PROPOSALS FOR ENABLING JEWELLERY MANUFACTURERS TO PROCURE RAW MATERIALS AT WORLD MARKET PRICES
1) One of the most important issues in the jewellery sector is enabling exporters to procure, at minimum cost, the gold corresponding to the fine-gold content of the jewellery they export.
The exporter concludes the sales agreement on the basis of “fine gold + workmanship”.
Example: 14-carat, 585‰ fineness gold bracelet sales are made against gold, based on the material value + workmanship.
For a 10-gram gold bracelet, the calculation is as follows: 10 g × (585 + 100)‰ = 6.85 g fine gold
Since the jewellery system operates on the basis of fine-gold weight, neither the manufacturer nor the seller incurs an exchange-rate loss from this sale.
A jewellery manufacturer does not seek to earn income from selling gold as bullion.
The manufacturer’s primary objective is to replenish the standard gold bullion used as the workshop’s raw material at the time of export, while remaining protected against exchange-rate differences.
The exporter should be able to replenish the workshop with the amount of fine gold represented by the export, together with the workmanship amount, without incurring an exchange-rate loss.
Current Procurement Methods and the Inward Processing Permit
The exporter needs to bring the consideration for the exported product into the country, through the importer, in the form of standard or non-standard gold bullion and return it to the workshop as quickly as possible.
Gold is brought into Türkiye in two ways:
• Exchange members import gold within their quota limits through permanent importation and place it on the market after it has been registered with the Exchange.
• Gold temporarily brought into the country under the Inward Processing Regime is re-exported within three months as processed jewellery.
The Ministry of Trade, through the customs administrations, grants import permits under the Inward Processing Permit only to manufacturers/exporters holding a capacity report, based on a specified calculation method.
For example, a permit valid for 3.5 months is granted to a manufacturer with an annual capacity of 800 kg.
The examples provided relate to actual operating businesses. Exporters that are not manufacturers are not granted an Inward Processing Permit.
Proposal: Inward Processing – Equivalent Goods Method
It is considered that applying the “equivalent goods” method under the Inward Processing Regime could resolve the issue faced by the entire sector.
1. Procurement of gold bullion:
Gold bullion, the raw material used by the manufacturer to produce jewellery, is sourced domestically in Türkiye and used to produce the export goods.
At the time of export, the authorised assay office report specifies the total fine-gold quantity used in production.
For each export transaction, the exporter may be granted an import permit for an amount equal to the fine gold used during manufacturing.
This permit will correspond to the completed export.
a) Since the export declaration will be issued on the basis of the actual fine-gold value, declared export values will increase; the gold + workmanship value will be stated in the declaration.
Where necessary, it may also be possible to grant the right to import gold bullion in addition to the workmanship value.
b) Since the export will take place first, the uncertainty and monitoring difficulties under the Inward Processing Regime will be eliminated.
c) All exporters will be able to export their own goods.
Implementation Principles of the Equivalent Goods Method
d) Before importation, the manufacturer will export the finished jewellery/ornaments produced from equivalent gold sourced domestically and may then permanently import, as equivalent goods, an amount of fine gold equal to that used in the production of the export goods.
Generally, where the importation of standard gold bullion is preferred, customs procedures may be completed more quickly without the need to visit the Mint.
e) In all gold trading, fine-gold + workmanship values are calculated on the basis of a specified fineness value.
This system protects the manufacturer against shocks in gold prices and foreign-exchange rates.
The manufacturer prices the workmanship according to the fine-gold content, for example 50‰ for 14-carat gold and 75‰ for 18-carat gold. In practice, this system is primarily managed by businesses.
The Ministry of Trade should implement the equivalent goods method, which is an element of the Inward Processing Regime, in line with this system.
• The system should be open to all gold exporters, and all manufacturers, suppliers and exporters should be able to benefit from it.
• Minimum workmanship rates should be established for tax purposes in order to prevent tax evasion.
• The exporter should be permitted to import at least the amount of fine gold corresponding to the quantity exported.
CONCLUSION;
Since both manufacturers and exporters will be assured that they can export their own jewellery and receive the same amount of fine gold in return, the greatest obstacle faced by exporters — the issue of “replenishing the fine gold used in production” — will be resolved.
Hamit GENÇ
Customs Broker