DUSHANBE, December 16, 2013, Asia-Plus – Tajik cotton yarn exporters face serious problems in exporting their products to Iran, according to the report “Trade Cooperation Program in Tajikistan. Component ONE: Policy Advice and Capacity Building” by International Trade Center (ITC).
One of the issues mentioned as a problem was the possible application of discriminatory VAT on imports of yarn into Iran – cotton yarn of Tajik origin was subject to VAT at the rate of 30 percent, whereas, the rate for Turkmen and Uzbek origin yarn was only 18 percent.
However, interviews with yarn exporters could not confirm if this was the case since their exports were limited mainly due to currency exchange and payment restrictions in Iran. If this indeed is confirmed — it puts Tajik exporters in a far less competitive position in the Iranian market vis-à-vis Turkmen and Uzbek suppliers.
Iran submitted its Memorandum on Foreign Trade Regime (MFTR) on November 29, 2009. The replies to the first set of questions were submitted in December 2011. However, no further progress was made in the accession process. There might be a need for updated information to be submitted by Iran – possibly in the form of a revised foreign trade memorandum.
Therefore the issue may be brought up by Tajikistan when Iran’s accession process revives and after review of the new revised document that could be submitted by Iran, the study says. Nevertheless, the approach in describing the VAT in the current document indicates that Iran is not considering VAT as internal tax applied on imports. Therefore, it would be necessary to bring up the VAT issue into negotiations as internal tax on imports.
According to the report, during the interviews some of the cotton yarn exporters have indicated that there were significant problems in exporting to Iran. Problems were due to difficulties related to international payments and currency regulation requirements in Iran. Tajik exporters faced problems with timely payments for their goods supplied to Iran. In particular, Iranian importers were required not to make pre-payments and were obliged to issue letters of credit; they had limited access to foreign currency exchange; there was an official exchange rate and “market rates” that significantly differed. Trying to avoid payment difficulties, some traders were forced to engage in barter trade.
This is apparently a serious impediment to Tajik exports to Iran. Most of the exporters had to stop export operations after attempting one or two deals. Although this issue was raised by the cotton yarn exporters, however, currency and payment regulations affect all other existing and potential Tajik exports to Iran.
Engage in accession negotiations of Iran and request to implement provisions of Article VIII of Articles of IMF Agreement in full. Note that Iran applied for WTO membership in 1996 and the Working Party on its accession was established in 2005. No significant progress was made since then. Iran has submitted its Memorandum of Foreign Trade Regime in 1999 but the Working Party has never met. There could be a need for revision of the outdated information provided.
Some cotton yarn exporters indicated that there were high tariffs/taxes charged on imports into Iran. They could not, however, specify the nature and compositions of the import payments. Nevertheless they felt this was a significant obstacle for expanding their exports.
Iran is still in its initial stages of accession negotiations. Iran is yet to submit its initial offer on market access on goods and therefore no bilateral negotiations have been initiated. Tajikistan could engage in negotiations once it is initiated and after the review of the initial offer to be submitted by Iran.
Although cotton yarn exporters raised the issue, Tajikistan may wish to engage in bilateral market access negotiations on a wider range of goods that are of interest to its economy.
The study surveys trade obstacles faced by Tajikistan’s private sector in exporting their goods and services to selected markets. It was conducted as part of the activities to support Tajikistan’s WTO accession and post accession implementation efforts under the component ONE of SECO’s Trade Cooperation Program (TCP) in Tajikistan, which started in 2012 and is planned to last for three years.
The main task under the study was reportedly to conduct the survey of Tajik exporters and analyze the results of the survey so as to identify what issues are to be addressed within the domain of the WTO and suggest how.
The study represents results of the activities taken to implement the task conducted during the months of June – July and October 2013. At the initial stage the following five countries are selected as subject of this survey: Afghanistan, Kazakhstan and Iran as acceding countries; as well as China and Kyrgyzstan as members of the WTO.
