Resolving Customs Disputes in Turkey - Legal Remedies Guide

Why does the Turkish Customs Administration challenge declared values?

The Turkish Customs Administration challenges declared values when they suspect the transaction price does not reflect the "true" customs value as defined by Customs Law No. 4458. This usually happens if the price appears significantly lower than the statistical data for similar goods or if the importer and exporter are related parties.

Under Articles 23 through 31 of the Turkish Customs Law, the administration focuses on several key triggers for valuation disputes:

• Royalties and License Fees: If an importer pays royalties for the goods but fails to include these in the declared customs value, authorities will likely issue a tax assessment and a penalty.
• Related Party Transactions: When the buyer and seller are related (e.g., parent and subsidiary), the administration examines whether this relationship influenced the price.
• Omitted Costs: Failure to include transport costs, insurance, or commissions in the customs value is a frequent cause for secondary tax assessments.
• Unit Price Discrepancies: If the invoice price is significantly below the "reference price" in the Customs Ministry's database, it triggers a demand for an explanation and additional documentation.

Should you choose an administrative appeal or a lawsuit in Tax Court?

In Turkey, the legal remedy for customs disputes follows a strictly hierarchical path where an administrative objection is a mandatory prerequisite for judicial review. You must first file an objection with the higher administrative authority (usually the Regional Directorate of Customs) before you are permitted to bring the case before a Turkish Tax Court.

The Administrative Objection Process

1. Filing the Objection: Within 15 days of the notification of the tax or fine, the importer must submit a written objection to the relevant Customs Directorate.
2. The Decision: The administration must render a decision within 30 days. If they remain silent for 30 days, it is considered a "tacit rejection."
3. The Outcome: If the objection is accepted, the tax or fine is canceled. If rejected, the importer has 30 days to file a lawsuit in the Tax Court.

Filing a Lawsuit in Tax Court

If the administrative appeal fails, the dispute moves to the Turkish Tax Courts (Vergi Mahkemeleri). This is an evidentiary process where the court reviews the legality of the administration's actions.

• Suspension of Execution: Generally, filing a lawsuit against a tax assessment stays the collection of the tax until the court reaches a decision.
• Expert Witnesses: In complex technical or valuation disputes, the court often appoints an expert panel to provide a technical report.
• Appeal Levels: Decisions from the Tax Court can be appealed to the District Administrative Court (Bölge İdare Mahkemesi) and eventually to the Council of State (Danıştay).

What are the time limits for contesting customs penalty notices?

The time limits for contesting customs actions in Turkey are strictly enforced and start from the day following the official notification of the act. Missing these deadlines typically results in the total loss of the right to appeal, making the tax or fine final and enforceable.

• 15 Days: To file an administrative objection against taxes, fines, or seizure decisions.
• 15 Days: To apply for the Reconciliation (Uzlaşma) procedure from the date of notification.
• 30 Days: To file a lawsuit in the Tax Court after receiving a rejection from the administrative objection.
• 30 Days: To appeal a Tax Court decision to the District Administrative Court.

If you choose to use the reconciliation process, the 30-day clock for filing a lawsuit is paused. If the reconciliation ends in "no agreement," the remaining time to file a lawsuit (or at least 15 days) begins to run from the date the disagreement is recorded.

How does the reconciliation (Uzlaşma) procedure work?

Reconciliation, known as Uzlaşma in Turkey, is a pre-litigation settlement mechanism where the importer and a customs committee negotiate to reach an agreement on the amount of taxes and fines. It is designed to resolve disputes quickly without the costs and delays of the court system.

To apply for reconciliation, you must submit a request within 15 days of receiving the notification. The process follows these rules:

1. Scope: You can reconcile for both unpaid taxes and customs fines. However, fines resulting from "smuggling" offenses are generally excluded from this process.
2. The Meeting: A committee is formed (usually three officials), and the importer or their authorized lawyer/customs broker presents their case.
3. The Offer: The committee usually offers a reduction. For fines, reductions can be as high as 90% of the original amount. For taxes, the reduction is typically much lower.
4. Finality: If you sign the reconciliation minute, the debt becomes final. You must pay within one month, and you waive all rights to file a lawsuit or continue an existing appeal.
5. Failure to Agree: If no agreement is reached, the importer resumes the standard administrative or judicial appeal process.

How are disputes over tariff classification and origin managed?

Tariff classification (HS Code) and Origin disputes are technical in nature and often involve high stakes because they determine the basic customs duty, anti-dumping duties, and additional financial obligations. In Turkey, these codes are known as GTİP (Gümrük Tarife İstatistik Pozisyonu).

Managing Classification Disputes

If the customs office reclassifies your product into a category with a higher tax rate, you should:

• Request Laboratory Analysis: Many classification disputes are solved by technical analysis of the product's chemical or physical composition at a customs laboratory.
• Present Binding Tariff Information (BTI): If you possess a BTI for the same product, the administration is legally bound to respect that classification for six years.
• Technical Literature: Provide technical drawings, user manuals, and international "Explanatory Notes" from the World Customs Organization (WCO).

Managing Origin Disputes

Disputes regarding the "origin" of goods usually arise when Turkish authorities suspect that goods from a high-tax country are being rerouted through a country with a Free Trade Agreement (FTA) or the EU Customs Union. To resolve these:

• Verification Requests: Turkish customs may initiate a "post-importation verification" by contacting the customs authorities in the exporting country to verify the authenticity of a Movement Certificate (e.g., A.TR, EUR.1).
• Supplier Declarations: Maintaining a strong paper trail of manufacturing processes and raw material sourcing is essential to prove the goods meet the "rules of origin."

Common Misconceptions about Turkish Customs Law

Myth 1: "If I pay the fine now, I can still sue later to get my money back."

In the Turkish system, if you pay a fine without a "reservation of rights" or if you opt for the reconciliation procedure, you effectively close the door on litigation. If you intend to sue, you must follow the administrative objection path or pay under protest to avoid being deemed as accepting the debt.

Myth 2: "Customs disputes only happen during the import process."

The Turkish Customs Administration has the authority to conduct "post-clearance audits" for up to three years after the goods have been imported. They can examine your corporate books, bank transfers, and contracts. Many major lawsuits in Turkey arise from these audits rather than issues at the border.

FAQ

Can I release my goods from the warehouse while the court case is ongoing?

Yes. Under Article 202 of the Customs Law, you can request the release of goods by providing a guarantee (usually a bank letter of guarantee or cash) equal to the amount of disputed taxes and penalties.

What happens if I lose a customs lawsuit in Turkey?

If you lose in the Tax Court, you must pay the taxes and fines, plus "delay interest" calculated from the original import date. You can appeal to the District Administrative Court, but you may need to provide a guarantee to prevent the administration from initiating collection proceedings during the appeal.

How much does it cost to file a customs lawsuit?

The costs include a fixed filing fee and a proportional fee based on the disputed amount. If you lose, you will also be ordered to pay the "legal counsel fee" to the Customs Administration's lawyers, which is calculated based on a regulated tariff.

Is an administrative objection really necessary?

Yes. In Turkey, if you skip the administrative objection and go straight to the Tax Court, the court will dismiss your case on procedural grounds, citing a "premature lawsuit."

When to Hire a Lawyer

Navigating Turkish customs disputes requires a combination of technical trade knowledge and procedural legal expertise. You should hire a lawyer if:

• The Customs Administration has issued a "Post-Clearance Audit" report demanding significant retroactive taxes.
• Your goods have been seized under suspicion of "misrepresentation" or smuggling.
• The dispute involves complex intellectual property issues, such as royalty inclusions in customs value.
• You have received a rejection for an administrative objection and have only 30 days to file a lawsuit.
• The financial stakes are high enough that the "Reconciliation" offer from the government is insufficient.

Next Steps

1. Locate the Notification: Identify the exact date you received the tax or penalty notice to calculate your 15-day deadline.
2. Gather Documentation: Collect the commercial invoice, proforma invoice, insurance policy, freight invoice, and any correspondence with the supplier.
3. Evaluate Reconciliation vs. Litigation: Determine if you want a quick settlement (Reconciliation) or if you have a strong legal case to fight for a total cancellation (Lawsuit).
4. Draft the Objection: Prepare a formal written objection to the Regional Directorate of Customs, ensuring you address every legal and technical point raised in the penalty notice.
5. Secure the Goods: If the goods are held at the port, arrange for a bank guarantee to prevent mounting storage and demurrage costs.