The inward processing regime is an export incentive scheme that allows raw materials, auxiliary materials and packaging used in the manufacture of export products to be imported without paying customs duties. A significant share of Türkiye's exports consists of goods produced under this regime; in textiles, automotive components, chemicals and machinery in particular, the inward processing regime is the main source of cost advantage. At Özd Global, managing import and export shipments for manufacturers in Gebze and Kocaeli, we know first-hand how decisive accurate document tracking and customs handling are under this scheme. This article covers how the regime works, its two systems, its benefits and the risks to watch.
What Is the Inward Processing Regime?
The logic is simple: inputs brought in from abroad are processed in Türkiye into a new product that is exported within a set period. Because the inputs do not remain in the country, customs duty, VAT and any other charges are either not paid at all or are paid and refunded after export. This lets Turkish manufacturers source inputs at world prices and compete internationally.
To use the regime, a company obtains an Inward Processing Authorisation Certificate (DİİB) from the Ministry of Trade or, for simpler operations, an Inward Processing Permit (Dİİ) from the customs office. The certificate defines which inputs may be imported in what quantities, which products must be exported in what quantities, and the commitment period.
Two Systems: Suspension and Drawback
| System | How It Works | Best Suited To |
|---|---|---|
| Suspension | Duties on imported inputs are secured by a guarantee and released after export | Regular exporters with guarantee capacity |
| Drawback | Duties are paid at import and refunded once export is proven | Companies that prefer not to lodge guarantees or export irregularly |
In practice the suspension system is far more common because it protects cash flow. Guarantees can take the form of a bank letter of guarantee, cash or, for companies meeting certain criteria, reduced guarantee schemes.
Use of Equivalent Goods
One of the regime's major flexibilities is the equivalent goods facility. A manufacturer can produce and export using domestic or free-circulation inputs of the same quality without waiting for the import, then carry out the import later within the certificate period. This is a big advantage in sectors with short delivery lead times.
Benefits of the Inward Processing Regime
- Exemption from, or refund of, customs duty, VAT, SCT and additional financial levies
- Relief from trade policy measures such as anti-dumping and surveillance, subject to conditions
- VAT deferral and cancellation on domestic purchases
- Production flexibility through equivalent goods
- The ability to define wastage and secondary processed products in the certificate
Together these benefits noticeably reduce the unit cost of products with high input costs; the actual gain varies by sector and product.
Certificate Process and Discharge of the Commitment
The regime is not complete when the certificate is issued but when the commitment is discharged. The process generally runs as follows:
- Application: an electronic application to the Ministry with the capacity report, input-output ratios and export projection.
- Issue of the certificate: the DİİB is approved; import and export lists, the period and the foreign-exchange usage ratio are set.
- Import: inputs are imported under the certificate with duties secured by guarantee.
- Production and export: products are exported with reference to the certificate number, which appears on the export declarations.
- Discharge: at the end of the period, import and export declarations are matched and a discharge application is filed; the guarantee is released.
The certificate period varies by sector, and extensions can be granted on justified request. If the commitment is only partly fulfilled, duties on the unexported inputs are collected with late-payment interest and penalties may apply.
Common Mistakes and Risks
In our experience, the issues that most often put the regime at risk are:
- The certificate number missing or wrong on export declarations
- Input-output ratios that do not match actual production
- Failing to track the certificate period and missing the extension deadline
- Using imported inputs in a product not defined in the certificate
- Neglecting customs formalities for secondary processed products such as scrap and wastage
Tip: Do not leave certificate tracking to your accountant alone; make sure your logistics and customs team matches every import and export declaration to the certificate. A monthly reconciliation table prevents most of the surprises at discharge.
Certificate-Compliant Logistics with Özd Global
Özd Global manages your import and export shipments under the inward processing regime through its customs clearance service in full alignment with the certificate; our warehousing and distribution infrastructure keeps input stock safely in bonded or free warehouses, and we plan your sea freight and road shipments around certificate deadlines. Our Gebze base, close to the production plants and ports of Kocaeli and Istanbul, speeds up the import-production-export cycle. For details, visit our contact page or call +90 551 462 41 34.
Frequently Asked Questions
Who can benefit from the inward processing regime?
Manufacturers established in Türkiye that hold a capacity report and export, or plan to export, can obtain a certificate. Supplier companies that do not export themselves but manufacture for exporters can also use the regime under certain conditions.
What happens if export does not take place within the certificate period?
Customs duty, VAT and other charges on the unexported inputs are collected with late-payment interest, and penalties may be imposed under the certificate. Requesting an extension on justified grounds reduces this risk.
How does inward processing differ from temporary admission?
Under inward processing, inputs are processed and exported as a new product; under temporary admission, goods are re-exported in the same state after a set period without processing. The two regimes serve different purposes and run on different documents.
Managed well, the inward processing regime is one of the strongest cost advantages available to exporting manufacturers. Özd Global supports your certificate-compliant imports, storage and export shipments; contact us today and let us plan your operation together.
