Turkish Jewelry Sector Wants US Custom Taxed To Be Lifted

In the year 2009, the country that showed the greatest demand for Turkish jewelry was the United Arab Emirates.  Last year, gold jewelry exports to this country reached a value of $348.9 million.  The jewelry exports to the US were worth $120 million and to Germany $57.3 million.

As indicated in the same report, Turkey’s exports were worth $287.7 million in 1999; $384.2 million in 2000; $1.1 billion in 2005; and $1.6 billion in 2008.  Due to the global crisis last year, Turkey’s exports of gold jewelry amounted to $1.1 million.

Turkey, with its exports valued at $1.6 million in the precious jewelry sector in 2008, was in 11th place.  As Turkey has one of the greatest production sectors, this sector employs 250,000 people and consists of nearly 6000 producers and 35,000 jewelers.

Since the exports to the US under the Gold Jewelry and Materials category were removed from the Generalized Preference System and made subject to customs taxes, there was a 45 percent decrease in exports in 2008.  And this decrease has also impacted the total exports of 2009.

TURKOFAMERICA asked Ismet Naci Kurtulan, the owner of Kurtulan Jewlery and a Board Member of the Istanbul Precious Minerals and Jewelry Exporters, Ilyas Gencoglu, the owner of Mioro, and Alen Bag, the owner of Bag Jewelry, about the expectations of Turkish producers from the US market.


Is there another strategy that is being considered to deal with the products exported to the US that have been in decline?
Ismet Naci Kurtulan: As long as the US customs tax is in place, this problem will persist.  I don’t think there’s much to do about it.
Ilyas Gencoglu: Gold jewelry exports to the US are carried out under six categories.  One of these categories has been removed from the Generalized Preference System due to exceeding the limit.  This situation also influenced the 45 percent decrease in exports, though its actual share in the market does not amount to this ratio.  The global crisis and the great increase in the prices of gold are the other two reasons for such a decrease.
Alen Bag: Not only the customs tax but also the increase of gold prices in record amounts affected the export level negatively.  Minimizing the usage of gold products and considering silver and other precious metals as alternatives could be a strategy.

What needs to be done in order to utilize the experiences of the sector in the North American market with an aim towards increasing exports in the future?
Ismet Naci Kurtulan: If we do not take into account the customs tax, the problem is rather more about the shrinking of the US market.
Ilyas Gencoglu: The North American market maintains its place as one of the most important markets of the world.  Even though there has been a shrinkage in this market, it still remains important.  For this reason, our sector must continue its activities in this market and try to gain back the share it has lost.  The North American market has to be understood well, and the gold jewelry and decoration goods have to be produced according to customer preferences and purchasing power.  This should be done by sales representatives that know the market well.
Alen Bag: The efforts to lift the customs tax should continue.  There has to be a solution for eliminating the negative effects on the two separate jewelry fair organizations in Istanbul.  The Turkish jewelry sector should become aware of the importance of brand accreditation efforts within the world market and should continue its work more actively.

What are the advantages in terms of growing in the North America market?  In entering this market, what is the biggest disadvantage aside from the customs tax?

Ismet Naci Kurtulan: There is no disadvantage except for the customs tax.  And there is no advantage either. The USA is the greatest importer in the sector of manufactured precious metal and jewelry.  The biggest disadvantage is the special consumption tax that is applied to precious stones in Turkey.  
Ilyas Gencoglu: The advantage in the American market is that the jewelry sector knows this market well and there are established partnerships.  In the past, we used to have the advantage with cheap labor; however, since the alternative markets, such as those in China, India, Indonesia, and Malaysia, began production we no longer have that advantage.
Alen Bag: Turkey’s geographic location and its cultural heritage will affect sales and marketing efforts positively.  This advantage should be utilized better.  History and art should be the main theme of Turkish brands and our products should be introduced aside from their industrial identities.  For example, the theme of Istanbul being the European Capital of Culture 2010 could have been used in our sales and marketing activities in North American markets.

Today in New York, which is the heart of the gold sector, there are many businessmen, sales representatives, experts, and masters that have been to Istanbul’s Grand Bazaar.  How could this potential influence an acceleration in trade volume?  Is your sector using such networks in the US sufficiently?
Ismet Naci Kurtulan: Those people must certainly be people that we feel a connection with, enjoy trading with and that have great potential.  These networks could not only be used but also be advanced.
Ilyas Gencoglu: Many of our Turkish colleagues continue their occupations in the US.  Our ties with them have been utilized in the past and today.  This market is very large and institutional firms are very strong.  So, these networks alone are not enough to grow the trade volume.
Alen Bag: No, they are not utilized.  And such people do not only reside in New York but also in Los Angeles.  These experts could be utilized in production design efforts.

Despite the potential of the sector and the presence of many experienced firms, exports decreased below the $1 billion line in 2009 due to the economic crisis.  What are the goals set for the coming 10 years?  Which countries are considered to be developing markets?
Ismet Naci Kurtulan: It is very difficult the foresee ten years in the future because our export level depends greatly on the prices of precious metals. The UAE, Russia, the Turkic countries and China are among the countries that will have greater importance for us.
Ilyas Gencoglu: We can say that exports hit rock bottom in the year 2009.  We are expecting exports to increase 10% this year.  So long that the prices of gold remain stable and fall a little, and the impacts of the crisis lessen, exports would reach the value of $3 billion in ten years.

The markets of the developed countries are shrinking for our sector.   The search for alternative markets for our sector continues.  The ties with the markets of the North and Central African countries, the Eastern European countries and the Balkan countries are among the markets that should be advanced.
Alen Bag: As it is the case for all sectors, countries where the people have a greater purchasing capacity and an eye for quality, such as China, India and Brazil, are the targeted markets.

What are your expections from the US market?
Ismet Naci Kurtulan: As of the third quarter of 2010, I am expecting significant increases in our trade.
Ilyas Gencoglu: The US market should be continuously given importance and there should be efforts to ensure its sustainability; it is a market with great purchasing power.  We are aiming to account for 20% of the jewelry sector’s exports to the US market.
Alen Bag:  As morale in the markets rises, there will be more positive changes.  However, since the jewelry sector is in the luxury consumption category, our sector would feel such positivity the last.

What is the characteristic that would give the Turkish firms primacy in the US market?
Ismet Naci Kurtulan: Our speedy and affordable production.
Ilyas Gencoglu: The most important characteristic of the Turkish jewelry sector is its ability to produce quality items, provide fast model developing capacity, and respond to the customer demands flexibly.  Lately, arts and technology production methods have been paralled and as a result we have begun to produce unique products.
Alen Bag: Since the firms’ owners mostly come from the production field, they would be able to reflect the changes of the market in production in a positive way.  However, the personnel in the sales and production units have to work collaboratively; otherwise, there could be negative consequences.  

Is there anything you would like to add?
Ismet Naci Kurtulan: Until about two or three years ago, North America was already a good market.  I think it will regain its importance towards the end of 2010.

Ilyas Gencoglu: The jewelry sector is a business field that requires innovation and dynamism.  The entrepreneurial structure of our sector’s members has the strength to allow transformation.

The obstacles in front of the sector should be lifted through the establishment of necessary legal steps and regulations.  The jewelry sector is among the last sectors that are recognized by the industry and trade organizations.  However, it has a potential to grow.  It should be given importance by the state and it should be given a chance.  

Alen Bag: Thank you.