MARKET AND ECONOMIC OVERVIEW

With a population of 74 million, Turkey is important emerging market for U.S agricultural products. Economic growth continues at strong pace. Inflation drastically decreased to 8.9 percent in August 2012, down from 30 percent in 2002. In 2010 Turkey ranked 15th in terms of PPP, with a GDP of $736 billion; However due to a decline in exports to Europe in response to the global economic meltdown, its GDP in PPP terms fell by $33 billion in 2011 bringing it to number 16. The Turkish economy, which was growing quite rapidly before the crisis, rebounded in the last quarter of 2011 and has grown at a rate of almost 9 percent per annum since then. Moreover, according to the OECD, Turkey is expected to be the fastest growing economy among OECD members between 2011 and 2017, with an annual average growth rate of 6.7 percent. Although immigration from rural to urban areas since 1990 has been high, 24.5% of the population still lives in rural areas. The major cities and their populations are: Istanbul, the trade and finance centre, 12.9 million; Ankara, the capital, 4.7 million; Izmir a major player in the dairy, greenhouse and tourism sector, 3.9 million; Bursa, the centre of automotive manufacturing and food processing, 2.6 million; Adana, the centre of agricultural production, 2.1 million; Konya, the canter of grain production, 2.0 million; and Antalya, the centre of vegetable production and tourism sector, 1.9 million. The population of Turkey is expected to reach 75.8 in 2013 and 77.6 million in 2015. Seventytwo percent of the population is under the age of 35 and 26% is under the age of 15.

Parameter Population Labour Force (Population) Median Age GDP GDP Per Capita Exports Value Imports Value Tourism Revenue Tourist Number Foreign Direct Investment Number of Companies with Foreign Capital Inflation Rate

Value in Year 2010 74 million 25.9 million 29.2 USD 736 billion USD 10,079 USD 120.9 billion USD 185 billion USD 20.8 billion 28.5 million people USD 9.1 billion 25,500 6.4%

Table-1 Turkey's largely free-market economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 25% of employment. An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middle-class entrepreneurs is adding dynamism to the economy and expanding production beyond the traditional textiles and clothing sectors. The automotive, construction, and electronics industries, are rising in importance and have surpassed textiles within Turkey's export mix. Oil began to flow through the Baku-Tbilisi-Ceyhan pipeline, marking a major milestone that will bring up to 1 million barrels per day from the Caspian to market. Several gas pipelines projects also are moving forward to help transport Central Asian gas to Europe through Turkey, which over the long term will help address Turkey's dependence on imported oil and gas to meet 97% of its energy needs. After Turkey experienced a severe financial crisis, Ankara adopted financial and fiscal reforms as part of an IMF program. Turkey's public sector debt to GDP ratio has fallen to roughly 40%. Continued strong growth has pushed inflation to the 8% level, however, and worsened an already high current account deficit. Turkey remains dependent on often volatile, short-term investment to finance its large trade deficit. The stock value of FDI stood at $99 billion at year-end 2011. Inflows have slowed considerably in light of continuing economic turmoil in Europe, the source of much of Turkey's FDI. Further economic and judicial reforms and prospective EU membership are expected to boost Turkey's attractiveness to foreign investors. However, Turkey's relatively high current account deficit, uncertainty related to monetary policy-making, and political turmoil within Turkey's neighbourhood leave the economy vulnerable to destabilizing shifts in investor confidence.
2

IMPORT REGULATIONS
IMPORT REGULATION

Overall, Turkey has a relatively free market for trade in goods and services as a result of liberalization measures introduced over the past two decades. Turkey follows basic WTO rules to regulate imports and tariff structures and has adopted the European Union (EU)'s common customs tariff for imports from third countries. Turkey signed a customs union with the EU in 1996, eliminating all duties and charges on goods imported from EU member countries, excluding services, public procurement and unprocessed agricultural products. Turkey has signed free trade agreements with various countries and extends preferential treatment for least developed countries and some developing countries. TARIFFS AND CLASSIFCATION OF GOODS Turkey's tariff schedule is based on both the Harmonized Coding System (HS) and the Combined Nomenclature (CN) of the European Union within the framework of the Customs Union. Import duties are calculated on cost, insurance and freight (CIF) prices and are levied as a percentage on the landed value of the good. The importer is responsible for payment of the Turkish value-added tax (VAT), which is set at 18% for the majority of imports or 26% for luxury goods. Goods on which duty was paid on entry to an EU country can be admitted duty-free to Turkey and vice versa (with exceptions for agricultural goods and some industrial products). Clearance time is usually one to three days, depending on the type of freight. In the event of a classification dispute, the higher duty can be paid with the intent to seek reimbursement at a later date STANDARD The Turkish Standards Institute (TSE) is responsible for setting standards in Turkey. TSE approval is required to import any product covered under these standards. Many categories of products are subject to restrictions and special requirements such as narcotics (prohibited) and weapons (subject to strict license control). Items such as live animals, medicines and pharmaceuticals, food and plant products, organic chemicals, telecommunications equipment, ozone-depleting substances, explosives, banknotes and commercial paper, radioactive materials and temporary import of goods for exhibition may require additional permissions and certificates from government agencies. FOREIGN INVESTMENT IN TURKEY

Foreign direct investment plays an important role in the Turkish economy. The Government has introduced reforms to improve the investment environment in Turkey, such as simplified procedures, new legislation and tax incentives to attract foreign investors. Under Turkey's programme to privatize state enterprises, foreign investors benefit from the same rights and incentives as local investors. FREE TRADE ZONES IN TURKEY Turkey has numerous free trade zones, considered to be outside the jurisdiction of Turkish customs authorities. Goods can be imported duty-free, assembled, manufactured, stored, repackaged and re-exported without paying tariffs. Unlike many free zones around the world, Turkish free zones allow sales into the Turkish market, subject to a fee.

EXPORT REGULATION
TRANSIT 1

Increased concern on the transit of dual-use items within Turkey as well as within the international community. Relevant Turkish legislation 1 The related provisions of the under secretariat of Foreign Trade Communiqu 2003/12 on the Control of Exports of Dual-Use and Sensitive Items. The related provisions of the Customs Law no. 4458 dated 5 February 2000 which conforms with EU Customs Code (Council Regulation 2913/92).

TRANSIT - 2 Relevant Turkish legislation 2 Anti Smuggling Law no. 5607. Within this legislative framework, transits of items that are subject to export controls are treated on a case-by-case basis within the scope of interagency cooperation. ENFORCEMENT -1 Located in a sensitive geography where transit-trade and transit-shipment is common, customs enforcement and ground interdiction in general is of prime importance to Turkey. Customs authorities use an extensive database for enforcement purposes. New security systems have also been developed and established to prevent illegal trafficking of goods. ENFORCEMENT- 2

Intelligence and Land Border Gates Vehicle Pursuit Program has been developed. System currently operates at strategically important land border gates and seaports. All alerts and intelligence information about suspected vehicles, goods, firms, brokers and other actors are introduced into this program and forwarded to all regional units.

ENFORCEMENT- 3 Fixed and mobile vehicle and container scanning systems Fixed, mobile and handheld radiation detection units

Transit Vehicle Traction System / Monitoring of movements at the Control Centre in Ankara. System alerts enforcement officers when The vehicle leaves its specified route within Turkey, or The vehicle remains outside the path already specified,
The mobile tracking unit is removed.

EXPORT CONTROLS: COOPERATION ON THE GROUND We receive intelligence (either through own Intel channels or through international cooperation. Immediate action by MFA: call on board interagency task force. Depending on the intelligence: relevant export control authority + intelligence insight sought + if necessary military advice (including naval/air). Ability to confirm proper licensing/customs info. Intelligence needs to be on time and accurate.

A CHALLENGE IN EXPORT CONTROLS-FREE ZONES-1

Constitutes a loophole within control systems. Can be exploited by proliferators. The transfer of sensitive items to other destinations is difficult to trace. The burden of the exporter country is increased In Turkey: transfer of dual-use items into free zones in Turkey are subject to licensing according to the export legislation.

A CHALLENGE IN EXPORT CONTROLS-FREE ZONES-2 The items transferred into the free zones cannot be transferred out of the free zone without the permission of the under secretariat of Foreign Trade (UFT). Import Certificate and End-user Certificate is required for the transfer. If and when necessary, UFT consults other relevant institutions before granting permission. The UFT has the authority to deny or postpone the transfer.

RECENTLY CHANGED REGULATIONS Recently Changed Regulations(Date of official gazette) December 17, 2011 Name of Regulation Important Articles

December 17, 2011

Official import controls -Based on 5996 law, veterinary services, of plant origin food and plant health, food and feed law feed Importers should get electronic username and password for the pre-notification -Importers should electronically complete a pre-notification form listing plant origin, food, feed and food contact material. Also attached should be copies of the health certificate, ingredient list, and other documents as determined necessary by MINFAL. -Border Inspection Post or provincial directorates will give a date of inspection -Frequency of analysis will be determined by risk analysis -If there is a case of non-compliance, importers can either use special treatment, declare a change in intent of use, send it back or it can be given up for confiscation. - An electronic certificate will be accepted if there is a protocol between two countries -Turkish translated labelling should be done before actual import control is carried out. Measurements to monitor -EU harmonization regulation, 96/23/EC certain substances and -EU harmonization regulation, 97/747/EC their residue on live -If residue is detected on imported animal animals and animal or animal products then they will increase products. frequency of analysis from the same origin -EU harmonization regulation, 852/2004/EC -Based on 5996 law, veterinary services, plant health, food and feed law -Defines general hygiene criteria for premises including HACCP criteria and good management practices Food premises -Based on 5996 law, veterinary services, registration and approval plant health, food and feed law -Define which premises requires registration and define criteria of how they should register Food Hygiene

December 17, 2011

December 17, 2011

December 17, 2011

Food and Feed official control

December 17, 2011

December 17, 2011

December 17, 2011

December 17, 2011

December 17, 2011

-Based on 5996 law, veterinary services, plant health, food and feed law -MINFAL is now ready to delegate some of their control. Pre-notification and -EU harmonization regulation, veterinary checks of 282/2004/EC animal and animal -EU harmonization regulation, products entering to the 136/2004/EC country -Based on 5996 law, veterinary services, plant health, food and feed law -Pre-notification of imports of animal and animal products -Veterinarians responsibilities to check and sign forms Specific rules for animal -EU harmonization regulation, products official 854/2004/EC inspections -Based on 5996 law, veterinary services, plant health, food and feed law -Approval of premises -General hygiene rules -Raw meat inspections -Role and duties of official veterinarian and his/her assistant -Live animal inspections and animal welfare Veterinary checks on EU harmonization regulation, 97/78/EC products entering to the -Based on 5996 law, veterinary services, country plant health, food and feed law -Pre-notification and veterinary checks at the border inspection post -Issuance of veterinary check form -Frequency of veterinary controls -Physical criteria of border inspections post Veterinary checks on live -EU harmonization regulation 97/794/EC animals entering to the -EU harmonization regulation, 91/496//EC country -Based on 5996 law, veterinary services, plant health, food and feed law -One day before arrival, importers should inform amount, variety and expected date of arrival to veterinary border inspection -Veterinary controls should contain documentary checks, physical checks, -First veterinary checks should be done at the border inspection posts Domestic animal and -Based on 5996 law, veterinary services, animal products plant health, food and feed law movements -Issuance of veterinary health certificate on animal movements -Define vehicle criteria on animal and animal products movements
9

December 21, 2011

Animal Hospital regulation

December 21, 2011

December 23, 2011

December 23, 2011

December 23, 2011

December 23, 2011

December 24, 2011 December 24, 2011

December 24, 2011

December 24, 2011 S Regulations December 27,2011

-Based on 5996 law, veterinary services, plant health, food and feed law -Criteria to setup animal hospital including staff qualification. Veterinary checks on -EU harmonization regulation 97/78/EC animal and animal -EU harmonization regulation, 91/496//EC products entering to the - EU harmonization regulation, country 2007/275//EC -Based on 5996 law, veterinary services, plant health, food and feed law -Attached list of regulation classifies which products are animal and animal products Animal welfare -Based on 5996 law, veterinary services, regulations plant health, food and feed law -Defines criteria of animal farms including barns, cages for chickens etc. Protection and combating -Based on 5996 law, veterinary services, measurements against plant health, food and feed law cattle leucosis -Vaccination to leucosis cattle is prohibited -Animal movements to herds that have leucosis cattle restricted Protection and combating -Based on 5996 law, veterinary services, measurements against plant health, food and feed law cattle anthrax -Diagnosis, notification and combating measures. Surveillance of zoonose -EU harmonization regulation 97/78/EC and zoonotic agents, -Based on 5996 law, veterinary services, related antimicrobial plant health, food and feed law resistance and food borne -Surveillance of Brucellosis, outbreak Criteria of livestock -Based on 5996 law, veterinary services, markets registration, plant health, food and feed law inspections Animal welfare during -Based on 5996 law, veterinary services, animal transportation plant health, food and feed law -Criteria of animal transportation vehicles including ships and trucks -Responsibilities, training, inspections and reports Animal by products that -EU harmonization regulation are not intended to use for 1069/2009/EC human consumption -Categorization of by products -Collection and transportation criteria Sperm, Ovum and -Registration, approval and certification of Embryo production centre centres. establishment Special hygiene regulation for animal products
10

-EU harmonization regulation, 853/2004//EC -Based on 5996 law, veterinary services,

December 27,2011

December 27,2011

December 27,2011

December 29,2011 December 29,2011

December 29,2011

December 29,2011 December 29,2011 December 29,2011

December 29,2011

December 29,2011

December 29,2011

plant health, food and feed law -Defines criteria for animal slaughtering and animal products processing facilities Feed hygiene -EU harmonization regulation, 183/2005//EC -Based on 5996 law, veterinary services, plant health, food and feed law -Registration and approval of feed premises placing on the market and EU harmonization regulation, use of feed 767/2009//EC -Based on 5996 law, veterinary services, plant health, food and feed law -Principles of labeling and presentation methods of sampling and -EU harmonization regulation, analysis for the official 767/2009//EC control of feed -Based on 5996 law, veterinary services, plant health, food and feed law Turkish food codex, -Based on 5996 law, veterinary services, Maximum residue limits plant health, food and feed law of pesticides Turkish food codex, -EU harmonization regulation, flavorings and certain 1337/2008//EC food ingredients with -EU harmonization regulation, flavoring properties 2065/2003//EC -Based on 5996 law, veterinary services, plant health, food and feed law Turkish food codex; Food EU harmonization regulation, additives 1333/2008//EC -Based on 5996 law, veterinary services, plant health, food and feed law Turkish Food Codex -Based on 5996 law, veterinary services, plant health, food and feed law Turkish Food Codex -Based on 5996 law, veterinary services, preparation plant health, food and feed law Turkish food codex, -Based on 5996 law, veterinary services, Microbiological criteria plant health, food and feed law for foodstuff -EU harmonization regulation, 2073/2005//EC Turkish food codex, -Based on 5996 law, veterinary services, labeling plant health, food and feed law -EU harmonization regulation, 2000/13/,/79/112/,2002/67,/608/2004,/90/4 96,87/250,1924/2006 EEC Turkish food codex, -Based on 5996 law, veterinary services, Contamination plant health, food and feed law -EU harmonization regulation,1881/2006/EC Turkish food codex, Based on 5996 law, veterinary services, Materials and articles plant health, food and feed law
11

December 30, 2011 December 4, 2012 December 4, 2012

intended to come into contact with food Import inspection regulating

December 4, 2012

December 4, 2012

December 4,2012

December 4, 2012

-EU harmonization regulation,1935/2004/EC -Published by Ministry of Economics -Explains what MINFAL documents are required to release products at customs. Turkish food codex, -Increased bran content of bread Bread and varieties of -Decrease weight of bread to decrease the Bread amount of waste bread Turkish food codex, -EU harmonization regulation, methods of sampling for 87/524/EEC chemical analysis for the monitoring of preserved milk Turkish food codex, -EU harmonization regulation, 41/2009/EC composition and labeling of foodstuffs suitable for people intolerant to gluten Turkish food codex, sampling, testing method for dioxin and similar -EU harmonization regulation, products 1881/2006/EC Turkish food -EU harmonization regulation, 86/424/EC Codex, methods of sampling for chemical analysis of edible caseins and caseinates Turkish food codex, -EU harmonization regulation, 89/396/EC indications or marks identifying the lot to which a foodstuff belongs Table-2

TURKEY EXPORT-IMPORTS
EXPORT $133 billion (2011) $120.9 billion (2010) EXPORTS-COMMODITIES Apparel, Foodstuffs, Textiles, Metal Manufactures, Transport Equipment
12

EXPORTS-PARTNRES Germany 10.1%, UK 6.4%, Italy 5.7%, France 5.3%, Iraq 5.3%, Russia 4.1% (2010) TURKEY EXPORTS BY PRODUCT SECTION IN US DOLLORS-YEARLY (In US DOLLORS ($)) Section Food and Live Animals
Beverage s and

2006 3,316,181,000

2007 3,071,256,000

2008 3,943,801,000

2009 5,044,325,000

2010 6,512,339,000

471,094,000

425,670,000

488,614,000

590,940,000

736,445,000

Tobacco Crude
materials,

Inedible, Except fuels Mineral Fuels,

Lubricants

607,577,000

685,301,000

916,570,000

1,172,974,000

1,334,833,000

and Related Material

444,538,000

683,083,000

980,128,000

1,429,137,000

2,641,023,000

Animal and
Vegetable

180,495,000

96,450,000

254,730,000

205,451,000

405,300,000

Oils, Fats and Waxes Chemica ls and Related Products Manufac

1,272,078,000

1,370,090,000

1,725,205,000

2,342,365,000

2,801,266,000

9,453,058,000

10,495,875,00

13,204,590,00
13

18,586,791,00

20,408,933,00

tured Goods
classified

chiefly by Material
Machinery

and
Transport

7,152,448,000

8,587,499,000

Equipment Miscella -neous Manufac -tured Articles Commod ities and Transact -ions not
classified elsewhere

12,370,221,00 0

18,275,353,00 0

21,005,357,00 0

8,099,397,000

9,878,182,000

12,658,869,00 0

14,757,837,00 0

15,947,496,00 0

337,079,000

468,574,000

710,113,000

715,782,000

1,106,838,000

in the SITC Table-3

ELECTRICITY EXPORTS (million kWh) Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Electricity(million kWh) 209 350 437 433 433 433 600 1100 2576 2576 1120
14

2011 2012

1120 1550 Table-4

OIL EXPORTS 68,450 bbl/day (2011) Variable: Value of oil exports Units: U.S. dollars Scale: Billions Year 2001 2002 2003 2004 2005 Value of oil exports 0.445 0.692 0.98 1.429 2.641
15

Percent Change 35.26 55.51 41.62 45.82 84.81

2006 2007 2008 2009 2010

3.567 5.148 7.532 3.921 4.469 Table-5

35.06 44.32 46.31 -47.94 13.98

NATURAL GAS-EXPORTS 649 million cu m (2011) IMPORTS $212.2 billion (2011) $185 billion (2010) IMPORTS-COMMODITIES Machinery, Chemicals, Semi-Finished Goods, Fuels, Transport Equipment

IMPORTS-PARTNERS Russia 11.6%, Germany 9.5%, China 9.3%, US 6.6%, Italy 5.5%, France 4.4%, Iran 4.1% (2010) TURKEY IMPORTS BY PRODUCT SECTION IN US DOLLORS-YEARLY (In US DOLLORS ($)) Section Food and Live Animals Beverages 2006 735,741,000 296,431,000 2007 1,047,645,000 218,006,000
16

2008 1,604,010,000 250,248,000

2009

2010

1,817,607,00 1,615,878,000 0 270,022,000 298,876,000

and Tobacco Crude materials, inedible, except fuels Mineral Fuels, Lubricants and Related Materials
Animal and Vegetable Oils, Fats and Waxes

2,435,057,00 0

3,663,107,000

5,160,437,000

6,969,911,00 7,660,516,000 0

6,140,805,00 0

7,169,912,000

8,585,735,000

11,132,807,0 15,764,234,00 00 0

321,012,000

413,905,000

512,100,000

531,907,000

744,731,000

Chemicals and Related Products

Manufacture d Goods

6,157,927,00 0

7,797,742,000

10,277,390,00 0

14,049,069,0 16,166,494,00 00 0

classified chiefly by Material Machinery and Transport Equipment

Miscellaneous Manufactured

6,642,758,00 0

8,766,293,000

11,623,540,00 0

16,523,007,0 19,989,660,00 00 0

12,635,622,0 00

15,593,104,00 0

21,509,601,00 0

33,704,169,0 37,808,892,00 00 0

2,533,486,00 0

2,969,634,000

3,795,638,000

5,354,340,00 6,615,182,000 0

Articles
Commodities

and
Transactions

not classified elsewhere in the SITC

3,500,236,00 0

3,630,837,000

6,020,992,000

7,186,928,00 10,109,685,00 0 0

17

Table-6

OIL IMPORTS

581,000 bbl/day (2011)

Variable: Value of oil exports Units: U.S. dollars Scale: Billions Year 2001 2002 2003 2004 Value of Oil Imports 8.339 9.204 11.575 14.407 Percent Change -12.60 10.37 25.76 24.47

18

2005 2006 2007 2008 2009 2010

21.256 28.859 33.881 48.281 29.905 38.497 Table-7

47.54 35.77 17.40 42.50 -38.06 28.73

NATURAL GAS-IMPORTS 38.04 billion cu m (2011)

GROSS DOMESTIC PRODUCT (GDP)

DEFINATION This entry gives the gross domestic product (GDP) or value of all final goods and services produced within a nation in a given year. A nation's GDP at purchasing power parity (PPP) exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States. GDP (PURCHASING POWER PARITY) $1.026 trillion (2011) $981.2 billion (2010)

19

$906.9 billion (2009) Note: data are in 2011 US dollars Source: International Monetary Fund - 2011 World Economic Outlook Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Gross domestic product based on purchasing-powerparity (PPP) valuation of country GDP 494.652 533.644 573.555 658.633 747.326 824.656 888.2 913.881 878.956 968.604 Table-8

Percent Change -3.57 7.88 7.48 14.83 13.47 10.35 7.71 2.89 -3.82 10.20

GDP - REAL GROWTH RATE 4.6% (2011) 8.2% (2010) (2009) Variable: Gross domestic product, constant prices Units: Percent change Country-specific Note: See notes for: Gross domestic product, constant prices (National currency). -4.7%

20

Source: International Monetary Fund - 2011 World Economic Outlook

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Gross domestic product, constant prices -5.697 6.164 5.265 9.363 8.402 6.893 4.669 0.659 -4.826 8.945 Table-9

GDP - PER CAPITA (PPP) $14,600 (2011) $13,800 (2010) $12,900 (2009) Note: data are in 2011 US dollars Year Gross domestic product based on purchasing-power-parity (PPP) per capita GDP 7350.66 7803.009
21

Percent Change

2001 2002

-5.16 6.15

2003 2004 2005 2006 2007 2008 2009 2010

8255.231 9335.531 11116.96 12116.07 12891.57 13107.54 12460.79 13577.11 Table -10

5.80 13.09 19.08 8.99 6.40 1.68 -4.93 8.96

GDP - COMPOSITION BY SECTOR Agriculture: 9.3% Industry: 28.1% Services: 62.6% (2011)

AGRICULTURE SECTOR
Agriculture has always been one of the most promising sectors for Turkey, both for the domestic economy and in terms of international trade. Around 40 percent of Turkeys land area is arable and offers a large range of products such as grains, pulses, oil seeds, fruits and vegetables, cut flowers, poultry, dairy products, seafood, honey and tobacco. Grain production, livestock and fisheries/forestry account for 67 percent, 26 percent and 7 percent of the total agricultural production, respectively.

22

Turkeys agricultural imports in 2010 and 2011, excluding processed food, reached USD 6.49 billion (3.49 percent of the total imports) and USD 8.94 (3.7 percent of the total imports), respectively. Export were USD 5.09 billion (4 percent of total exports) in 2010 and USD 5.35 (3.9 percent of total exports) in 2011. The top Turkish exports are dried figs, dried apricots, sultana raisins, hazelnuts and hazelnut products. Turkeys top imports are cotton, soybeans, hides and skins, feed ingredients, live animals and paddy rice.

FOOD PURCHASING BEHAVIOUR

The Turkish food sector is becoming more advanced due to retailer demands for higher standards and investments by food manufactures. Through the widespread presence of modern international and domestic grocery retail outlets such as Metro, Carrefour, Tesco and Migros as well as rising incomes, the consumption patterns of Turkish consumers have shifted away from bulk and raw foods towards packaged and processed foods, including ready-to-eat meals and frozen foods. An increase in the number of females working full-time and higher levels of disposable income has supported this trend. This is particularly the case in urban centers. The
23

major food consumption patterns have not changed as much in the rural areas and are still based on wheat and grain products and a variety of meat products. Consumers in the south east of Turkey mainly consume lamb, but in Central Anatolia and the West more consumers prefer beef. Milk consumption has not increased as quickly as milk production, which increased from 8 million MT in 2002 to 12.5 million MT in 2011, but the variety of milk products such as yogurt and cheese increased. There are still a lot of opportunities for investments in the dairy products sector but products should be adjusted to local tastes. Turkey should be considered a door to Middle Eastern market. Due to shared history and religion as well as common cultures, Turkish agriculture and food export to the Middle East increased dramatically in the past decade. The Halal and organic food subsectors are areas which could be ready for investments or partnerships in the region. Production in the food and beverage sector reached TRY 8,852 million in 2009, which constitutes 18-20 percent of the countrys production as a whole. The proportion of Turkish household expenditure allocated to food and beverages, which was around 23 percent and declined to about 21.9 percent in 2009, remains high compared with Western standards, which range between 15-20 percent. But Alcoholic beverages and tobacco expenditures increased from 4.1 percent to 4.5 percent in 2009-10. Total consumer spending on food, beverages and tobacco was estimated at around USD 145 billion in 2010. The Turkish economy grew 15.7 fold between 1980 and 2010 from TRY 70 billion to 1,105 billion whereas the food sector grew 14.8 fold from TRY 15 billion to 222 billion in the same period. Accordingly, the share of the food sector in Turkeys GDP dropped to 20.1% in 2010 from 21.4% in 1998. The Turkish diet contains a large share of baked goods. Hence, the bakery subsector forms the majority (65 percent) of the total number of food and beverage companies in Turkey. In 2011 Turkey consumed 11,486,000 MT of bread and only 33,600 MT of packaged bread. Turkish consumers tend to buy bread from small bakeries when it is hot and generally dont buy packaged sliced bread. Another important bakery product is the Simit (type of bagel) as well as salty cookie-like products. Modern bakery shops have begun to open, especially in Istanbul, but that is not widespread throughout Turkey. Moreover, due to the low quality of flour available in

24

Turkey, pita style bread is popular in East and South East Anatolia. Therefore, the bakery sector in general offers a lot of opportunities for growth and development.

FINDING BUSINESS PARTNERS IN TURKEY

There are 467 foreign companies actively operating in the Turkish food sector. Cargill, Bunge, Nestle, Unilever, Coca-Cola, and Pepsi-Co are some of the most prominent ones. Restaurant franchises are one way of introducing new products. An increasing number of restaurant chains are opening in Turkey, especially in Istanbul. These include casual dining, fast food and cafes. While most of these companies source food ingredients produced in Turkey, some require specialized ingredients or imports of certain items that are not readily available. Exporters should check with importers to see if they are approved suppliers for franchises. Additionally, Turkeys hotel sector has traditionally represented an important niche market for certain highvalue food products that cannot be readily found throughout Turkey. Turkey attracts 30 million
25

tourists every year, especially in Istanbul and Antalya. There are 336 five star and 543 four star hotels in Turkey and most of them are located in Antalya and Istanbul. Global hotel chains including the Marriot, Hilton and Sheraton have a strong presence in Turkey. Turkey is a major tourism destination for Germans, Russians, British and Scandinavian travellers. Five star hotels would like to offer more high-quality products to their customers. Fresh fruits and vegetables are readily available in Turkey but high quality meat (especially steak) and fishery products (especially shrimp and crab) can be extremely difficult to source. Trader associations are also very important contacts for those seeking to enter the market. The Feed Millers Association, Turkish Food and Drink Industry Association Federation, and Poultry Meat Producers and Breeders Association are examples of important traders organizations. (See Annex A for more details). A visit to Turkey to gain a first-hand information about the Turkish market, preferably coinciding with a major trade show such as FOODST (See Annex C for more details), is a good way to get started before entering the Turkish market and meeting prospective importers. Similarly, international food shows such as ANUGA, SIAL and Gulfood area attracting more and more Turkish importers, and may also be a way to meet prospective customers.

TRADE POLICY
The major barrier to selling agricultural products to Turkey is high tariff rates. The tariff for beef cuts is bound at 225%, for milk is 150%, for white cheese is 80%, and for wheat and corn is normally 130% (depending on demand, the government can temporarily lower tariffs). Turkey and the United States signed an import protocol allowing imports of live dairy breeding cattle and for fattening cattle. However, neither a protocol for slaughter cattle, nor for cut beef has been negotiated. Another major barrier is a new Biosafety Law which has been enforced in Turkey since September 26, 2010. The law banned importation of any GMO products until the genes contained within go through a lengthy approval process. On January 26, 2011, Turkeys Bio safety Board approved the three biotech traits for soybeans (A2704-12, MON89788, MON4026

3-2) for feed use that were approved in the European Union at the time, allowing U.S. soybeans to enter Turkey for feed use only. Then on December 24, 2011, The Bio safety Board approved 13 corn (see annex D for more information) events for feed use. The remaining 9 events have been reviewed, but due to a negative recommendation by the committees, approval will be difficult. Our office provides updates on biotechnology and other issues through the FAS website under Attach Reports: www.fas.usda.gov. New import regulations were published in the Official Gazette dated December 30, 2011. Changes in these regulations reflected that fact that the Ministry of Food Agriculture and Livestock (previously known as the Ministry of Agriculture and Rural Affairs) was reorganized in 2011 and divided oversight of plant and animal products. According to the new import regime, plant and plant products no longer require control certificate (Find more details in Annex F) however the importer must pre-notify imports of material according to the information provided below. Some animal and animal products now require control certificates. A list of products which require control certificates is given in Annex E Most Turkish agriculture-related regulations, laws, communiqus, directives, and notifications are available on the website of the General Directorate of Food Control (GDFC) of the Ministry of Food, Agriculture and Livestock (MINFAL): www.gkgm.gov.tr. Some of the regulations have an English translation available on the same website. The legal infrastructure of agriculture is mainly based on communiqus rather than on laws. The reason for this is that the Turkish constitutional system does not allow laws to be adopted, amended or abolished easily. Therefore governments have traditionally preferred to publish communiqus or regulations in order to maintain flexibility. As you will see from table below, currently the main policy goal of Turkish food and agriculture officials is to harmonize the related laws and regulations with the EU Acquis Communitarians. Sometimes it appears that this concern overwhelms other concerns such as national interest and farmer interests.

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IMPORT DUTIES
High tariffs on the majority of food items continue to hinder the growth of food imports from the United States (see Annex G for tariff rates of important products). Import tariffs on consumer food products range from zero to 225 percent, but most products face tariffs in the range of 40-50 percent. Turkey has considerable flexibility in raising or lowering tariffs. Consequently, tariffs are subject to review and change, especially on December 30. Tariffs can vary and often depend on whether there is a need to import or not. Turkey normally applies the highest/bound rates for some products such as meat cuts at 225%. Some products, however, like cereals, have high tariff rates at 130% although still below the bound rate of 180%. Due to high meat prices last
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year, allowed imports of carcass meat (but not cuts) and lowered the customs tax from 225% to 30% at first, then slowly raised the tariff back to 75% when meat prices dropped slowly. Where there is strong demand but a lack of domestic supply, the applied tariff can be very low such 8% for soybeans, and DDGS at 4.3%. Turkish corn producers and soy millers are calling on the government to raise the bound rate on DDGS but, since it is bound, they use non-tariff barriers such as standards that are difficult to meet. Two important government agencies receive special tariff quotas when acting as importer get special tariff quotas. The Turkish Grain Board (TMO) (www.tmo.gov.tr) usually procures grain from the domestic market but when there is a need to import the government allocates a special zero tariff rate import quota for TMO. The other institute is The Meat and Fish Institute (www.ebk.gov.tr), which acts to control domestic meat prices and also receives reduced tariff meat import quotas from the government when there is a need.

CUSTOMS INSPECTION AND DOCUMENTATION

Upon entry of the product at Customs, the importer should be prepared to present the approved control certificate if required as well as other normal import documentation such as the bill of lading, original invoice and certificate of origin. In addition, the importer should be prepared to present Customs with the exporting companys analysis report for physical, chemical, microbiological and heavy metal content, and a certificate from the official food inspection agency of the country of origin stating that the product meets the quarantine requirements of the importing country. Turkish Ministry of Agriculture, Food and Livestock (MINFAL) officials take samples of the imported product to government laboratories for physical, chemical and microbiological
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analysis and confirm it matches the information supplied from the exporting country. Import of the foodstuff is allowed if the results of the analysis are found to be acceptable and consistent with Turkish regulations, and the imports have been approved by MINFAL. Results of the analysis are normally received within a few working days. If the inspection results do not match with Turkish requirements, the importer may request secondary sample tests. In the case that the secondary test results are also against the Turkish import requirements then the shipment is rejected by MINFAL authorities or they allow special treatments under specific circumstances.

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