Auto Importers, TPO in New Fracas

EghtesadOnline: Iran Auto Importers Association has filed a complaint against the Head of the Trade Promotion Organization of Iran Mojtaba Khosrotaj.

News ID: ۷۷۸۹۵۹

02 September 2017

In a drastic move five weeks ago, the TPO stopped issuing auto import permits for all cars.

Deploring the move as “disruptive”, Farhad Ehteshamzad, the association’s director told Financial Tribune, “An official complaint against Khosrotaj has been launched with the judiciary.”

“TPO has halted issuing auto import permits under direct instructions from Khosrotaj. The move has disrupted the work of importers,” Financial Tribune quoted him as saying.

Issuing auto import permits for all cars was halted almost five weeks ago. As per law, local companies are required to make an online registration with the TPO for importing every single vehicle.

Furthermore, according to Ehetshamzad, 5,000 cars are stuck in the customs since the year the car was made and delivered do not comply with the permits issued.

Previously, importing companies could edit the data with few clicks through the registration website. With the Islamic Republic of Iran Customs Administration refusing to release the vehicles, several importers have failed to meet their commitments to customers.

As per law, importers are obliged to pay a fine to customers if they do not deliver the pre-sold cars in the timeframe stipulated in the contract. For each 30-day delay in delivering the car, the importing company must pay 2.5% of the product’s value to the consumer.

Imported cars in Iran are the most expensive in the world and a vast of the vehicles are pre-sold with buyers paying almost the total price of the vehicle they have bought but not seen.  Thus, the amounts paid in advance by Iranians wanting to driver foreign cars are high by local, regional and international standards. The same rule (paying in advance) applies also to buyers of locally-made cars

According to Ehteshamzad, TPO’s haphazard decision in addition to imposing financial losses on auto importers, has also tarnished their public image.

“The association will indeed not drop the case against Khosrotaj,” he said.

Ehteshamzad’s comments were later echoed by the head of Tehran Chamber of Commerce Industries Mines and Agriculture. Masoud Khansari said the “TPO’s hasty decision has disrupted the market.”

Khansari urged Mohammad Shariatmadari, the incoming minister of industries, mining and trade to intervene to solve the problem.

“Such instantaneous decisions add to the investment risk in the country and further discourage private sector investment,” the chamber chief said.

Later on Tuesday, the embattled TPO director criticized “the unbridled auto imports” saying “During the first five months of the current fiscal (started in March) 38,000 cars were imported costing $1.4 billion.”

During the same period last year 26,359 vehicles entered the country. The number indicates a 44% YoY jump in auto imports.

Khosrotaj says “The online application system will not be reopened until the government issues new guidelines for auto imports.”

The draft of the new guidelines has been published on the official website of the Cabinet.

It says a new clause will be added to auto import regulations that demands auto importers also invest in local car manufacturing.

According to this clause “Auto importers have two options: starting local production or partnering with Iranian car manufacturers. The total value of imported cars by the companies should not exceed half the value of the importers’ domestic production.”

While Khosrotaj says that the new permits cannot be issued before ratification of the new guideline, Ehteshamzad disagrees. “Law stipulates that the Ministry of Industries and TPO are obliged to issue permits to anyone who meets the existing legal requirements.”

In his opinion “Shutting down the online registration system has no legal justification. If the ministry wants to change the guidelines it must follow legal protocols.”

According to rules, before introduction of any new directive the government cannot and should not change or suspend existing procedures.

So far TPO’s move has had a major negative effect on the imported car market causing a 15% jump in prices of imported vehicles in just three weeks.