A total of 900 million square meters of textiles worth $1 billion are imported annually, according to a member of the board of directors at Textile Industries Association.
“Close to 3.6 billion square meters of different kinds of textiles are consumed in the country per year, some 2.7 billion square meters of which are produced domestically and the rest is imported,” Amin Moqaddam was also quoted as saying by IRIB News.
The official noted that the Iranian textile industry needs investment to be able to continue meeting the local demand, adding that if investments expand to machinery and production lines, the country will be able to export its products.
He added that massive volumes of contraband textile enter the country every year and hamper local production.
About $4.5 billion worth of textile products were smuggled into Iran in the last fiscal year (March 2021-22), according to Abbas Sarshar, a board member of Iran’s Textile Industry Union.
“The figure shows an %18.4 rise compared with the $3.8 billion of the year before,” he said.
According to the official, Iran’s textile industry exports $1 billion worth of products every year.
“Machine-made carpet accounts for close to 90% of this volume,” he added.
Secretary of Producers and Exporters of Textile and Apparel Union said in February that smuggled products make up around $2 billion or 25% of Iran’s annual apparel market.
“At present, Iran’s apparel market is worth $8 billion. The figure shows a decline compared with the fiscal 2017-18 when the market size was more than $12 billion. The main reasons are the Covid-19 pandemic that impacted the global clothing market, in addition to the depreciation of the rial against the dollar,” Saeed Jalali Qadiri was quoted as saying by the news portal of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
The official noted that per capita apparel consumption has dropped from $150 to $100 over the period.
“Presently, the lion’s share of apparel smuggled into Iran are off-season brands sold at discounted prices that happen to be even lower than the production cost and that of the raw materials combined with price tags no one can compete with,” he said.
Qadiri called on officials to take urgent measures to combat contraband apparel in the market and lend support to domestic manufacturers.
Textile Union’s Letter to Interior Ministry
Garment manufacturers are grappling with recession due to smuggling, shortage of raw materials, the sharp decline in purchasing power and lower consumption due to the outbreak of Covid-19, read a letter by Textile and Clothing Producers Unions addressed to Interior Minister Ahmad Vahidi and published by the news portal of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
“Given the $2 billion share of smuggling in the $8 billion clothing market of Iran and its upsurge in recent months, shortage of raw materials and equipment, as well as the sharp decline in clothing consumption and people’s purchasing power due to Covid-19, clothing and related industries have fallen into recession. Investment is going downhill despite the low cost of job creation in this economic sector.”
Iran’s textile and clothing supply chain, with more than 7,900 industrial units and 140,000 trade unions and employment of 1 million people only in the production sector, continues to be undermined by smuggling and unregulated, excessive imports via legal channels and agencies such as free and special trade zones, border markets, border couriers and travelers, it said.
Textile and clothing producers made the following recommendations in their letter:
First, the provisions of the Law on Combating Goods and Currency Smuggling to establish transparent infrastructure in the clothing industry chain must be carried out as soon as possible. These provisions include the establishment of goods identification and tracking systems, communication of Paragraph 4 of Article 18 of the law and the launch of mechanized sales tills.
When it comes to combating smuggling, the most important issue is to create transparency along the chain. To reach this end, transparent mechanisms should be gradually established. Unfortunately, the lack of transparency has led to an increase in smuggling and informal activities in the clothing sector.
Second, mechanized sales tills must be set up as soon as possible and value added tax should be replaced by consumption tax. The connection between VAT chain and the final consumer is one of the most important issues in creating transparency, but unfortunately VAT is currently levied up until the production stage; the following stages, including wholesalers and retailers, are not subject to this tax. The whole thing results in a lack of transparency through the chain and losses are imposed on producers.
Third, the speedy communication of Paragraph 4 of Article 18 of the Law on Combating Goods and Currency Smuggling in the clothing group is urgent. Without communicating this paragraph, which is in fact a guarantee for the implementation of the Anti-Smuggling Law, officers and confiscators of smuggled goods will not be allowed to deal with unidentified smuggled clothing in warehouses under the Anti-Smuggling Law because Article 13 underlines that imported clothes without a product ID are considered contraband only at the supply level.
Following the successful implementation of the plan in dealing with smuggled clothes from well-known brands in early 2019 and the failure to communicate Paragraph 4 of Article 18, those who were accused of smuggling are being acquitted; they claim that their confiscated goods are made in Iran. Such a procedure will undermine the fight against smuggling.
Fourth, instructions on imports of clothing, bags and shoes need to be written with the aim of determining the status of international clothing brands when the ban on import is lifted.
Fifth, the ban on smuggled clothes of well-known brands should continue, according to the specific guidelines of the headquarters in this regard. Failure to do so will result in their quick reemergence in the market and offset previous measures.
Sixth, step-by-step implementation of this plan to establish ID code for all imported and domestic goods is important. Fixing the misguided practices that lead to non-transparency in the country is certainly difficult and time consuming. However, it is inevitable in the fight against smuggling. Special attention should be directed to this issue, apart from introducing fundamental reforms regarding the law on direct tax and value added tax. The private sector calls for precise planning and perseverance in the fight against smuggling.
