US embassy cable - 03ANKARA5015

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. 
 
 
------------------------- 
Helpful or Helpless? 
------------------------- 
 
 
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 
---------------------------- 
 
 
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