Majlis Report Exposes Car Import Racket in Iran

EghtesadOnline: A member of the Majlis Industries and Mines Commission, Vali Maleki, has presented a report on ingrained corruption in car imports that confirms at least 6,481 cars were brought into Iran illegally in the last six months of 2017.

News ID: ۷۴۶۲۰۵

11 November 2018

In an open session last week, the lawmaker from Ardebil said evidence shows irrefutable infringement of law and illegal import of vehicles. The report has been sent to the judiciary to prosecute the smugglers and those responsible in the multi-million-dollar racket, ICANA reported.

Following public outcry over illegal car imports reported in rare detail in the print media, the Majlis launched an inquiry the initial results of which were published in September. The law-making institution has often complained that the auto sector is riddled with holes, namely rent-seeking, fraud and making a mockery of the law. The probe was led by the Majlis Industries Commission.

The Intelligence Ministry and Islamic Republic of Iran Customs Administration have confirmed the outcome of the parliamentary report. Though representatives from the Intelligence Ministry did not give a written statement to the commission, they have confirmed “the existence of rent-seeking and other illicit practices” in the lucrative auto import sector, according to Financial Tribune.

In an oral statement, one IRICA representative confirmed “the existence of violations” but did not present any documented evidence.

The legislative report notes that between July 2017 and January 2018 when the website, locally known by its Persian acronym Sabtaresh, which provided importers with permits to bring foreign vehicles was shut down, “6,481 import permits were issued illegally.”

It called on the ministries of intelligence and industries, IRICA, and the ‘Tazirat’ organization (a judiciary-affiliated ombudsman dealing with trading offenses) to conduct a full-scale investigation, take legal action and report the outcome to the people.

> Stance of Importers

Iran Auto Importers Association which represents private companies that bring vehicles into the country has sent a report to the Majlis.

While Parliament in its statement put the number of illegally issued online import permits at 6,481, the association is of the opinion that the real number is closer to 17,000.

Furthermore, auto imports have been singled out by the government and its supporters as business that amplified capital flight in recent years. In its statement the association provided data saying in the past fiscal that ended in March, 68,700 cars were brought into the country worth $768 million, indicating a 10.5% and 61.6% decline in volume and value respectively compared to last year.

The statement criticizes local carmakers overreliance on auto part imports. “Last year the auto part import bill reached $3.7 billion,” it said, indicating that the carmakers’ growing dependence on foreign suppliers is a greater evil that must be removed instead of restricting car imports.

Following the announcement of revised car import rules in January, which resulted in steep hikes in tariffs, according to the association, companies were hopeful that they would get back to normal business.  But that was not to be and import companies faced unexpected headwinds that forced them to jack up prices.

Some of the main problems listed by the association include:

-importers cannot bring in vehicles based on permits issued after March

-taxes and tariffs have increased significantly cutting profit margins and discouraging investors

-car imports have been banned.

The association says that chaos in the market has helped middlemen, profiteers and hoarders to make easy money.

>Import Ban

The Ministry of Industries has also sent its own report to the Majlis outlining the government position made known on more occasions than one.

Following US President Donald Trump’s decision in May to pull out of the historic Iran nuclear deal and re-sanction Tehran, the rial tanked and its value plunged to unprecedented lows.

In a move aimed at preserving the exhausted currency reserves, the government of President Hassan Rouhani introduced drastic measures to curb expenditures, including a ban on car imports.

Earlier in October, a member of the Majlis Industries Commission said the ban on car imports is not permanent and would end in the coming months. So far nothing has happened and imported car prices have climbed to the highest levels unseen in the recent history of the nation.

Saeed Bastani said the introduction of the ban on auto imports was an emergency measure aimed at protecting the scarce foreign currency reserves. “The ban will be lifted by March 2019… The commission is working on a bill aimed at managing auto imports.”

In recent months and following the introduction of several government initiatives that many say were at best ill-conceived, imported cars have become the exclusive premise of a tiny minority that does not know what to do with its windfall.

Despite Bastani's comments, business insiders are of the opinion that even if the import ban is eased, car importers will face new hurdles because the deep economic problems that forced the government to ban auto imports have not been resolved.