A Glance at Export Income Repatriation

EghtesadOnline: In three years from April 2018 to March 2021, an estimated 24,000 Iranian export companies returned their foreign earnings.

News ID: ۷۸۶۴۲۴

08 May 2021

They exported goods and services worth €70.2 billion in the period. Export by manufacturing companies was €52.7 billion, of which they were required by law to return €45.2 billion. Data show they repatriated €40.1 billion – nearly 88% of their commitment.

Non-manufactures performance was weaker in returning the earnings.  They sent out goods worth €17.5 billion in the three years and were supposed to return €15 billion. What actually was brought back was €3.3 billion or barely 22% of the financial commitment, data compiled by the Persian-language economic newspaper Donya-e-Eqtesad reported.

Categorizing exporters into holders and non-holders of commercial cards, the newspaper said while those without  commercial cards outnumbered card owners , most of the export was by authorized firms with valid commercial cards issued by the Iran Chamber of Commerce, Mines, Industries and Agriculture.

Out of the total 24,115 exporters 11,486 had the mandatory commercial cards accounting for 48% of the total.

“Exporters who lacked commercial cards exported goods worth  €2 billon… that means that more than 97% of the export business was handled by commercial card holders. ”

Owners of commercial cards had to repatriate €58.6 billion. They returned €43.3 billion.

This is while exporters lacking commercial cards returned only €100 million of their earnings, which accounts for barely 0.3% of the total returned earnings. They were required to return €1.6 billion.

As per data, 3,325 exporters including 2,283 manufacturers and 1,042 non-manufacturing firms fully met their financial commitment to banks. They exported goods and services worth €31.5 billion.

The number of defaulters was 16,641 who exported €10.7 billion in goods and were required to return €9.1 billion. Their repatriation was zero.

The deadbeat exporters included 2,055 manufacturers with €1.2 billion liability and 14,586 non-manufacturers who were required to bring back €7.9 billion.

According to Donya-e-Eqtesad, these companies exported mainly to Iraq and Afghanistan in 2019 in rials.

The issue of returning rials instead of foreign currency was a hot topic among rial-earning exporters for some time and the Central Bank of Iran with the latter insisting that the repatriation must be only in foreign currency. How this dilemma has been resolved is not known.

Without mentioning figures, the newspaper said a portion of unreturned earnings is related to temporary entry - a customs procedure under which goods can be brought into the country conditionally exempt (totally or partially) from import duties and taxes.

Such goods must be imported for a specific purpose only for re-export within a specific period and without having undergoing physical change. Goods may be exported temporarily for final manufacturing, processing or repairs and be reimported.

Easing Rules

The Trade Promotion Organization of Iran announced rules earlier in April that seemingly eased currency repatriation rules for exporters.

It announced a facilitative mechanism, the so-called “import in exchange for export” to reform rules for bringing back non-oil export revenue that long had been a bone of contention between export firms and the CBI.

As per rules passed last October, exporters can use part of their earnings to import goods, raw material and machinery either for their own needs or for a third party under “currency barter between exporters and importers”.

Apart from the increase in returning export earnings, the new measure seeks to help improve foreign trade that has taken a drubbing in recent years.

As per rules announced by the CBI, non-oil exporters had to bring back 80% of their earnings in foreign exchange hawala and sell it via the secondary foreign exchange market, known as Nima.  They also can sell a maximum of 20% of their currency to authorized exchange shops.

Nima is an online platform affiliated to the CBI where exporters sell their overseas currency income and companies buy for import. Rules also oblige exporters to return their earnings within four months starting from the date the export permit is issued by the customs authorities.

New rules announced by the TPO exempt a limited number of companies from selling their income at Nima. Major petrochemical, metal and similar commodity companies are excluded from the exemption.