Design Work Performed Abroad for Imported Products: Customs Valuation Risks in Turkey (2026 Updated Guide)

Design Work Performed Abroad and Turkish Customs Valuation Risks | 2026 Guide

Can design, engineering, development or technical work performed abroad increase the customs value of goods imported into Turkey? A 2026 guide for foreign manufacturers, Turkish importers and multinational companies.

When products imported into Turkey are developed using design, engineering, development, artwork, plans or technical work performed outside Turkey, Turkish Customs may examine whether the value of that work should be included in the customs value of the imported goods. This issue is particularly important where the Turkish importer provides designs to a foreign manufacturer free of charge or at reduced cost, a foreign parent company develops products for a Turkish subsidiary, or engineering expenses are separated from the commercial invoice for the physical goods.

The fact that the foreign manufacturer’s invoice does not contain a separate design charge does not necessarily resolve the customs valuation question. The commercial relationship must be examined as a whole. Fırat Fesih Kaya Law Office advises foreign investors, multinational groups, manufacturers and importers facing disputes concerning customs valuation, assists, engineering expenses, royalties and post-clearance assessments in Turkey.

Why Can Foreign Design Work Affect Customs Value?

The starting point for customs valuation is generally the transaction value of imported goods, subject to the additions and adjustments required under customs valuation rules.

One important category concerns certain goods and services supplied directly or indirectly by the buyer, free of charge or at reduced cost, for use in connection with the production and sale for export of the imported goods.

Depending on the circumstances, this may include certain engineering, development, artwork, design work, plans and sketches undertaken outside Turkey and necessary for producing the imported goods.

This means a company cannot determine customs value merely by asking:

“What amount appears on the supplier’s invoice?”

The broader question is whether the buyer has contributed something of economic value to the foreign production process that must legally be reflected in customs value.

Example: Turkish Importer Provides Product Designs Free of Charge

Assume that a Turkish company hires a European design firm to develop a new industrial product.

The Turkish importer pays the design company EUR 300,000.

It then provides the completed designs free of charge to a manufacturer in another country.

The foreign manufacturer uses those designs to manufacture the products and invoices the Turkish company only for manufacturing and materials.

Turkish Customs may investigate whether an appropriate portion of the EUR 300,000 design expenditure should be added to the customs value of the imported products.

The fact that the foreign manufacturer never received the EUR 300,000 does not necessarily prevent a valuation adjustment.

Engineering Work Can Create the Same Problem

The issue is broader than aesthetic product design. Depending on the facts, it may involve engineering drawings, technical specifications, product-development work, prototypes, industrial designs, manufacturing plans or other technical input required to manufacture the imported goods.

Companies importing machinery, automotive components, electronics, medical products, industrial equipment and specially manufactured components should pay particular attention to this issue.

Where Was the Design Work Performed?

The geographical location of the work can be highly significant.

Customs valuation rules distinguish certain design, development, engineering and similar work undertaken outside the importing country. Consequently, businesses should establish precisely:

• who performed the work;
• where the work was performed;
• who paid for it;
• who owned the resulting intellectual property;
• whether it was supplied to the manufacturer;
• whether the manufacturer paid market value for it; and
• whether the work was necessary to manufacture the imported products.

A vague description such as “global development expense” may be insufficient during a customs audit.

Design Performed in Turkey Requires Separate Analysis

Companies should not automatically apply the same treatment to engineering or design undertaken in Turkey.

The location of the work, nature of the service and relationship with the imported goods must be analyzed individually.

For multinational groups, this distinction becomes particularly important where design teams operate across several countries.

Free Design Work Can Still Have a Customs Value

A common misunderstanding is that there can be no customs-value addition because the foreign manufacturer received the design “for free.”

That may be precisely why an adjustment issue arises.

If the buyer pays for valuable design work and supplies it without charge to the manufacturer, the manufacturer’s invoice may not reflect the complete economic inputs used to manufacture the imported product.

Reduced-Price Design Contributions Can Also Be Examined

The issue is not limited to completely free contributions.

Suppose the Turkish buyer owns technical drawings worth EUR 200,000 and permits the manufacturer to use them for EUR 20,000.

Customs may investigate whether the economic contribution has been appropriately reflected.

The contractual structure should therefore be reviewed together with the underlying economics.

Who Paid the Designer?

Payment flows should be mapped carefully.

The design company may have been paid by the Turkish importer, foreign parent company, another group entity or an unrelated customer.

The existence of several companies does not automatically eliminate customs valuation exposure.

Customs may examine whether the cost was directly or indirectly borne by the buyer.

Foreign Parent Company Pays the Design Costs

Multinational groups frequently centralize research, design and engineering functions.

A parent company may pay global development expenses and allocate them to subsidiaries through management fees, cost-sharing arrangements or transfer-pricing mechanisms.

If products incorporating that work are subsequently imported into Turkey, the customs implications should be reviewed separately from corporate-tax and transfer-pricing treatment.

A transfer-pricing allocation does not automatically determine customs value.

Related-Party Transactions Increase the Need for Documentation

Related-party transactions are not automatically unacceptable for customs valuation purposes. However, complex intragroup arrangements can attract additional scrutiny.

Customs may examine contracts, transfer-pricing reports, intercompany invoices, accounting records, design agreements and payment flows.

The importer should be capable of explaining why particular design costs were included or excluded from customs value.

Design Fees Hidden Inside a Management Fee

Another difficult situation arises where a Turkish subsidiary pays its foreign parent a broad annual “management fee.”

The fee may cover finance, human resources, marketing, product development, engineering and design.

If part of that payment relates directly to the development of imported goods, Customs may investigate whether that component has customs valuation consequences.

Businesses should therefore avoid relying exclusively on broad invoice descriptions.

Allocate the Design Cost Correctly

Even where design work must be considered for customs valuation, the entire cost should not automatically be assigned to one shipment.

The appropriate allocation depends on the facts.

For example, a design may be used to manufacture:

100,000 units over several years.

If the total relevant design cost is EUR 500,000, the company should determine a reasonable and supportable method of allocating the relevant value across the goods benefiting from the design.

Allocation Method Can Become a Major Audit Issue

Possible allocation methods may depend on production quantities, imported quantities, expected lifetime production or another reasonable commercial basis.

The methodology should be documented before an audit begins.

An arbitrary allocation developed only after Customs raises the issue may be difficult to defend.

What If the Design Is Used for Products Sold Worldwide?

Suppose the design is used for goods sold in Turkey, Europe, Asia and the United States.

The Turkish importer should examine whether the design cost attributable to the goods imported into Turkey can be reasonably identified.

It may be inappropriate to allocate the entire global design expenditure solely to Turkish imports if the work supports substantially larger worldwide production.

What If the Design Has Several Uses?

A design platform may support several products or product generations.

In that situation, the company should identify which imported goods actually benefited from the work and develop an allocation methodology reflecting commercial reality.

General Research Should Be Distinguished From Product-Specific Design

Not every research or innovation expense should automatically be treated as directly connected with imported goods.

A multinational group may conduct broad exploratory research that never results in a commercial product.

That situation should be distinguished from engineering work specifically required to manufacture a particular imported product.

The factual link between the expenditure and imported goods is therefore critical.

Prototype Development Can Raise Valuation Questions

Prototype development may involve engineering, testing, drawings, tooling and design.

The importer should determine which costs relate to the production of the imported goods and whether any of those costs fall within the applicable customs valuation additions.

Simply classifying everything as “R&D” in the accounting system may not resolve the customs question.

Design Work and Tooling Costs Should Be Separated

Product design and physical production tools can raise related but distinct customs valuation issues.

Molds, dies, tooling, equipment and similar items supplied by the buyer for use in manufacturing imported goods may require their own analysis.

Companies should therefore create separate cost categories rather than combining tooling, engineering and design expenses into one unexplained development account.

Software Development Can Create Additional Complexity

Modern products increasingly combine hardware, embedded software and cloud-based functionality.

Where software development is closely connected with the imported product, customs treatment may require detailed examination of the nature of the software, how it is supplied and how the commercial transaction is structured.

The company should avoid assuming that every payment described as “software” is automatically outside customs value.

Intellectual Property Ownership Is Not the Only Question

A Turkish importer may argue that it owns the design and therefore no additional payment is due to the manufacturer.

Ownership alone does not necessarily resolve the customs valuation issue.

The relevant question can be whether something of economic value was supplied by the buyer for use in producing the imported goods and whether the applicable valuation rules require an adjustment.

Customs May Discover Design Costs During a Post-Clearance Audit

These issues frequently emerge years after importation.

Auditors may review general ledger accounts and identify entries such as:

“Product Development,” “Engineering Services,” “Design Fee,” “Technical Assistance,” “R&D Allocation” or “Group Development Cost.”

They may then compare those payments with imported products.

Historical Imports Can Be Reviewed

If Customs concludes that the company systematically omitted relevant design costs from customs value, multiple historical declarations may be examined.

The financial exposure can therefore extend far beyond one shipment.

The importer should prepare a declaration-by-declaration analysis before responding.

Additional Customs Duties May Be Assessed

Where an omitted amount should legally have formed part of customs value, Customs may calculate additional duties arising from the higher customs value.

Depending on the imported product and tax structure, the adjustment can also affect other import-related fiscal amounts calculated by reference to customs value.

Penalties Require Separate Legal Analysis

An additional customs debt and an administrative penalty should not automatically be treated as the same legal question.

If Customs imposes penalties, the company should review separately the legal basis, nature of the declaration error, information available at the time of importation and surrounding circumstances.

Incorrect Valuation Does Not Automatically Mean Fraud

Customs valuation involving design and engineering costs can be technically complex.

A disagreement about whether particular development work should be included in customs value does not automatically establish intentional evasion.

The importer should preserve internal opinions, broker communications, contracts and valuation analyses showing how the original treatment was determined.

Foreign Manufacturer Documents Can Be Critical

The manufacturer should explain how the design was used in production.

Relevant evidence can include technical drawings, manufacturing agreements, engineering change records, bills of materials, development correspondence and production specifications.

Review the Design Contract

The underlying contract should be examined carefully.

Determine whether the service concerns general consulting, industrial design, engineering, prototype development, manufacturing specifications, intellectual property licensing or another activity.

The contractual label is relevant but not decisive. Actual performance matters.

Review Invoices and Accounting Records

Invoices should be compared with general ledger entries, payment records and internal project codes.

If a EUR 1 million “consulting fee” actually financed the engineering of imported machinery, Customs may examine the substance of the transaction.

Review Transfer-Pricing Documentation

Transfer-pricing reports can sometimes contain descriptions of functions and payments that are relevant to customs valuation.

A company should ensure that explanations given to tax authorities do not contradict explanations later provided to Customs.

Customs and Tax Positions Should Be Coordinated

A multinational group may want to characterize a payment one way for corporate-tax purposes and another way for customs purposes.

Inconsistent descriptions can create audit risk.

Legal, tax and customs teams should therefore coordinate before responding.

Can the Importer Correct Historical Declarations?

Where a company discovers a potential valuation error before Customs completes an audit, available correction mechanisms should be evaluated promptly under the applicable customs rules.

The legal consequences depend heavily on timing and the circumstances of the disclosure.

What If Customs Issues an Additional Assessment?

The importer should obtain the formal assessment, identify the declarations concerned and determine how Customs calculated the design addition.

The calculation should be tested independently.

Challenge an Incorrect Allocation

Even if some design value is properly includable, Customs may have allocated too much to Turkish imports.

The importer can challenge the methodology by demonstrating the actual production volumes, markets, product families and period over which the design was used.

Challenge Costs Unrelated to the Imported Goods

A broad development invoice may include work unrelated to the products imported into Turkey.

The importer should separate relevant and irrelevant services with documentary evidence.

Protect the Customs Objection Deadline

Where a customs assessment or penalty is formally notified, applicable objection periods must be protected immediately.

Technical discussions with Customs should not cause the importer to miss a formal procedural deadline.

Expert Analysis May Be Necessary

Complex design projects can require engineers, accountants and customs specialists to work together.

An expert analysis can help establish what work was actually performed, which products benefited and how the relevant value should reasonably be allocated.

Review Supplier Agreements for Liability

If the foreign supplier was contractually responsible for customs-related information or failed to disclose how design costs were incorporated into pricing, contractual liability may also need to be considered.

Future Imports Should Be Corrected Prospectively

Once a valuation issue is identified, the company should not continue making identical declarations without analysis.

A prospective valuation methodology should be established for future imports.

Create a Customs Valuation File

Foreign-owned companies importing specially designed products into Turkey should maintain a file containing the supply agreement, design and engineering contracts, invoices, payment records, allocation methodology, production quantities, product lists, transfer-pricing documentation and customs valuation analysis.

This can substantially improve the company’s position during a future audit.

Immediate Action Plan

When Turkish Customs questions foreign design work, the importer should identify the exact services, determine where the work was performed, establish who paid for it, examine how it was supplied to the manufacturer, identify the products benefiting from it, review whether the work was necessary for production, calculate any appropriate allocation, reconcile the analysis with accounting and transfer-pricing records, review historical declarations and protect all available objection rights before deadlines expire.

Frequently Asked Questions

Can design costs paid outside Turkey increase customs value?

Potentially. Certain engineering, development, artwork, design work, plans and sketches undertaken outside Turkey and connected with production of imported goods can be relevant to customs valuation.

What if the manufacturer received the design for free?

That does not necessarily eliminate the issue. A buyer-provided contribution supplied free of charge can itself require customs valuation analysis.

What if the design work was performed in Turkey?

The location of the work is legally significant and the treatment should be analyzed separately rather than assuming the same rule applies.

Is the entire design cost added to one shipment?

Not necessarily. Where the work benefits substantial production, an appropriate and supportable allocation may be necessary.

What if the same design is used worldwide?

The importer should determine the portion properly attributable to the imported goods rather than automatically allocating the entire global expenditure to Turkey.

Can Customs review old imports?

Potentially. A post-clearance audit can lead authorities to examine historical declarations, subject to the applicable legal framework and time limits.

Can additional duties and penalties both be imposed?

Potentially, but the customs debt and penalty should be examined separately. A valuation adjustment does not automatically resolve penalty liability.

Does a transfer-pricing report determine customs value?

No. Transfer pricing and customs valuation involve related but distinct legal frameworks. However, transfer-pricing documents can contain evidence relevant to the customs analysis.

Can the importer challenge Customs’ allocation of design costs?

Yes, where the authority’s methodology incorrectly allocates costs or includes services unrelated to the imported goods, the importer can present accounting, production and technical evidence supporting a different calculation.

What is the most important practical step?

Map the entire design and production relationship rather than reviewing only the commercial invoice. Customs valuation can depend on economic inputs supplied directly or indirectly to the foreign manufacturer even where those inputs never appear as a separate charge on the import invoice.

Client-Focused Legal Support for Customs Valuation Disputes

Disputes concerning foreign design and engineering work can result in additional customs duties, post-clearance assessments, administrative penalties and substantial historical exposure for Turkish importers and foreign-owned companies. Fırat Fesih Kaya Law Office assists international manufacturers, foreign investors and Turkish importers in analyzing customs valuation structures, buyer-supplied assists, engineering expenses, royalties, related-party transactions and post-clearance audits. Lawyer Fırat Fesih Kaya provides legal assistance in preparing valuation defenses, reviewing historical declarations, challenging additional assessments and penalties and developing compliant valuation structures for future imports.

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