TCCIM Chief Slams Holdups at Iranian Ports of Entry

EghtesadOnline: President of Tehran Chamber of Commerce, Industries, Mines and Agriculture Masoud Khansari said as many as 139,000 containers holding 7 million tons of goods have piled up at Iranian ports of entry.

News ID: ۷۸۳۹۹۴

12 September 2018

Khansari noted that 2.5 million tons of these goods are essential goods whose owners have to pay growing demurrage fees and warehousing costs each day, ILNA reported.

“From April 10 to August 13, the government issued more than 32 bylaws and the Islamic Republic of Iran Customs Administration churned out 160 directives, only to confuse importers and exporters. This uncertainty feeds consumers’ and producers’ distrust in officials,” he said.

> Confusion Commences

In an effort to halt the months-long slide of local currency, the government unveiled its first so-called rescue package for foreign currency market on April 10, announcing that the country’s dual exchange rate system will be replaced with a unified one. The unified official rate was set at 42,000 rials per dollar and the government pledged to grant foreign currency at the official subsidized rate to all importers, according to Financial Tribune.

This announcement by the government triggered a surge in registration of import orders at Trade Promotion Organization of Iran’s import registration website. Many formed long queues to receive currencies at the cheap rate and then sell their goods on the open market to gain massive profits.

According to Minister of Industries, Mining and Trade Mohammad Shariatmadari, the demand for registration of import orders increased by 3.5 times in the four months following the first forex rescue package.

> Dramatic Shift

As the criticism of the Central Bank of Iran’s performance grew louder and the fallout from forex market volatility continued despite the allocation of foreign resources, the government unveiled a new rescue package on August 7.

According to the new forex policy, which is closer to market economy, hard currency would only be made available at a subsidized rate for the import of essential goods, including medicine.

Other imports, labeled as "non-essential" goods, have to procure their needed foreign currency through Secondary Forex Market (open market). The government eased foreign exchange rules and allowed money exchangers to resume work at open market rates.

The implementation of new foreign exchange policies has meaningfully curbed unnecessary demand for cheap currency. However, new import regulations are not free of flaws, the most controversial of which is the so-called Clause V.

> Troublesome Clause

Under Clause V, goods imported after the implementation of the new forex policy can receive customs clearance only if their owners pay the surcharge on exchange rate difference between the government’s subsidized foreign currency rate (42,000 rials per dollar) at which they registered their import orders before the new policy took effect, i.e. on August 7, and the forex rate currently determined by Secondary Forex Market.

The new requirement left imports, including huge volumes of raw materials and manufacturing machinery, stuck at ports, raising storage costs, leaving customs in limbo and hampering production.

New amendments were introduced by the Cabinet into Clause V in late August to fix the new troubles of traders and customs offices. For example, the exchange rate surcharge was set at 28,000 rials per dollar and importers were required to clear their goods within a maximum six months from the customs clearance date.

“Importers who fail to pay the surcharge will be introduced to the ‘Tazirat’ organization (a judiciary-affiliated oversight body dealing with trading offenses) and might face the risk of not receiving foreign currency for future imports,” the directive warned.

> Growing Concessions

The government exempted importers of 3,479 items categorized within the three main groups of “Machinery and Equipment”, “Raw Materials for Production”, and “Raw Materials of Pharmaceuticals and Medical Equipment” from paying the exchange rate surcharge.

On Sunday, IRICA added 40 agricultural machines to the list of imports qualifying for exemption from paying the surcharge. Yet there seems to be no end to daily criticisms aimed at the government.

“More than 200 economic operatives referred to TCCIM during the past week, complaining about why they have to pay the surcharge,” Khansari said.

“The government’s decision was not fair. In April, it vehemently defended [the allocation of] subsidized foreign currency, although the implementation of the policy caused ongoing troubles. Many traders have sold their goods prior to the goods’ arrival or they have even opened letters of credit. The pressures businesses face from the increase in costs would lead them to throw in the towel.”

Khansari stressed that a fraction of commodities now stuck in customs are carry-over from last year’s imports.

"If the current trend persists, we’ll witness a shortage of raw materials in the next three months. There are 12 senior economic officials or organizations, but none of them is accountable for economic issues,” he added.

> Rosy Picture?

Khansari’s comments come as government officials, including IRICA chief, Foroud Asgari, keep on repeating that customs clearance process for imports is back to normal.

“With new amendments in place, the customs clearance process has increased from 3,400 trucks per day to 6,000 trucks,” he said.

“The ministries of industries and health have been mandated to issue clearance permits for some raw materials and equipment not included on the surcharge exemption list. Local producers are allowed to clear up to 80% of their imports of raw materials and industrial machines, and then go through customs procedures and formalities,” Asgari concluded.