Clearance of Non-Essential Goods From Customs Allowed

EghtesadOnline: Importers of goods included in Group IV of customs categories, i.e., non-essential goods, are allowed to discharge their goods, provided that they had completed banking import registration and foreign currency provision procedures.

News ID: ۷۸۶۰۳۵

17 February 2021

According to Mehrdad Jamal Orounaqi, a senior official with the Islamic Republic of Iran Customs Administration, the customs clearance of Group IV goods is not subject to time limitations and importers have been allowed to initiate the procedure starting Feb. 13, ISNA reported.

Following the re-tanking of the national currency in early 2017, the government introduced stringent rules like banning the imports of 1,339 items categorized as Group IV, which are products deemed “non-essential” and have domestic counterparts, in a move to economize on foreign currency amid US sanctions.

IRICA stopped clearing Group IV merchandise despite the fact that more than €70 million worth of them had arrived at the country’s ports. The administration had allowed the clearance of Group IV products on certain conditions from Feb. 18-Sept. 16, 2020. However, abandoned goods have piled up at customs terminals across the country, some of which are on the brink of decay.

The government also decided to allocate subsidized currency at the rate of 42,000 rials per US dollar to 25 categories of goods (also known as Group I or essential goods) to help protect consumers against galloping inflation, rampant price gauging and hoarding, not to mention the high and rising cost of living.

Two other categories of imports were also defined: Group II, which mostly included raw materials, intermediate and capital goods, and Group III consisting of essential consumer goods.

Importers of products in Group II were to meet their forex requirements from the secondary forex market. Importers of goods in Group III could buy hard currency from exporters who were not required to offer their forex earnings on Nima.

The Central Bank of Iran has provided $8.74 billion in subsidized foreign currency at the rate of 42,000 rials per US dollar for the import of essential goods since the beginning of the current Iranian year (March 19, 2020) to Jan. 31, 2021.

Latest statistics released by CBI show it supplied $1.985 billion to import corn; $910 million for oilseeds; $405 million for barley; $1.2 billion for raw vegetable oil; $990 million for soybean meal; $677 million for wheat; $40 million for fertilizers; $36 million for paper; $1.107 billion for medical equipment and $1.39 billion for the import of pharmaceuticals and their raw materials during the period under review.

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

As per the decision of the government’s Economic Headquarters, a total of $8 billion at the rate of 42,000 rials per US dollar are to be allocated for the supply of essential goods in the current fiscal year (ending March 20).

Of the total sum, $5.5 billion are to 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.

“A total of 4 million tons of essential goods were imported during the 10 months to Jan. 19,” Amir Talebi, an official with the Government Trading Corporation of Iran, said recently.

“Since the beginning of the current Iranian year [March 20], 194 vessels carrying essential goods docked and unloaded at domestic ports. Imam Khomeini Port located in the southern Khuzestan Province accounted for 45% of imports, Bandar Abbas, a southern port city in Hormozgan Province, handled 31% and Chabahar in Iran's Southeastern Province of Sistan-Baluchestan accounted for 17% of total imports; the remaining volume entered the country via northern ports,” he was quoted as saying by IRNA in January.

Decline in Import of Essential Goods

The import of all essential goods, except corn, declined this year compared with last year, Domestic Commerce Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture recently cited figures released by the Central Bank of Iran.

Over the nine months ending Dec. 20, the central bank paid under $4.42 billion at the exchange rate of 42,000 rials per US dollar for the supply of essential goods, registering a 41% decline compared with the corresponding period of last year, Ashraf Mortezaei, an expert with the commission, said.

“Order registration for the import of essential goods stood at $12.24 billion during the nine-month period, posting a 17% year-on-year decline. Since the beginning of the Iranian year [March 20] to Dec. 20, a total of $9.25 billion have been allocated to essential goods, which is $500 million less than last year’s similar period,” she said.

“The value of discharged essential goods stood at $6.23 billion in the nine months to Dec. 20, indicating a 30% drop compared with $8.9 billion of last year’s same period.”

On the five essential goods with the highest impact on households’ livelihoods, namely corn, soybean meal, unprocessed oil, oilseeds and barley, Mortezaei said these items accounted for half the value of subsidized currency allocated to import essential goods during the period, which shows a 5% decrease YOY.

“The government planned to allocate $6.4 billion to import these five items during the fiscal 2020-21. By Dec. 20, a total of $4.75 billion were allocated and $4.3 billion were paid, suggesting that the government has to pay the remaining sum of $2.1 billion by March 20, 2021,” Otaghiranonline.ir quoted her as saying.

According to the official, over $3.08 billion were provided for importing soybean meal and barley in the nine-month period, showing a 14% YOY decline.

“Prices of raw oil and oilseeds and, accordingly, vegetable oils saw a 15-25% growth in the current year. Over the last nine months, 702,000 tons of unprocessed oil worth $559 million were discharged from customs. Imports of oilseeds stood at 1.7 million tons worth $807 million, indicating a 15% rise in weight but a 7% decline in value YOY. Altogether, the custom clearance of oilseeds and raw oil imports indicates a decline of 22% in weight and 7% in value YOY,” she said.

According to members of Domestic Commerce Commission of ICCIMA, challenges facing the provision of essential goods in the next year (March 2021-22) include government intervention, misguided policies regarding market regulation, hurdles in the way of timely allocation of foreign exchange, lack of transparency about the country’s strategic reserves, barriers facing transfer of currency, inflation and lower demand due to the decline in people’s purchasing power, and problems related to production as a result of the burgeoning money supply.

As per the budget bill for the next year (March 2021-22), the government will provide $8 billion for the supply of essential goods. But the correlation between the sum of allocated forex and the exchange rate has not been stated and the budget fails to indicate how long the government would keep the cheap imports policy.

On the other hand, there is not enough transparency regarding subsidized forex allocation and pricing. The level of essential goods reserves by March 20, 2021, and the next year has not been specified.

Furthermore, imports of essential goods and market regulation policies as well as the government’s policies to protect the economic wellbeing of households are ambiguous.

Kaveh Zargaran, the chairman of the commission and secretary of the Federation of Iranian Food Associations, believes that the government is likely to rid itself of subsidized import policy completely by the end of the Iranian year (March 20), given the Industries Minister Alireza Razm-Hosseini’s approach.

“As a result, prices will increase to some extent and demand will decline and a relative recession will emerge. Food and related industries are likely to experience a relative recession by the end of the year and the beginning of the new Iranian year,” he said.

“The flow of imports has all but stopped by the importers of raw materials and essential goods who are unwilling to take risks, given the pressure of sanctions and the state of the government’s budget and the central bank,” he said.

“As the representatives of producers and economic operators, the Ministry of Industries, Mining and Trade is pursuing a unified foreign currency exchange rate. Today, we are expecting the parliament to take a revolutionary decision in this regard,” the industries minister said recently.

“A total of 17.46 million tons of essential goods worth $8.76 billion were discharged from Iranian customs during the nine months to Dec. 20,” according to Rouhollah Latifi, the spokesperson of the Islamic Republic of Iran Customs Administration.

Imports stood at 25 million tons during the same period, of which 70% were categorized in 25 groups of essential goods, he added.

A total of $26.8 billion worth of goods were imported into Iran during the period.

“Five essential items, namely corn, barley, oilseeds, raw oils and soybean meal, were subsidized imports weighing 12.29 million tons worth $4.14 billion. They accounted for 49% of the country’s imports and 70.5% of essential goods’ imports in terms of weight,” he said.

Corn imports stood at 7.24 million tons worth $1.77 billion during the period under review; it was the top subsidized imported commodity both in terms of weight and value.

It was followed by 1.84 million tons of oilseeds worth $949.75 million, 756,121 tons of raw oils worth $627.86 million, 1.1 million tons of soybean meal worth $461.74 million and 1.34 million tons of barley worth $326.83 million.

Among other essential goods imported during the period were pharmaceuticals and medical equipment worth $1.23 billion, rice worth $707.87 million, wheat worth $696.51 million, raw sugar worth $357.23 million, manufacturing machinery worth $327.27 million, dried tea worth $221.18 million, heavy duty tires worth $206.24 million and paper pulp worth $144.25 million.

According to Latifi, publication paper worth $142.6 million; chemical fertilizers worth $123.78 million; pulses worth $111.36 million; frozen red meat worth $104.73 million; pesticides worth $58.43 million; livestock medicines worth $47.02 million; butter worth $38.47 million; fresh red meat worth $28.61 million; print paper worth $3.79 million; and chicken worth $203,408 were other essential imports during the period under review.

Latifi noted that March 20-Dec. 20 imports of essential goods indicate a 2% decline in weight compared with the same period of last year.

“During the month ending Dec. 20, over 2.13 million tons of these goods were imported, which is nearly 200,000 tons more than the current year’s monthly average and 450,000 tons more than the previous month (ended Nov. 20),” he said.