The Trade Promotion Organization of Iran announced new rules Wednesday for repatriating forex earnings from exports in the current fiscal year that ends March 2022.
It was prepared and published by the Ministry of Industries, Mining, and Trade and it seems the Central Bank of Iran was sidelined in the entire process.
The rules call for diversifying repatriation methods to assist export companies. While offering export proceeds at the secondary foreign exchange market, known as Nima, is one of the options available to exporters, the guidelines put an end to the controversial obligation on some exporters to sell their currency earnings at Nima.
Nima is a trade platform affiliated to the CBI where exporters sell forex to importers in the form of hawala.
“To boost export and domestic production, exporters are no longer obliged to sell their currency via Nima,” the TPO said on its website, citing a decision by the Government Economic Coordination Headquarters.
That means exporters are allowed to meet their export repatriation commitments through other methods envisioned in rules.
The provision, however, excludes exporters of petrochemicals, steel and petroleum products as they must sell a portion of their forex at Nima while also having access to other repatriation channels.
Apart from selling currency at Nima, the export companies are allowed to use their overseas income to import for themselves or a third party, a method known as “import in lieu of export” or “currency barter between importers and exporters”. In addition, they can sell their export income in hard currency to banks and exchange shops.
Using one of the methods, exporters must bring back 90% of their foreign income. The 10% discount is granted to offset the cost of returning the currencies home, Hamid Zadboum, the TPO head said.
“Exporters have expenses when fulfilling their forex repatriation commitments, including transfer fees,” TPO’s website quoted him as saying. “There are ambiguities with regard to the [official] valuation of export goods,” he said, echoing constant complaints by exporters that customs officials at times overestimate the value, which adds to their currency repatriation commitment.
Flexible Timelines
As per past rules, exporters have four months to return their overseas earnings. The timeline starts from the date export permit is issued by the customs office. However, the deadline has been extended for some goods designated by the Industries Ministry.
Rules stipulate that the tax authority will refund value added tax of companies that abide by the timeline.
Rules also address defaulters who have not fulfilled their forex commitments in the past two years. For exports in fiscal March 2019-20, exporters have until July 22 to return their earnings. For goods taken out in the last fiscal year (ended March 20) the timeline is Sept 22.
Zadboum said the new rules were devised in consultation with all stakeholders, including the central bank, Iran Customs Administration, the Iranian National Tax Administration, Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) and Iran Chamber of Guilds.
Easing Rules
It appears that the Industries Ministry has eased some stringent CBI regulations that attracted criticism from more quarters than one after the new US economic sanctions in 2018 took a heavy toll and access to foreign currency became a gargantuan task for businesses across the spectrum.
Data indicate that exporters brought back $42.7 billion in two and a half years since April 2018, indicating that almost 70% of the forex repatriation commitments were met.
As per rules announced by the CBI in July 2020, non-oil exporters had to bring back 80% of their earnings in foreign exchange hawala and sell it at Nima. They also could sell a maximum of 20% to authorized exchange shops.
Under pressure from exporters, the CBI was forced to restore the so-called “import in exchange for export” mechanism last October as part of efforts to reform rules for bringing back export revenue that long had been a bone of contention between companies.
Exporters who fail to comply face penalties including suspension of commercial cards, closure of bank accounts, travel bans and impounding of goods.
Decline in oil exports, the US economic blockade and difficulties in importing raw material and intermediate goods have disrupted Iran’s economy and battered businesses. This is in addition to the Covid-19 plague that has battered most businesses and ruined lives and livelihoods.
Due to the hostile policies of Donald Trump, the controversial former US president, most export companies complain that they are unable to bring money home because international banks simply refuse to handle Iranian money.
