Foreign-made apparel brands that have not been registered in Iran are considered contraband, according to the director general of the Ministry of Industries, Mining and Trade’s Textile, Clothing and Cellulose Products Department.
“Out of all the foreign apparel brands currently sold in the domestic market, only one has been registered and the Industries Ministry has no record of any other brand with branches in Iran. We view the entry of these brands as smuggling, since it goes against regulations that became mandatory in late 2018,” Afsaneh Mehrabi was also quoted as saying by IRNA, without referring to the name of the registered brand.
The official explained that as per the regulations, since March 2019, all apparel, domestically-made or foreign, should acquire an ID for their sales to be considered legal in the country.
“This will help us identify and confiscate contraband, hopefully resulting in a decline in the smuggling of apparel into the country,” she said.
“At present, everything is in place for the regulation to come into force and Iranian apparel producers as well as related associations and unions are in favor of this and are cooperating fully.”
According to Majid Nami, the vice chairman of Iran's Textile and Apparel Production and Export Union, smuggling is the biggest challenge facing Iran’s apparel industry.
“The Headquarters to Combat Smuggling of Goods and Foreign Exchange currently puts the amount of contraband apparel entering the country at $600 million per year. But how they have come up with this figure is a big question since tracking and detecting smuggled goods in the market is impossible,” he was quoted as saying by Mehr News Agency.
Putting the value of apparel smuggling at $600 million per annum, Ali Moayedi Khorramabadi, the head of Iran’s Headquarters to Combat Smuggling of Goods and Foreign Exchange, recently said, “In the past, smuggled apparel accounted for as much as 90% of all clothing available in the country. Now, 80% of demand for clothes are met through local production, thanks to the efforts of 26 agencies of Iran's Headquarters to Combat Smuggling of Goods and Foreign Exchange.”
Saeed Jalali Qadiri, the head of Textile and Apparel Production and Exports Union, told Mizan Online last year that close to $1.8 billion worth of contraband apparel enter Iran every year.
One reason, says Nami, Iranian customers show more willingness to buy contraband clothing is their relatively cheaper prices.
According to Bahram Havali Shahriyari, the deputy head of Iran’s Apparel and Textile Producers and Exporters Association, the rise in prices of domestic products, depreciation of Iranian rial against the dollar and the reopening of some international borders after the country’s partial success in controlling the spread of the Covid-19 pandemic, resulting in more travels abroad, have given rise to contraband apparel entering the country after years of effective battle against the illegal activity.
“Around three years ago, a ban was imposed on apparel imports. Yet the measure was not effective since the lion’s share of these products were smuggled into the county in the first place. At the time, an average of $2.5 billion worth of apparel were estimated to have been smuggled into the country every year, while official and legal imports during the same period only amounted to $60 million,” Shahriyari was quoted as saying by the news portal of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
The official noted that after the Headquarters for Combating the Smuggling of Commodities and Foreign Exchange set out to curb contraband apparel around the same time, smuggling declined and reached close to $1.8 billion.
Upsurge in Raw Material Prices
Nami noted that due to the faulty economic structure, raw material prices have surged over the past few years.
“For instance, in Turkey, the industry’s required raw material can be bought at prices 20-30% cheaper than that in Iran. This alone has a considerable impact on making end prices more affordable and smuggling of these goods more profitable,” he said.
Noting that one of the main raw materials in the apparel industry is cotton, he said that at present, the annual domestic demand for cotton is around 180,000 tons.
“Of this demand, only 60,000-70,000 tons are locally produced and the rest has to be imported. The problem is that domestically-produced cotton is not of high quality, therefore, not quite suitable for meeting customers’ standards.”
According to Mehrabi, prices of imported cotton have increased due to the depreciation of local currency.
“Efforts made by the Agriculture Ministry to increase import tariffs seem unjustifiable. Furthermore, sanctions have made imports even more challenging,” she has been quoted as saying by Mehr News Agency.
Years ago, Iran used to export 270,000 tons of cotton but in recent years, cotton production has declined to 50,000-60,000 tons per year, Alimardan Sheibani, a board member of the Association of Iran Textile Industries, says.
“Given the machinery installed in factories, the country needs to import 120,000 tons of cotton annually. Textile industries consume locally-produced cotton in its entirety. In fact, they are facing a shortage of cotton,” he was quoted as saying by IRIB News.
According to Nami, Iran imports 100% and 20% of its demand for viscose and tricot respectively but produces all its required polyester locally. He said sufficient capacity has not been created for the production of raw materials and even most apparel accessories, such as zips and buttons, are imported.
“After the import of apparel into the country was banned, many sites and Instagram pages started selling contraband items, and since they are not made to pay import duties or taxes, their businesses have thrived,” Nami said.
