A potential market opening up multiple opportunities for Vietnamese exporting enterprises

Turkey is currently the 17th largest economy in the world and one of the important manufacturing and logistics hubs connecting Europe, the Middle East, North Africa, and Central Asia. With an annual import turnover of over 350 billion USD, this market is opening up multiple opportunities for Vietnamese exporting enterprises. However, the import tariff rates applied in Turkey are not completely identical to other countries because this nation operates a quite specific tariff incentive system closely tied to the European Union (EU), free trade agreements (FTAs), and domestic investment encouragement programs.

Customs Union with the EU – The largest incentive for industrial goods

Since 1996, Turkey and the EU have established a Customs Union. Under this mechanism, the majority of industrial goods originating from the EU are imported into Turkey with an import tariff rate of 0%. Concurrently, Turkey applies an external tariff schedule aligned with the Common Customs Tariff of the EU for goods arriving from third countries.

This creates a notable reality for Vietnamese enterprises. If goods are exported directly from Vietnam to Turkey, enterprises usually have to bear MFN (most-favored-nation) tariff rates or additional duties under Ankara's protectionist policies. Meanwhile, the exact same item, if originating from the EU or satisfying free circulation conditions within the EU, can enjoy significant tariff incentives.

This is the reason why an increasing number of international enterprises select to construct supply chains through distribution hubs in Europe before approaching the Turkish market.

FTA network helps multiple goods get exempted or reduced from tariffs

Apart from the EU, Turkey currently maintains a Free Trade Agreement network with more than 20 partners and different partner groups. These FTAs allow multiple tariff lines to be reduced to 0% or enjoy preferential tariff quotas if rules of origin are satisfied.

A number of important FTA partners encompass: the EFTA bloc (Switzerland, Norway, Iceland, and Liechtenstein), the United Kingdom, North Macedonia, Georgia, Serbia, Bosnia and Herzegovina, Albania, Morocco, Tunisia, Egypt, Palestine, and multiple other nations.

For industrial goods originating from these countries, import tariffs in Turkey have, in many cases, been completely eliminated. For agricultural products, incentives are usually implemented under the form of tariff quotas or a partial reduction of import tariffs.

Tariff exemption program for raw materials and manufacturing inputs

One of Turkey's most notable incentives is the support mechanism for importing raw materials serving manufacturing and export.

The Turkish Government maintains a "Suspension List," allowing enterprises to import certain raw materials, chemicals, electronic components, semi-finished products, or intermediate products that have not yet been manufactured domestically or within the EU at very low or 0% tariff rates.

For Vietnamese enterprises exporting input raw materials, this is a group of opportunities worth paying attention to, particularly in the sectors of: Textiles, Footwear, Industrial Chemicals, Plastics, Electronics, Supporting Mechanics, and Automotive Components.

Incentives for investment projects granted encouragement certificates

Turkey applies an "Investment Incentive Certificate" system aiming to attract capital into strategic industrial sectors.

Enterprises possessing this certificate can enjoy policies of import tariff exemption for machinery and equipment, exemption or reduction of import VAT, corporate income tax incentives, and social insurance and land support in a number of cases. This means multiple factories in Turkey possess demands to import manufacturing equipment at very low tariff costs, creating opportunities for machinery and technology suppliers from abroad.

Export processing regime and non-tariff zones

Turkey operates multiple Free Zones and export processing programs.

Under this mechanism, raw materials imported to serve the manufacturing of export goods can be exempted from import tariffs, deferred from tax payments, and exempted from a number of domestic taxes for a certain period. This is a policy strongly exploited by textiles, electronics, household appliances, and automotive components enterprises aiming to upgrade competitive capacities in the international market.

What should Vietnamese enterprises note?

Although there are multiple incentive mechanisms, the majority of goods exported directly from Vietnam currently have not yet enjoyed an FTA with Turkey. Therefore, when constructing market penetration strategies, enterprises need to evaluate carefully:

First, determine the HS code precisely to know the applicable import tariff rate.

Second, consider the capacity to participate in the supply chain of Turkish manufacturers who are enjoying raw material import incentives.

Third, research export opportunities through intermediate partners in the EU or nations that have signed FTAs with Turkey.

Fourth, for agricultural products and processed food items, it is necessary to pay special attention because this is a group that is usually protected by Turkey with higher tariff rates than industrial goods.

Generally speaking, Turkey's tariff incentive system is constructed with a dual goal: protecting domestic production while still guaranteeing raw material supply sources and maintaining the competitive strength of the export industry. For Vietnamese enterprises, opportunities lie not only in selling goods directly into this market of 85 million people, but also in the capacity to participate more deeply in the supply chain of Turkish manufacturers who are enjoying import tariff exemption and reduction mechanisms.

In a context where Turkey sets the target to raise export turnover to over 400 billion USD in the coming years, the import demand for raw materials, components, and equipment serving manufacturing is projected to continue rising sharply. This can be a heading for Vietnam's exporting enterprises to approach far more efficiently compared to merely concentrating on exporting finished consumer goods into this market./.

Source: Thuong vu Tho Nhi Ky