Turkey Suspends Import Licenses, Raises Corn Duty

UNCLAS SECTION 01 OF 02 ANKARA 005015

SIPDIS


SENSITIVE


STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT
DEPT PLEASE PASS USTR FOR NOVELLI, LERRION
USDA FOR FAS FOR ITP/BERTSCH, MACKE, MEYER, HANSEN
USDA FOR FAS/CMP, ALL COMMODITY DIVISIONS
EMO/FREEDAN
USDA FOR APHIS/ACKERMAN, PATEL
USDA FOR GIPSA/FGIS REILLY
USDOC FOR DEFALCO
TREASURY FOR OASIA, MILLS AND LEICHTER


E.O. 12958: N/A
TAGS: ETRD EAGR KPAO TU
SUBJECT: Turkey Suspends Import Licenses, Raises Corn Duty


Sensitive but Unclassified. Not for Internet Distribution.



1. (SBU) Summary. At the end of July, the government of
Turkey (GOT) stopped issuing licenses for corn imports
without any prior notification. Turkish officials claim that
the action was taken in order to assess the number of
licenses issued rather than to inhibit trade. After the
corn duty was increased from 20 to 45 percent today, August
8, the GOT began issuing licenses again. One shipment of
U.S. corn arrived on August 7 without licenses. Once the
tariff was increased, the buyers were issued import licenses
and were able to discharge their corn, which had become
significantly more expensive overnight.


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No Formal Advance Notification
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2. (SBU) On July 28, the GOT stopped issuing new import
licenses for corn. As is normally the case, the GOT gave no
advance warning of their actions. This action proved
ultimately to be tied to the increase in the tariff, which
rose to 45 percent on August 8. Turkey often applies higher
tariffs during the harvest in order to placate domestic
producers. Corn, rice, and even high fructose corn syrup
(HFCS) have had import duties significantly raised this
summer. Normally, as proved to be the case with the U.S.
vessel of corn, licenses are withheld for a short period
until the tariffs are raised.


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A Situation of Their Own Making
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3. (SBU) THE CURRENT SITUATION IS DUE, IN GREAT PART, TO
UNCERTAINTY IN THE MARKET CAUSED BY TURKISH POLICIES. IN
JUNE, THE TURKISH GRAIN BOARD (TMO) ANNOUNCED A DOMESTIC
PROCUREMENT PRICE OF APPROXIMATELY $215/TON FOR CORN. AT
THE SAME TIME, THE STRONG TURKISH LIRA HAS BEEN SUPPORTING
GREATER IMPORTS OF LOWER-PRICED CORN. TURKISH CORN IMPORTS
WERE EXPECTED TO REACH BETWEEN 1.5 - 1.6 MILLION TONS WITH 1
MILLION TONS EXPECTED TO COME FROM THE UNITED STATES IN

2003. TURKISH IMPORTERS HAVE BEEN TAKING ADVANTAGE OF THE
FAVORABLE EXCHANGE RATES IN ORDER TO STOCKPILE CORN FOR THE
COMING YEAR. TURKEY'S CORN SUPPLIES CAN FLUCTUATE, CREATING
GREAT UNCERTAINTY IN THE MARKET. FURTHER, IMPORTERS AND END-
USERS DON'T KNOW SPECIFICALLY WHEN TARIFFS WILL BE REDUCED.
AS A RESULT, THEY IMPORT IN GREAT QUANTITIES TO COVER FUTURE
NEEDS.



4. (SBU) While many companies are able to anticipate
imminent changes in import policy such as tariff increases
and license restrictions, the official import regime does
not allow them to plan purchases without risk. According to
the official regulations, a Certificate of Origin is
required as part of the application for an import license.
Since a Certificate of Origin cannot be received until the
vessel is loaded, the importer must commit to shipping a
cargo before even applying for an import license. Every
year importers are `caught out' under this system with a
cargo on the way without an import license. The same
scenario results from sudden non-notified changes in phyto-
santiary regulations. The GOT does not seem to realize that
the millions of dollars paid in demurrage fees and other
costs primarily impact Turkish companies and are a
deadweight loss on the Turkish economy.


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Helpful or Helpless?
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5. (SBU) The trader and buyers of the U.S. corn contacted
FAS/Ankara to intervene with the GOT on their behalf. On
Aug 5 Ag Attache met with Dr. Nihat Pakdil, General Director
of Protection and Control, which is the branch of the
Ministry of Agriculture and Rural Affairs that governs the
import licensing system. In response to concerns raised
regarding the GOT import licensing regime and the vessel of
U.S. corn, Dr. Pakdil claimed that the temporary halt in
issuing import licenses was not an effort to stop trade. He
also indicated that the license and tariff issues were not
related. Note: He is correct in the sense that tariff
changes are made by the Ministry of Finance, however it is a
coordinated policy. End Note. He also stated that the GOT
was delaying the issuance of further import licenses in
order to assess the number of licenses issued in response to
complaints from domestic producers that too much corn was
being imported. When pressed, Dr. Pakdil said it should
only be a matter of days before new licenses would be
issued.



6. (SBU) NOTE: WHILE UNWILLING TO TAKE ANY DIRECT ACTION TO
RESOLVE THE SITUATION, DR. PAKDIL DID ALLUDE TO A FUTURE
RESOLUTION. THIS SUGGESTS THE LIKELIHOOD THAT SUCH
DECISIONS ARE COORDINATED AT A MUCH HIGHER POLITICAL LEVEL
THAT IS IMMUNE TO OUR CONCERNS. END NOTE.


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COMMENT: THE BIGGER PICTURE
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7. (SBU) THE CURRENT LICENSING PROBLEM ONLY APPEARS TO HAVE
AFFECTED ONE VESSEL, ALBEIT AT SIGNIFICANT COST. HOWEVER,
THE GOT'S IMPORT LICENSING REGIME SYSTEM IS KNOWN FOR BEING
NON-TRANSPARENT AND FOR OBSTRUCTING TRADE IN COMMODITIES AND
FOOD PRODUCTS. THESE LICENSES ARE REQUIRED FOR EVERY SINGLE
IMPORTED FOOD AND AGRICULTURAL PRODUCT. THESE LICENSES, AND
THE FAILURE TO ISSUE THEM, POSE AN ANNUAL CHALLENGE TO CORN,
RICE, WHEAT, BANANAS, HFCS AND OTHER COMMODITIES THAT ARE
CONSIDERED SENSITIVE. CITING HEALTH CONCERNS, THE GOT OFTEN
WITHHOLDS CERTIFICATES FROM A NUMBER OF HIGH-VALUED
PROCESSED FOODS AS WELL. THIS APPEARS TO BE ANOTHER EXAMPLE
OF THE GOT IGNORING ITS WTO RESPONSIBILITIES. THESE
COORDINATED POLICIES CONTINUE TO OBSTRUCT TRADE WHILE
CREATING UNCERTAINTY AND INCREASING COSTS FOR U.S. EXPORTERS
AND TURKISH IMPORTERS ALIKE.


DEUTSCH