"Cash Declaration Form" in International Export Processes

Av. Mert Türk
Jun 22, 2024
9 min read

I. Introduction

With the development and globalization of commerce, commercial activities between countries have become more vibrant. As a result, countries have implemented various regulations to organize commercial activities and protect the economic value of their currencies. The Turkish Commercial Code and the Customs Code No. 7681 are among the significant regulations enacted for this purpose. Another key regulation, the Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency (regarding Export Proceeds), published in the Official Gazette on 04.09.2018, imposes various obligations on individuals residing in Turkey and engaged in export activities.

Among these obligations, exporters must bring the proceeds from their exports into the country within 180 days from the actual export date and sell at least 80% of the foreign currency proceeds to a bank to obtain a Foreign Exchange Purchase Certificate (FEPC). This control over the mandatory repatriation of foreign currency proceeds from exports, along with the imposition of various sanctions for non-compliance, has significantly impacted exporters in the market. Although the Central Bank of Turkey has lifted the relevant obligation through the "Export Circular" published after this communiqué, strict inspections regarding these obligations continue.

In this article, the "Cash Declaration Form" mentioned in Article 12 of the "Export Circular" issued by the Central Bank of Turkey will be examined. Obligations in the circular and provisions in the Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency regarding export proceeds, along with regulations on force majeure in the relevant communiqué, will be analyzed.

Regulations in the Circular

The "Export Circular," published by the Central Bank of Turkey on 16.01.2020, stipulates that export proceeds must be brought into the country within a maximum of 180 days from the actual export date. This period is considered the maximum, and the relevant payment must be brought into the country directly and without delay after the importer makes the payment. The circular also regulates the provisions for closing the export account, procedures for bringing export proceeds into the country, and the "Cash Declaration Form" for physically brought export proceeds.

Article 12 of the 2020 Export Circular details the "Cash Declaration Form" for physically bringing export proceeds into the country. Clause 1 of Article 12 states:

"The identification of export proceeds brought in cash from abroad is made with the CDF approved by customs administrations."

Thus, the identification of physically brought export proceeds is left to the customs administration. The term "effective" in the circular refers to money that is on hand and available for immediate use. The Central Bank aims to simplify the procedure for exporters who bring their export proceeds into the country in cash with this regulation.

The Cash Declaration Form is filled out by customs officers after ensuring the form matches the individual's declaration electronically. It is then printed in three copies, signed by both the customs officer and the liable party. Two copies remain with the administration, and one copy is given to the liable party. If the subject of the form is the export proceeds or foreign capital, it must be indicated as "Export Proceeds" or "Foreign Capital" in the "Reason for Arrival" section of the form. Additionally, if the export proceeds are brought on behalf of another person, this must be specified in the relevant section of the CDF, as stated in subparagraphs b and c of Clause 2 of Article 12 of the Export Circular:

"b) An indication that the reason for bringing the cash is related to export in the 'Reason for Arrival' section of the CDF, c) If the export proceeds are brought on behalf of another person, the relevant sections of the CDF must be filled out to indicate this, or it must be noted in the explanation section of the CDF."

After the Cash Declaration Form is completed, it must be submitted to banks within 30 days, along with the foreign currency involved. Besides this procedure, the exporter’s written declaration regarding the export, a proforma invoice, sales contract, final sales invoice, or a copy of the Income Declaration, and the Income Declaration details must be presented to the banks. If the effective amount recorded in the CDF is fully bound to the IBKB, the original CDF will not be returned to the interested party and will be retained by the banks. If partially bound, a note indicating the amount bound to the IBKB will be written on the original CDF, a photocopy will be taken, and the original will be returned to the interested party:

"a) Submission of the CDF and the foreign currency involved to banks within 30 days from the date of the CDF's issuance, d) Submission of the exporter's written declaration regarding the export process, a proforma invoice, sales contract, final sales invoice, or a copy of the Income Declaration, and the Income Declaration details, along with the written declaration of the exporter or importer, indicating the relationship between the person identified in the Cash Declaration Form and the exporter and importer in the Cash Declaration Form to the banks, e) If the effective amount recorded in the CDF is fully bound to the IBKB, the original CDF will not be returned to the interested party and will be retained by the banks. If partially bound, a note indicating the amount bound to the IBKB will be written on the original CDF, a photocopy will be taken, and the original will be returned to the interested party."

Clause 3 of the Export Circular states that "Acceptance of foreign currency brought by third parties on behalf of the exporter is possible only if the deposit is made to the exporter's own or bank account," aiming to prevent unauthorized transfers and control the process.

Based on the Ministry of Treasury and Finance's letter dated 09.02.2021 and numbered 51410, Clause 4 of Article 12, which stated, "Acceptance of export proceeds transferred to the exporter's account as cash by another bank, provided that an intermediary bank letter or confirmation from the bank that performed the cash transaction is presented, verifying that the cash came from abroad," has been removed.

Clause 4 of Article 8 of the Circular states: "Without prejudice to the provisions of legislation on the prevention of laundering of crime proceeds, in export transactions to Iraq and Libya where it is not possible to transfer export proceeds directly to our country through the banking system, the acceptance of export proceeds by banks:

c) Physically, without the need for a CDF, based on the written declaration of the exporter and the nature of the transaction, such as a sales contract or final sales invoice (or proforma invoice), d) In the case of pre-paid foreign currency, based on the written declaration of the exporter and the nature of the transaction, such as a sales contract or final sales invoice (or proforma invoice), without the need for a CDF."

These provisions clarify that export proceeds for transactions to Libya and Iraq can be accepted by banks without the need for a CDF, based on the exporter’s written declaration and the relevant transaction documents. In this context, for the acceptance of physically brought export proceeds by banks, the exporter’s written declaration and the nature of the transaction, such as a sales contract or final sales invoice (or proforma invoice), are required. If these documents are available, the CDF will not be required for the acceptance of export proceeds for transactions to Libya and Iraq.

Provisions in the Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency (Regarding Export Proceeds)

In forming the provisions regarding the repatriation of export proceeds, the 2020 Export Circular includes regulations from the 2018-32/48 Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency (Regarding Export Proceeds) (hereinafter referred to as the 2018-32/48 Communiqué). This communiqué regulates the repatriation of export proceeds and the closure of the export account by the intermediary bank after the proceeds are brought into the country. Failure to do so results in notification to the Tax Office Directorate and Tax Office.

The 2018-35/48 Communiqué stipulates that "payments related to export transactions conducted by individuals residing in Turkey must be transferred to the intermediary bank directly and without delay after the importer makes the payment." The maximum period for bringing proceeds into the country cannot exceed 180 days from the actual export date, and at least 80% of these proceeds must be sold to a bank.

The communiqué also includes various payment methods for bringing export proceeds into the country. Article 3, Clause 4 of the communiqué states: "If the export proceeds are brought physically along with the passenger, they must be declared to the customs administrations." This provision mandates the declaration of physically brought export proceeds to the customs administrations. The method for this declaration is the "Cash Declaration Form."

As the Export Circular is considered to be issued in connection with the 2018-32/48 Communiqué (see Article 12 of the 2018-32/48 Communiqué), it is clear that the declaration of physically brought proceeds will be made through the Cash Declaration Form stipulated in the circular.

Another issue regulated by the 2018-32/48 Communiqué is the responsibilities arising from export transactions. Article 6 of the communiqué states that "exporters are responsible for bringing the proceeds from exported goods into the country within the specified period, selling them to banks, and closing the export account within the specified period." Clause 3 of the article also assigns the responsibility of monitoring the repatriation of export proceeds to the intermediary banks.

"Force Majeure" and "Extension of Periods in Force Majeure" in the 2018-32/48 Communiqué

Accounts related to export proceeds brought into the country within the specified period for commercial exports are closed by intermediary banks. Article 8 of the communiqué states that accounts not closed within the specified period will be reported in writing to the relevant Tax Office Directorate or Tax Office within 5 business days, detailing the stages of the process. Following this notification, a 90-day warning will be sent to the relevant parties within 10 business days to close the accounts. During this period, accounts must be closed, or force majeure situations or valid reasons mentioned in Article 9 must be documented.

At this point, the communiqué ensures that intermediary banks are in control of the process of bringing export proceeds into the country. Banks are responsible for reporting unclosed accounts arising from export transactions and notifying the counterparty to provide a valid reason or declare a force majeure situation. Following this, the communiqué specifies the additional periods granted for force majeure situations and valid reasons outside of force majeure.

In cases of force majeure, additional periods will be granted by the relevant Tax Office Directorate or Tax Office in six-month periods for the duration of the force majeure situation.

Force majeure situations are regulated in Article 9 of the communiqué:

Force Majeure Situations

Article 9 – (1) Situations that can be considered as force majeure:

a) Dissolution, bankruptcy, declaration of concordat, or permanent cessation of activities by the importing or exporting company, a decision for the postponement of bankruptcy for the company, or the death of the company owner in sole proprietorships, b) Strike, lockout, and general average, c) Impossibility of closing accounts due to decisions and actions of the official authorities of the exporting or importing country or the actions of correspondent banks, ç) Natural disasters, war, and blockade, d) Loss, damage, or destruction of goods, e) Filing a lawsuit or applying for arbitration due to a dispute.

Certification of Force Majeure Situations

After regulating force majeure situations, the path for certifying force majeure situations is provided:

(1) Certification of force majeure situations:

a) Situations (a) and (e) are certified by the relevant authorities, b) Situations (b) and (ç) are certified by the importing country’s official authorities or the buyer or importing company, provided they are authenticated by the local chamber of commerce (except for war and blockade situations), c) Situation (c) is certified by our official authorities, the importing country’s official authorities, or correspondent banks, d) Situation (d) is certified by insurance companies, international inspection companies, or the relevant official authorities of the importing country.

(2) Documents related to force majeure situations obtained from abroad must be authenticated by our foreign missions or approved under the provisions of the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents.

After the regulations regarding force majeure, Article 8 includes provisions for granting additional periods to exporters in cases of valid reasons outside of force majeure. Accordingly, "In the presence of valid reasons outside of force majeure, requests for additional periods up to six months for closing accounts will be considered by the relevant Tax Office Directorate or Tax Office based on the company's written declaration of valid reasons, in three-month intervals. Requests for additional periods beyond six months will be reviewed and concluded by the Ministry of Treasury and Finance."

According to this regulation, after the warning, even if force majeure situations mentioned in Article 9 are not present, if the exporter provides a valid reason for not closing the export accounts, additional periods of three months and, ultimately, six months upon the Ministry's review, can be granted based on the declaration of valid reasons.

The relevant article provides an opportunity for exporters to present a valid reason to the authorities if they encounter problems with the buyer or seller that are not included among the force majeure situations. In this context, after submitting the customs declaration or declaring it to the customs administrations through the CDF, if the export accounts are not closed, exporters can present a valid reason to the authorities or document their force majeure situation.

Although the communiqué specifies the documents required to certify force majeure situations in Article 9, there is no such provision for valid reasons outside of force majeure. This deficiency raises the question of whether the procedures for force majeure situations should also be followed for valid reasons or whether the authorities can grant additional periods based on a valid reason presented without any specific condition. In our view, the authorities are given discretion to review the validity of the reason presented for valid reasons outside of force majeure. Despite the article stating that "the force majeure situation or the valid reason must be documented," Article 9 only provides for the certification of force majeure situations and does not regulate the existence of valid reasons. Additionally, Article 8, Clause 5, stipulates that "requests for additional periods for valid reasons outside of force majeure will be reviewed and concluded by the authorities," clearly leaving discretion to the authorities.