IRICA Sets Customs Clearance Record

EghtesadOnline: The Islamic Republic of Iran Customs Administration discharged more than 1.1 million tons of goods in two days to set a record.

News ID: ۷۵۱۴۷۴

14 November 2020

According to Mehrdad Jamal Orounaqi, the deputy head of IRICA, a total of 15 million tons of essential goods have been cleared from customs since March 20, the beginning of the current Iranian year, but carrying out customs clearance of more than 1 million tons of goods in just two days is a record for the administration, Mehr News Agency reported.

The record comes despite problems in clearing goods largely due to currency glitches that caused massive holdups at customs terminals.

According to Abdolvahab Sahlabadi, the head of Iran’s House of Industry, Mining and Trade, many manufacturers have to import raw materials but time and again the goods are caught up in the customs’ bloated bureaucracy as well as the wrangling between the Central Bank of Iran and Industries Ministry.

“One company is now paying $5,200 per day only in demurrage charges. This is when companies are already under immense pressure in trying to evade the [US] sanctions and buy unprocessed goods and spare parts, only to come across new hurdles in the customs,” he said recently.

Goods have piled up in the customs over the past six months, he said, arguing that “[without production], manufacturers cannot export and there will be no earnings from foreign sales to repatriate. It is critical that the CBI and the Industries Ministry find a solution” out of this chaos.

“The multiple exchange rate system is another irritant for producers. Some have gone so far as to float the idea of clearing their goods from customs by meeting their currency commitments at open market rates but the proposal was rejected,” he was quoted as saying by Fars News Agency.

After the tanking of the rial in early 2017, the government introduced stringent rules, including bans on import of non-essential goods, especially those produced inside the country (known as Group IV goods).

It subsidized currency ($1=42,000 rials) for 25 categories of goods (Group I or essential goods) to help protect consumers against galloping inflation, rampant price gouging and hoarding, not to mention the high and rising cost of living.

Over the years, it turned out that the forex subsidy policy was an utter failure because people are buying almost all consumer goods at the free market currency rates.

Two other categories are also defined: Group II, which mostly includes raw materials, intermediate and capital goods, and Group III essential consumer goods.

Importers of Group II items were obliged to meet their forex requirements from the secondary forex market while companies dealing in Group III goods could buy currency from exporters not required to offer their forex earnings on Nima.

As per the law, revenues from foreign sales must be returned via one of the following ways: selling it on the secondary foreign exchange market known as Nima (Persian acronym for Integrated Forex Deal System), cash transfers through hawala, offering it to exchange bureaus and finally using the money to import goods and machinery, or allowing a third party to do so.

Nima is a platform where exporters sell their overseas earnings to companies wanting to import raw materials and machinery. It logs data about repatriated and purchased currency.

*** Problems Galore

Another problem companies regularly complain about is that CBI does not allow companies to use their own foreign currency, in or outside the country, to import goods, apparently due to transparency issues, which some say is closely related to money-laundering concerns.

A total of 3.93 million tons of essential goods were unloaded at Iran’s 13 ports as of Nov. 4. Imam Khomeini Port in the southern Khuzestan Province accounted for 2.84 million tons, the largest volume of imported essential goods followed by Shahid Rajaee Port in the southern Hormozgan Province with 390,550 tons and Amirabad Port in the northern Mazandaran Province with 295,100 tons.

There were also more than 7.35 million tons of non-containerized cargo (goods shipped in pieces separately without the use of a container. These goods are shipped in crates, bags, boxes, drums and barrels, and are extremely large in size or dimension) at ports.

Again, Imam Khomeini Port hosted the largest volume of non-containerized goods among Iranian ports with 4 million tons, followed by Shahid Rajaee Port with 2.5 million tons and Amirabad with 330,710 tons, Fars News Agency reported.

Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.

Amid high inflation and diminished purchasing power, the Iranian government has sought to ensure a steady supply of essential goods at subsidized prices.

Despite all restrictions resulting from US sanctions, the Central Bank of Iran provided $6,214 million in subsidized foreign currency to import essential goods over seven months ending Oct. 21. It is up to the related ministries, namely those of industries, Agriculture and health, to determine the priorities concerning what commodities or companies are eligible to receive cheap currency, CBI’s Public Relations Department announced.

As per the decision of the Economic Headquarters of the government, a total of $8 billion at the rate of 42,000 rials per dollar will be allocated to the supply of essential goods over the current fiscal year (March 2020-21). Of the total sum, $5.5 billion will be allocated to import corn, oilseeds, raw vegetable oil, soybean meals, barley and wheat, $1.5 billion to import pharmaceuticals and $1 billion to import medical equipment.

Latest statistics have it that the CBI supplied $1,624 million to import corn, $777 million to import oilseeds, $260 million to barley, $778 million to raw vegetable oil, $638 million to soybean meal, $330 million to wheat, $40 million to fertilizers, $30 million to paper, $615 million to medical equipment, $985 million to pharmaceuticals and their raw materials, and $137 million to import items classified as “others” over the seven-month period.

“The Central Bank of Iran has fully supplied forex to import essential goods as instructed by the Economic Headquarters of the government. Challenges faced by companies regarding CBI’s alleged failure in the provision of forex are to blame on ‘priorities’ set by related ministries and the central bank plays no role in this matter,” the statement concluded.