The EU-Turkey Customs Union for a Company Producing in Turkey: What Decision 1/95 Covers, How the A.TR Certificate Works, What Still Applies at the EU Border, and What CBAM Costs From 2026

The reason a European, British or Nordic manufacturer looks at Turkey as a production base for the EU market is a legal instrument thirty years old: Decision 1/95 of the EC-Turkey Association Council, which since 1 January 1996 has removed customs duties and quantitative restrictions on industrial goods moving between Turkey and the Union and has put Turkey on the Union's Common Customs Tariff towards the rest of the world. The reason the same manufacturer needs a lawyer before it commits is that the customs union is narrower than the brochure, that the document it runs on certifies free circulation and not origin, that import VAT, product law and trade defence still apply at the EU border, and that since 1 January 2026 the EU's Carbon Border Adjustment Mechanism has attached a carbon cost to Turkish steel, aluminium, cement and fertiliser that the customs union does nothing to remove. In my files the plant that disappoints its parent is the one whose product turned out to be an agricultural good, a coal and steel product or a CBAM good, or whose EU customer needed EU origin for an onward sale that an A.TR certificate cannot give. This page sets out the decision, the certificate, the Turkish export formalities including the repatriation and conversion rules for export proceeds, CBAM as it applies from 2026 with Turkey's own emissions trading law, the separate UK arrangement, and the state of the modernisation talks, as they stand in September 2026.

Sources, checked 9 September 2026. Decision No 1/95 of the EC-Turkey Association Council, Articles 2, 3, 4, 5, 6, 7, 13, 14 and 65; Customs Law No. 4458, Articles 3, 150 and 151; Communiqué No. 2018-32/48 on Export Proceeds (Official Gazette 30525, 4 September 2018) and the Central Bank's Export Circular, Article 4 and Provisional Article 4; Regulation (EU) 2023/956 establishing the Carbon Border Adjustment Mechanism as amended by Regulation (EU) 2025/2083; Climate Law No. 7552, Article 9 and Provisional Article 1; UK-Turkey Trade Agreement (2021) and the UK government's negotiation updates of June 2026; Ministry of Trade and Istanbul Chamber of Commerce pages on the customs union and the A.TR certificate.

What the customs union covers, and what it does not

Article 2 of Decision 1/95 applies the free movement chapter to products other than the agricultural products defined in Article 11 of the Ankara Agreement, agricultural products being dealt with separately in Chapter II of the decision. The Ministry of Trade states the scope in one sentence: the union covers industrial goods and processed agricultural products. Article 4 abolishes, from the decision's entry into force, customs duties on imports and exports and charges having equivalent effect between the Community and Turkey, including fiscal duties, and forbids new ones; Articles 5 and 6 prohibit quantitative restrictions on imports and exports and measures having equivalent effect, subject to the public policy, health and property exceptions in Article 7. Article 13 has Turkey apply the Common Customs Tariff to non-member countries from the same date, and Article 14 obliges the Community to inform Turkey in advance of tariff changes so that the Turkish tariff can follow; the Ministry records that average tariff protection on industrial goods fell from about sixteen per cent before 1995 to 5.4 per cent by 2019, and that Turkey now has twenty-two free trade agreements in force out of thirty-eight signed, most of them concluded to mirror the Union's own. Article 65 put the decision into force on 31 December 1995.

What the decision does not do matters as much. Agricultural products are outside the free movement chapter and trade in them runs on the preferential arrangements of Decision 1/98, with quotas and reduced duties rather than free circulation. Coal and steel products, the old European Coal and Steel Community list, are outside the customs union and move under the 1996 free trade agreement, with rules of origin and an origin certificate rather than an A.TR. Services, public procurement, the free movement of workers and the mutual recognition of every technical rule are not in the decision, which is why the modernisation talks described below exist. A group whose Turkish plant will make food products, steel or software is not buying what the customs union sells.

Free circulation, not origin: the A.TR certificate

Article 3 of the decision defines what moves freely. The chapter applies to goods produced in the Community or in Turkey, including goods obtained wholly or partly from third-country products that are in free circulation there, and to third-country goods in free circulation in either; and third-country goods are in free circulation when the import formalities have been completed and the customs duties and charges due have been collected in Turkey or the Community without a full or partial refund. Article 3(3) makes the customs territory of the union the Community's customs territory plus Turkey's. The Customs Law No. 4458 mirrors the definition in Article 3 for Turkish purposes.

The A.TR movement certificate is the document that proves that status. It is issued on the exporter's application, on the standard form, certified by the chamber of commerce and endorsed by the Turkish customs office, under the Council of Ministers decision of 2006 that implements the Customs Cooperation Committee's Decision 1/2006 on the union's detailed rules; the Istanbul Chamber of Commerce's foreign trade unit performs the certification in Istanbul, and electronic issue is the norm. The certificate is valid only for trade with EU member states and is not issued for goods on the agricultural list or the coal and steel list, which need an origin proof instead.

The distinction that decides commercial disputes is this: an A.TR certifies free circulation, not origin. A product assembled in Turkey from Chinese components on which Turkish import duty was paid at the Common Customs Tariff enters Germany duty-free under an A.TR, because it is in free circulation. It is not, for that reason, of Turkish or EU origin. If the German customer re-exports it to a country with which the Union has a free trade agreement, or sells it into a market that asks for EU origin, the A.TR proves nothing; origin is determined under the Union's rules and evidenced by an origin declaration or supplier's declaration that the Turkish producer must be able to give and support. A Turkish plant whose value added is low and whose inputs are Asian is a free-circulation plant, not an origin plant, and its EU customers should know which they are buying.

What still applies at the EU border

The customs union removes duties and quotas between the parties. It does not remove import VAT, which the member state of importation charges on the customs value plus any duty at its own rate, recoverable by a taxable importer under that state's rules; it does not remove excise duties on the products that carry them; and it does not remove the product legislation that goods placed on the EU market must meet, which the decision's provisions on the approximation of technical legislation have brought closer over thirty years but not completed for every sector, medical devices being the example the Union and Turkey handled by a separate arrangement. Trade defence instruments remain available under the decision, so an anti-dumping duty imposed by the Union on a product category from Turkey applies at the border regardless of the A.TR. Processed agricultural products enter under the decision's special provisions for their agricultural component. A company pricing a Turkish production line for the EU market prices duty at zero and everything else at the same rate as a competitor inside the Union.

The Turkish side of the export

Under Article 150 of the Customs Law the export regime is the regime under which goods in free circulation leave the Turkish customs territory for export, applied by an export declaration to the competent customs office together with any trade policy measures; under Article 151 the goods are actually exported when they leave the territory in the state they were in when the declaration was registered, at which point customs control ends. The export is exempt from Turkish VAT with a right to credit, as described on the free zone page for the parallel case of deliveries into a zone.

The rule that a foreign group's treasury most often does not expect is the one on export proceeds. Communiqué No. 2018-32/48 under the exchange legislation, published in the Official Gazette of 4 September 2018, requires export proceeds to be brought into Turkey, and Article 4 of the Central Bank's Export Circular under it sets the outer limit at one hundred and eighty days from the actual export date, the proceeds to be brought in directly and without delay after the importer pays. Provisional Article 4 of the circular, in the version in force after the Treasury's letters of 2025 and 2026, requires at least thirty-five per cent of the proceeds tied to an export declaration to be sold to the bank that records them, and by the bank to the Central Bank at the day's buying rate, until 31 January 2027, the exporter receiving the full lira counter-value. A euro-invoicing Turkish subsidiary therefore receives a share of its receipts in lira whether or not it wants lira, and the group's transfer pricing and cash pooling must be built around that. The rule is set by the Treasury and the Central Bank by letter and has changed several times since 2022; the figure above is the one in the circular on the date checked.

CBAM from 1 January 2026

Regulation (EU) 2023/956 established the Carbon Border Adjustment Mechanism for the goods in its Annex I: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, including many downstream steel and aluminium products. From 1 October 2023 to 31 December 2025 importers reported embedded emissions without paying; from 1 January 2026 the definitive period applies. Only an authorised CBAM declarant may import the goods into the Union, the declarant must buy CBAM certificates corresponding to the embedded emissions of what it imported and surrender them annually, and the certificate price follows the EU Emissions Trading System allowance price. Regulation (EU) 2025/2083, published in the Official Journal on 17 October 2025 and in force from 20 October 2025, changed the mechanics before the definitive period began: an importer whose imports of CBAM goods, electricity and hydrogen excluded, stay within fifty tonnes in a calendar year is outside the mechanism altogether, and an importer that crosses the threshold is inside it for all of its imports; the annual declaration and surrender deadline moved from 31 May to 30 September of the following year, so that the first declaration and surrender for 2026 imports fall on 30 September 2027; certificates for 2026 imports are priced on the quarterly average of ETS auction prices, with sales of certificates beginning in 2027; the quarterly minimum holding fell from eighty to fifty per cent of the cumulative embedded emissions of the year; and the deduction for a carbon price effectively paid abroad now covers any third country, not only the country of origin.

For a group with a Turkish plant and an EU importing company, the obligations sit with the EU company as declarant, and the cost sits wherever the group's pricing puts it. The Turkish plant's part is the data: verified actual emissions per tonne of product, in the Union's methodology, delivered in time for the declaration, failing which the importer uses default values that are set to be unfavourable. Turkey's answer to the deduction rule is the Climate Law No. 7552 of July 2025. Article 9 establishes a Turkish emissions trading system run by the Climate Change Directorate, with a national allocation plan, free allocations based on historical data or benchmarks, and a market operator; Provisional Article 1 provides for a pilot period before full application, with administrative fines reduced by eighty per cent during the pilot and an obligation on operators within the system's scope to obtain a greenhouse gas emission permit within three years of the law's entry into force. A carbon price the Turkish plant actually pays under that system is, in principle, deductible from the EU importer's CBAM liability under the deduction rule; how much and how soon depends on the Commission's implementing rules and on the Turkish price, and a plant that plans on the deduction should model both.

The United Kingdom is a different agreement

The customs union covers the Union's twenty-seven member states. Trade with the United Kingdom runs on the UK-Turkey Trade Agreement in force since 1 January 2021, a free trade agreement with rules of origin and origin proofs, not an A.TR regime, amended by an exchange of letters in 2025; the two governments are negotiating an enhanced agreement to add services, digital trade and investment, the fifth round having taken place in Ankara from 15 to 23 June 2026 with a sixth expected in the autumn. A Turkish plant serving both markets therefore runs two documentary regimes, free circulation for the Union and origin for Britain, and the origin rules decide whether the British sale is duty-free at all. The tax position of the British owner is on the UK page.

Modernisation: promised, not mandated

The Union and Turkey agreed in 2016 to update the customs union to cover services, public procurement and agriculture and to address the asymmetry under which Turkey applies the Union's free trade agreements without being party to them. The Commission has had a draft negotiating mandate since 2016; the Council has not adopted it, and in September 2026 it still has not, several member states objecting. Turkish officials said in early 2026 that a majority of the technical issues had been resolved, and the two sides' joint statements continue to commit to modernisation, but until the Council acts the legal position is the 1995 decision described above, and a business plan should assume it.

The regimes at a glance

Whose side we are on, and how we are paid

The industrial park that sells you the site is paid for the site, and its brochure says "duty-free access to 450 million consumers" whatever you make. The customs broker is paid per declaration, right or wrong. The consultant who promises "CBAM compliance" is paid for the report. None of them is paid to tell you that your product is on the agricultural list, that your customer needs origin and you can only give free circulation, or that a third of your export receipts will arrive in lira.

We take no commission or referral fee from industrial parks, customs brokers, freight forwarders or consultants, in any form, on any file. The fee you pay us is our only income from your matter, and it does not depend on your building in Turkey. Because our position does not move with the investment, telling you that the customs union does not cover your product costs us nothing to say.

One boundary, stated plainly. We are lawyers, not licensed investment advisers, not customs brokers and not emissions verifiers. We do not forecast tariffs, exchange rates or the ETS price. What we protect is the legal position: whether your goods fall within Decision 1/95, whether you can give the free circulation or origin proof your customer needs, what the Turkish export and proceeds rules will do to your cash, and where CBAM's obligations and costs land inside your group.

Before you commit

Send us the tariff classification of what you intend to make, the origin and duty status of your main inputs, the markets your EU customers serve onward, whether the product is on the CBAM list, and where in the group the invoices and the receipts will sit. We will tell you which regime your product is in, which document you will be able to issue, what applies at the border, what the proceeds rules require, and how to place the CBAM obligations. Our company work is described on the company formation page, and the incentive and free zone regimes that often accompany a production decision are on the investment incentives page and the free zone page; the company itself is formed under the rules on the company formation page, and the general framework for foreign capital is on the foreign investment guide.

What this page does not settle

The detailed rules of origin under the Union's and Turkey's free trade agreements, the technical legislation and conformity assessment for particular product sectors, CBAM's calculation methodology and verification, the Turkish emissions trading system's secondary legislation, inward and outward processing regimes, and trade defence proceedings are separate subjects. The proceeds conversion percentage, the CBAM thresholds and the negotiation calendars change; the positions above are those on the date checked. For a group weighing Turkey against a candidate country that is still outside the Union's customs territory, the comparison with Montenegro is on the Montenegro EU accession page.