Incentive Fund" resources.
Theextra 10%originates from theinflationary medium ofthecountry. Inorder to
balance outthedifferences ofthevalue ofmoney intimeduetoinflation andsincethepayments
tobemade totheinvestors takealongtimeperiod aftertherealization ofthepurchase ofthe
machinery, anywhere from6-12months afterthepurchase ofthemachinery, the10%added
value looses itsmeaning andvalue. Along withtheinflationary medium, andinorder tobe
abletocreate equal levels oftreatment compared withtheinvestment aidmeasure towards
imported machinery, ascheme titled as"Postponement ofVAT onImported Goods" isalso
being implemented (seeReply 9).G/SCM/Q2/TUR/6
Page7
3. Interest Spread Return Programme
11. Payment ofCertain Obligations ofFirms Undertaking Large Investments
13. Subsidized Turkish LiraCredit Facilities
14. Subsidized Credit forProportion ofFixed Expenditures
15. Subsidized Credit inForeign Currency
Reply to3,11,13,14and15
Turkey doesnotmaintain anysubsidies under these titles.
4. Investment Allowance
Reply
Investment allowance isataxexemption granted toincome orcorporate taxpayers.
Theinvestments, inwhich allowance foreseen intheincentive certificate shallbenefit from
thisincentive. Themaximum ratio(100%) shallbeapplied forinvestments tobemade in
specially important sectors suchasheath andeducation activities andthatofpriority regions,
theleastratioisapplied forother investments (30%). Applications relating tothisincentive
arecarried outbytheMinistry ofFinance.
5. Mass Housing Fund LevyExemptions
6. Customs DutyExemptions
10. Other TaxExemptions
Reply to5,6and10
Theseexemptionsareimplementedwithinthe"InwardProcessingRegime".Thisscheme
fullycomplies withAnnex IIoftheAgreement onSubsidies andCountervailing Measures.
Under thisscheme, asindicated inAnnex II,inputs consumed intheproduction process of
theexported product, canbeexempted from import charges, (mass housing fundlevywas
abolished forallgoods except forsome agricultural products atthebeginning of1996) and
other indirect taxes.
Inrelation withthesystem ofGovernment aidforinvestments, inorder tobenefit from
theCustoms Dutyexemption, theinvestment should beprovided withan"Incentive Certificate"
ora"permission andIncentive Certificate" granted bytheUndersecretariat forTreasury.
Projectswhichintroduceadvancedandappropriatetechnologyandmeettheminimumeconomical
capacities tobedetermined bytheUndersecretariat, Customs Duty ofthemachinery and
equipment aspartoftheinvestment project shallbeexempted.
8. Additional Refunds ofVAT
Reply
There arenoadditional refunds ofVAT other thanthesystem explained inReplies 2
and7which relate toinvestment aids.G/SCM/Q2/TUR/6
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9. Postponement ofVATonImported Goods
Reply
VAT thathastobepaidforimports ofinvestment goods asindicated bytheIncentive
Certificates granted bytheUndersecretariat forTreasury, shallbepostponed untilthedate
when suchtaxmaybeactually deducted. Incasetheinvestment hasnotbeenrealized as
foreseenbytheIncentiveCertificate,thetaxpostponedshallbecollectedbymeansofapplication
ofpostponement interests.
12. Corporate TaxDeferral
Reply
IntheStateAidsystem"CorporateTaxDeferral"thisismentionedas"FinancingFund"
andwithin thesystem, pursuant toLawNo.2362 andrepeated Article 8andsubsequent
amendments thereof which amend various provisions ofCorporate TaxLawNo.5422,
investments withanIncentive Certificate, tobemade bycapital investment companies and
cooperatives maybenefit from thefinancing fund.
Thefinancing fundisnotanexemption orexceptional application butaregulation
providing taxpostponement. Itisafundtobeusedforthefinancing oftheinvestments to
bemade.
Investments made bycorporations which havebeencarrying outtheiractivities for
alongtimeandclose theiraccounting periods withaprofit maybenefit from thefinancing
fund. (Upon presentation oftheirIncentive Certificate, theeligible investors mayblock up
to25%oftheirdeclared profits attheCentral Bank. Corporate taxisthenpaidontheremaining
portion ofthecompanies 'profits. During thecourse ofthefiscal year, thedeposited amount
isadded tothecompany 'staxbase.)
16. Land Allocation
Reply
LandAllocation Support, isatoolproposed forinvestments toberealized inthepriority
development regions orintheindustrial beltswithanIncentive Certificate, andiftheinvestor
applies forland; landforthese applications isprovided fromthestock ofGeneral Directorate
ofLand Office oraswellasatthelandshown bythisAuthority. Since theformalities relating
totheactual implementation andpracticality there hasnotbeenandatpresent there isno
implementation ofthismeasure.
E. Advance Refunds ofTaxSavings
Reply
Other thanwhatwasdefined earlier, nosuchprogramme as"Advance Refunds ofTaxSavings"
exists.G/SCM/Q2/TUR/6
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F. Direct Payments toExporters ofWheat Products toCompensate forHighDomestic InputPrices
Reply
Such aprogramme doesnotexist.
G. Export Revenue TaxDeduction
Reply
Weunderstand from theindication made bytheUSinthisquestion thattheexport revenue
taxdeduction isinfactthecorporate taxexemption. Thissystem wasintroduced byLawNo.5422,
wasamended in1981 (byLawNo.2573), in1988 by(Law No.3482). Andfinally in1993 bythe
CouncilofMinistersDecreenumbered93/3893wasabolishedbyLawNo.3946publishedintheOfficial
Gazette dated 30December 1993.
H. Transportation Subsidy
Reply
Thissubsidy wasapplied between 1October-31 December 1995withtheDecree oftheMoney-
Credit andCoordination Council No.95/13. Thisprogramme wasapplied fortheexports ofsome
agricultural products inlinewithTurkey 'scommitments stemming from theWTO Agreement on
Agriculture bothinvalue andquantity. Thisprogramme provided US$35 perMTtoNorth andSouth
America andtheFarEast, US$25 perMTtoEurope, theMiddle East, North Africa andother
destinations. Pursuant toArticle 9,paragraph 4oftheAgreement onAgriculture during the
implementation period, developing country members shallnotberequired toundertake commitments
inrespect oftheexport subsidies listed insubparagraphs (d)and(e)ofparagraph 1,provided thatthese
arenotapplied inamanner thatwould circumvent reduction commitments. Since thissubsidy
programme wasinconformity withArticle 9/1(d-e) oftheAgreement onAgriculture andalsoasthis
programme wasimplemented afterthedateofTurkey 'sfullandnewnotification totheSCM Committee,
itwasnotnotified totheWTO.
Section II-Notified Programmes
A. Withsome exceptions, Turkey hasnotnotified relevant information onthebasis oftheagreed
notification format, which makes itdifficult todetermine where information which issupposed
tobenotified maybemissing. Could Turkey please provide anysuchmissing information
pertaining tonotified subsidy programmes inresponse totheparticular items enumerated in
G/SCM/6?
Reply
Other thannotified totheSCM Committee, there isnomissing information.
B. Could Turkey comment andelaborate ontheeligibility requirements forthePre-Shipment Export
Credit Programme andtheSmall andMedium-Scale Firms Export Credit Programme?
Reply
Theeligibility requirements forthePre-Shipment Export Credit Programme andSmall- and
Medium-Scale Enterprises Credit Programme areasfollows:G/SCM/Q2/TUR/6
Page10
Credits under Pre-Shipment Export Credit Programme areallocated totheagricultural, mining
andindustrial sectors, irrespective ofcountry ofdestination through theintermediation ofcommercial
banks towhich TurkEximbank hasallocated credit lines. Commercial banks areresponsible fordefault
riskoftheborrowers.
Pre-Shipment Export Credits areextended for120daysandupto50%off.o.b. value ofexport
commitments foragricultural-mineral products andmanufactured goods: applicants tothisprogramme
mustbeshort-term whole turnover export credit insurance policyholders. Total outstanding balance
ofcredit provided percompany cannot exceed acertain limit.
Credits under theSmall-and Medium-Scale Enterprises Credit facility which isasubprogramme
ofthePre-Shipment Export Credit Programme areextended only tosmall- andmedium-scale
manufacturers, manufacturer-exporters with1-200 employees. Applicants tothisprogramme must
beshort-term whole turnover export credit insurance policyholders. Minimum 40%ofthegeneral
limitthatisallocated tocommercial banks hastobeextended tosmall- andmedium-scale enterprises.
Maximum repayment period is180days.