The move is aimed at countering profiteering middlemen who buy metals off Iran Mercantile Exchange at subsidized prices and sell them at higher prices for profit, or falsely brand a certain product as another company's.
"Different types of metals are offered at IME at the official USD/IRR rate to support downstream industries' production and employment. However, there are those who turn this opportunity into a threat [for downstream buyers] by buying the products and exporting them [at black market forex rates]," reads a letter sent by Shariatmadari to the head of Islamic Republic of Iran's Customs Administration, Foroud Asgari.
Most metal's base prices on IME, such as steel, copper cathode and aluminum ingot, are calculated as per the official foreign exchange rate multiplied by either Persian Gulf FOB prices or London Metal Exchange prices, according to Financial Tribune.
Iran had a dual foreign exchange rate regime for years. The official and market rates, however, were unified as of April 9. Trading with unofficial rates currently take place in the forex black market.
The letter, published by Chilan Online, banned the export of "steel, or any other metals in the shape of ingot, slab, or cathode" without a certificate of manufacture origin. The directive came into force on May 24.
And there seem to be two approaches to receiving the certificates based on shipments' volume.
As for less than 10,000-ton steel shipments and 100-ton shipments for other metals such as copper, aluminum, lead and zinc, the customs administration will send a daily report of shipments to the ministry so that exporters' certificates can be cross-checked.
Shipments above the aforementioned volumes, however, must have their certificates checked before crossing the border by the ministry. The letter hints that this can be done online.
There appears to be no official definition for a "certificate of manufacture origin" with the only internationally recognized concept being a "certificate of origin", i.e. a document completed by the exporter and certified by a recognized issuing body, attesting that the goods have been produced in a particular country. Replacing "country" with "producing company" here seems to bring us to the ministry's concept.
> IME Concerned About Reexport
The letter also addresses First Vice President Es'haq Jahangiri, asking the official to mandate reexport revenues to be registered on the Central Bank of Iran's newly-launched online Forex Deals Integrated System.
In the system, officially known by its Persian acronym Nima, importers declare their currency needs, exporters–including the government as oil exporter–register their foreign currency proceeds, and banks and money exchangers act as mediators. Through it, CBI exerts oversight and has better control over market supply and demand.
Reexporters are currently not a part of Nima and the ease with which middlemen can transfer goods through neighboring countries such as Iraq is one of Shariatmadari's major concerns. Expanding Nima's scope increases transparency and would, at least in theory, curb middlemen's operations.
IME chief, Hamed Soltaninejad, comes into play, too. The minister has also asked him to set up the commodity exchange's metal sales in a way that "only producers are allowed to buy, especially for non-ferrous metals".
The official is asked to present a plan to the ministry in the next 10 days.
A recent surge in demand for metals such as copper seems to underlie both concerns. ISNA's Monday report says copper demand for IME grew eightfold in a week.
"Copper demand last week was about 2,500 tons and now it has reached 20,000 tons," said Alireza Kolahi, a member of Iran Chamber of Commerce, Industries, Mines and Agriculture.
Kolahi believes some of the demand is justified, as producers concerned about foreign currency fluctuations seek to fill up their inventories. But middlemen also play their part.
"They buy raw materials like copper, lead, zinc and petrochemicals at the 42,000-rial exchange rate against the US dollar and then sell it in regional markets or even Iran at higher prices," he said.
The rial has lost much of its value against the US dollar in recent months, prompting the government to intervene and set a fixed rate of 42,000 rials for all exchanges as or April 11. USD was being traded at above 60,000 rials before CBI's intervention.
CBI's move regulated the market, but it also gave rise to a black market trading at rates well above the official rate. Naturally, skirting the official rates and selling USD on the street at the black market rate is now a lucrative business.
> Exports Not to Be Affected
Mohammad Reza Bahraman, the head of Iran Mine House, believes that the ministry's move will simply help identify the origin of the products and would not hinder official shipments.
"Theoretically, it should not affect exports," he told the Persian economic daily Donya-e-Eqtesad.
"Some tend to wrongly use other brands' name for the products they're selling. Now, by identifying the origin of commodities, this cannot happen anymore."
The head of Tehran Iron Sellers Union also welcomed the move, noting that this might change metal producers' priorities.
"This will regulate exports and move producers to first prioritize the local market and then go through the process for getting the certificates for exports," Mohammad Azad also told Tasnim News Agency.