An interview with our General Manager Arkın Obdan, in which he discusses the effects of the visa crisis and trade wars on foreign trade, as well as the digitalization of the customs system and the strategic role of logistics warehouses and bonded warehouses, was published in Dünya Newspaper.
Arkın Obdan, Chairman of the UTİKAD Customs and Warehouse Working Group, answered questions from DÜNYA Newspaper while evaluating innovations in the customs system and discussing the strategic role that logistics warehouses and warehouses will play in Turkey's foreign trade in the new period.
What is the importance of warehouses and bonded warehouses in terms of both foreign trade and the logistics sector?
"The previous Customs Law did not include a bonded warehouse regime, only warehouses. However, with the new regulation, bonded warehouses have been included in an economically effective customs regime where waiting times in customs areas are unlimited. Thus, warehouses have ceased to be merely areas where goods are stored and have become elements of a regime that creates economic impact. It has been understood that the effective use of warehouses can generate significant benefits in foreign trade. In fact, Customs Law No. 4458 is similar to an Excel computer program. While some people can only perform four operations, others can perform more complex mathematical operations based on deeper knowledge using Excel. Our Customs Law also has the quality of being able to answer any question you ask if you are sufficiently familiar with the legislation and its implementation. In fact, our legislation is appropriate; we just need to ask the right questions to the system. Warehouses are one of the most important topics in the law. You can also do business in warehouses. Turkey is in the right place for inventory stockpiling, both in the post-pandemic period and in the current economic climate. We are at a point where east and west converge, like the neck of a bottle. The conflicts in the north and south and the geopolitical landscape have forced us to operate in the Middle Corridor and continue to do so. Turkey is one of the most important points for many global or foreign companies to store inventory and deliver goods to nearby shores. We are in a very important position both in conventional trade and storage and in e-commerce. If we can also connect the railway infrastructure, this advantage will increase even more. We are already in a very good position in Europe in terms of maritime and road logistics capabilities. In fact, the visa issue has also become part of the trade wars. A driver setting off with a large truck has no intention of seeking asylum in Europe. It is clear that there are those who want to make life difficult for Turkish transport fleets in international trade.
What is the post-pandemic situation in warehouse operations?
"Actually, after the pandemic, warehouse occupancy rates increased significantly, and we can now perform a wide range of operations. For instance, a company based in any country worldwide that is not resident in Turkey can declare goods in warehouses by obtaining a potential tax number in Turkey and store its goods here. When it wants to sell its goods to neighboring countries or within Turkey, it issues an invoice, completes customs procedures, and ensures delivery. This creates the opportunity for “just-in-time delivery.” We can now use warehouses very effectively for exports to neighboring coastal countries. An international company can combine products manufactured in 20 different countries with those produced in Turkey and position our warehouses as a distribution channel to the world. It can export to 20-30 completely independent countries through warehouses in Turkey. Micro-logistics operations also take place here. We can truly call warehouses ‘smokeless factories.’"
How will e-commerce encourage this trend?
"Along with the increase in e-commerce, Turkey also has serious goals. The goal is to achieve 10-11% of total exports through e-commerce by 2027. While achieving these figures, imports will also come, of course. There will be an additional need for warehouses. There is a 3-5 times difference between conventional storage and e-commerce storage. For example, if you are storing 5,000 pallets of goods in 10,000 square meters of warehouse space, you will need 3-5 times larger warehouses for e-commerce. With the growth of e-commerce, our current warehouse capacities will also need to increase. If we concentrate this warehouse capacity in regions like the Marmara or Aegean regions, land values will rise, and total logistics costs, including rental fees, will increase. Therefore, warehouse investments should be spread across the country."
Isn't it necessary to move away from the seas?
"Actually, we can move away from the seas. According to our Customs Law No. 4458 (which is 25 years old), when determining the customs territory of Turkey, the entire country is considered a customs area. The old law only defined the borders as the customs line. Therefore, we can now expand warehouses and bonded warehouses into inland corridors. There are already 12 logistics center projects in the current situation. These are planned in various regions of Turkey. Establishing a logistics center is easy. However, if you cannot connect them to each other with railway networks, there is no advantage. You are still forced to resort to road transport and cannot enter a multimodal transport system. Our coastlines are very valuable. For example, Turkey's largest foreign trade port is located in the most beautiful part of Mersin, and the port is expanding further into the surrounding area. Coastal areas are more productive, so we can store goods in logistics centers, or what we call “dry ports.” When we spread foreign trade and transit trade across the entire territory of Turkey, it will result in lower costs, increased employment, and a larger share of international trade.
The EU is becoming more inward-looking in its customs regulations, and we must be prepared.
"The EU transitioned to a new customs law system in 2016, and a series of harmonization efforts have been made during this period. It plans to complete these by 2025. The EU is making some additions to the new customs legislation to increase the flow of trade and facilitate e-commerce. However, in my opinion, while Europe aims to streamline business processes, it seems to be becoming more inward-looking in its customs legislation. It is incorporating the Fit-for-55 initiative and the commitments of the Paris Climate Agreement alongside customs laws. The goal is to reduce emissions by 55% by 2030 and then achieve a carbon-neutral Europe by 2050. As part of this effort, the Carbon Border Adjustment Mechanism has been introduced. This mechanism imposes non-tariff taxes and technical barriers on goods and products from third countries entering European borders. Heavy tax penalties and fines will be imposed if agricultural products are not produced in accordance with the rules. New restrictions have also been imposed based on sustainability criteria. Drawing on the new customs laws, very strict rules have been introduced regarding child labor. These penalties are triggered by a report and do not require proof. Imports from countries that do not comply with these conditions will also face serious penalties, including additional taxes or import bans. These sanctions will eventually come to Turkey as well. As a working group, we are continuously providing information and holding webinars to prepare our members for these issues. The EU is introducing new rules that go beyond the Authorized Economic Operator System and the regulations of the World Trade Organization with the Controlled Reliable Trader application. These rules will begin with e-commerce. By 2028, imports will be made with a single data entry."
What are the main problems encountered at customs?
"Let's put it this way. Our Customs Law is essentially based on European customs legislation. There are three points to consider at customs, and customs does not interfere with other matters. It says that I must know the value of the goods. Due to trade measures, I must know the origin of the goods and the customs tariff applicable to them. I must know which goods to tax, at what value, and under which concessions. All other applications are measures taken to protect consumers, the public, animal, and plant health, and are foreign trade applications outside the scope of customs. Foreign trade is based on the principle of reciprocity throughout the world. This has been the case for 50 years, and our foreign trade policy is also based on it. Trump, however, seems to have just discovered this. Due to our geopolitical situation, we are obliged to conduct these inspections at the border and maintain strict controls. People ask why things are getting harder for us while they are getting easier in Europe, because our land borders are very extensive and we are also protecting the borders of the EU. You cannot bring these goods into the country without conducting an inspection and control. Customs has been streamlined with a single window system. Work on the single window system began in 2008. Within the EU, work on the single window system began in 2016. During this time, a lot of paperwork has been digitized. Now, when we make a declaration to customs, we do it online. We also receive all ministry approvals and authorizations online. We no longer attach additional documents to the documents we submit to customs; we simply write the code number. The customs officer can then perform the inspection by checking this code. Here, we must acknowledge the efforts of the Ministry of Trade and customs authorities. Currently, we are ahead of Europe in terms of the single window application, but we are behind East Asian countries like Singapore and Taiwan. They have fully digitized all their processes and are running the single window system very efficiently. For us to achieve this, Europe must first catch up. With the introduction of the Union Customs Code, they will take the initiative in the single window system. As Turkey, we are actually ready in many areas, but the biggest obstacle to digitalization is the digital divide. While some areas are fully digitalized, others are lagging far behind."