Iran Market Entry

Iran Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

The Council for Export and Import, which is an advisory body of the Ministry of Industry, Mining and Trade, is responsible for import and export policy. At this ministry, the licensing policy is integrated into the Department for Import and Export Rules and Regulations. The latter is responsible for granting import and export licenses, with the exception of licenses for electricity, which are issued by the Ministry of Energy. Exceptions are also oil and gas, for which the license is issued by the Ministry of the Petroleum Industry, or the state organization National Iranian Oil Company falling under it. The granting of licenses for special material is exclusively the responsibility of the Ministry of Defence, or its component Defense Industries Organisation. The list of goods subject to an export/import license is updated every year by the Ministry of Industry, Mining and Trade.

Since 2008, Iran has applied the same procedure for direct imports from the Czech Republic that applies to all other EU member countries: The importer applies for approval and issuance of an import license from the Iranian Ministry of Industry, Mining and Trade (this is practically the approval of the Ministry, on the basis of which the local banks will open an L/C), the duration of this procedure is a maximum of 21 days. Due to the sanctions, Czech exporters need to emphasize a precise agreement on payment terms when concluding contracts. It is also necessary to check with the Iranian partner its real possibilities for obtaining an import license and allocation of foreign exchange funds for imports. At the same time, it is necessary to check the partner’s ability to make a foreign payment.

When importing goods worth over 20,000 USD and in the case of letter of credit payment, the importer must submit a certificate from an internationally recognized inspection organization, which must be verified by the Chamber of Commerce and Industry in the exporter’s country. In Iran, there is an organization for quality control (Quality Control and Inspection in Iran).

According to cheeroutdoor.com, Iranian banks strictly require the opening of an export bank guarantee (Performance Bank Guarantee) when opening letters of credit for important contracts for state-owned Iranian companies. The interest rate has increased by 2% since 2015. It is 20% for annual deposits, 21% for agreed loans in foreign exchange trading, and 24% when concluding Cooperation Agreements (valid until the end of 2021). An authorized importer/exporter must have an authorization for import/export, the so-called Commercial Card, which is issued by the Iranian Chamber of Commerce, Industry and Mining on the basis of official company registration.

Standard commercial documents for import from Iran are: pro-forma invoice, commercial invoice, bill of lading/bill of lading (ship-B/L, truck, rail, air waybill – AWB), Certificate of Origin, inspection certificate (e.g. from the international company SGS, COTECNA). It is also possible to use a certificate from the domestic inspection company Quality Control and Inspection in Iran. Individual Iranian departments also have specialized institutes for quality control, such as IDRO (belongs to the Ministry of Industry, Mining and Trade). In addition, a health certificate, quality certificate (not yet mandatory, depends on the type of contract), weighing list, packing list, etc. may be required.

In accordance with the 1996 law, product certification is mandatory for both import and export. It is commissioned by the Institute of Standard and Industrial Research of Iran (ISIR). When importing, the goal is to maintain the quality and completeness of the imported industrial production in accordance with the valid international standard. There is a quality control organization in Iran, therefore a selected group of products is subject to mandatory inspection during imports. Imports are being checked to see if they comply with Iranian standards.

Health certificates – there is a risk of big problems here. The Iranian Ministry of Health’s veterinary and phytosanitary standards do not match EU standards. However, in accordance with EU regulations, the shipment is controlled in the EU member state through which the shipment enters the EU market. If the contents of the shipment do not meet veterinary or phytosanitary regulations, they are disposed of at the expense of the importer.

In Iran, a harmonized system of description and numbering of goods corresponding to EU standards is in place.

The harsh protectionist policy of domestic producers, applied mainly in the import license and foreign exchange policy, is accompanied by high import fees and lengthy administrative bureaucracy. In addition, in 2018, a list of items whose import into Iran is completely prohibited was introduced. This list is continuously expanded. The occurrence of a specific type of goods on this list can be consulted directly with the commercial and economic section of the Consular Office of the Czech Republic in Tehran.

Forms and conditions of operation on the market

Permanent contact with the local market and its business entities is absolutely necessary for obtaining orders from the public and private sector and for obtaining international tenders.

The distribution and sale of goods in Iran is done through dealers, representatives and various types of agents. The optimal solution is to establish your own branch, which manages sales through a network of representatives, carries out centrally controlled marketing and is in contact with key customers, and resolves delivery and payment conditions.

The basic legislative norm is the Commercial Code of Iran (from 1975), which defines 7 legal forms of foreign entities, of which the most used are:

  • Broker – mediator of transactions in trading with securities and shares;
  • Commission Agent – ​​performs business transactions under one’s own name for payment for another person;
  • Commercial Deputy – acts as a director, representative of the company for the implementation of business operations in Iran, whether of the parent company or its branches.

According to Article 660 of the Civil Code, basically two types of power of attorney are defined, namely: general (in all areas) and limited (for defined specific areas).

The usual types of representation based on the principal’s written power of attorney are:

  • Special agent – ​​prosecution only for a defined area/areas;
  • General agent – ​​general prosecution with the exception of limited special areas;
  • Universal agent – ​​unlimited power of attorney for the principal;
  • Del credere agent – ​​power of attorney for additional authority and guarantee of the principal in the absence of authorized persons for the given specific type of representation;
  • Joint Stock Company — private or public;
  • Limited Partnership;
  • General Partnership — offers its shares to the public, must have at least 3 shareholders;
  • Private Limited Company — the shares must be held by the founders and their provision is published in the official gazette and the press;
  • A limited liability company (Proportionate Liability Partnership) — it consists of two or more partners who are jointly liable only up to the amount of invested capital, while the entire financial capital must be fully repaid and non-financial contributions valued;
  • Joint Venture;
  • Branch Office — sells and buys on its own account;
  • Liaison Office — it does not act on its own account and its operation is financed from representative commissions for all technical and service services.

Marketing and communication

In addition to regular promotion in the media, the key to successful marketing is participation in important international fairs in the territory (see subsection 5.9). In principle, promotions must comply with local regulations. Promotion of alcohol and cigarettes is prohibited.

In recent years, a large part of modernizing Iranian companies and startups have very successfully switched to marketing their goods on, for example, Instagram. A high-quality website of the local branch of the company, ideally in Persian, can certainly also help in successful sales.

Issues of intellectual property protection

In Iran, the violation of intellectual property rights in relation to foreign entities, incl. the Czech ones (e.g. fakes of Bohemia Crystal products can be found in all the more luxurious stores in Tehran, the originals are difficult to import to Iran due to the sanctions and would also be sold at much higher prices), absolutely common. Very high-quality fakes of luxury fashion brands (clothing, handbags, shoes, accessories, jewelry), expensive watches, decorations, cosmetics, etc. are easily available in the marketplaces, but also in shops in modern shopping centers.

Iranian legislation does not yet comprehensively regulate the issue of intellectual property protection. At the same time, Iran is not part of the World Trade Organization (WTO) system. That is why it is difficult to obtain justice in the event of a violation of intellectual property rights. Potential lawsuits last months to years and the outcome is far from certain. Without the assistance of local partners and consulting and legal firms in this direction, the success of a foreign entity is almost unthinkable. In general, it is better to avoid litigation in Iran at all costs.

Public procurement market

The announcement of tenders and other public tenders is governed by the By-Laws for Determining Bidders (Winners) of Tenders, which was issued on 22/04/1993 and its amendment of 27/02/1997. Information about tenders can be found on the English web at www.irantender.com. Unfortunately, the available information is not always updated. Much more accurate and up-to-date information is therefore available in the National Tender Database, which, however, is only available in Persian and only subscribers can access it. If you are interested in information from this database, please contact the representative of the commercial and economic section of the Representative Office in Tehran.

The awarding of public contracts is governed by the official act of the First Vice President of Iran No. 23229 of 07/08/2001. This act applies in particular to the financing of development projects in Iran from state or foreign financial sources. It establishes the capital participation of the Iranian side in the amount of min. 51%. All state procurement contracts must be awarded exclusively to Iranian companies, or to those foreign companies that receive permission from the so-called Economic Council. These provisions have been in effect since January 2002. Tenders are announced by state organizations or their specialized or authorized institutions. For the purpose of the tender, the competent department, under whose jurisdiction the subject activity in the tender falls, establishes an organization that is responsible for the announcement of the tender and the method of its financing and supervises the fulfillment of the tender until the moment of its complete completion.

The basis of success when trying to win a tender is obtaining information in the local business lobby, where a decision is made on the formulation of the tender specification in reasonable time before the tender conditions are announced. The most common condition for the participation of a foreign company in the tender procedure is the existence of a Branch Office or Liaison Office, or the presence of an official representative in Iran. The sales representative must have his business code, which is necessary for the implementation of all business and financial transactions. If he does not have this code, then he can work for a foreign company only on the basis of authorization and for a commission. The most common form of registered domestic representative is specialized consulting firms. The success of foreign entities in tenders is higher if the interested parties manage to secure export financing together with an Iranian or other foreign partner. An essential condition for the submission of an offer to the tender is also the requirement of the contracting authority to submit a tender bond, the so-called bid bond, usually in the amount of 3-5% of the price. This deposit must be deposited in one of the commercial banks in Iran. The usual practice is to organize tender pre-qualification. Interested parties are invited to send their details and reference lists, and on this basis a shortlist of companies is made, to whom the detailed specification of the tender is then sent directly.

However, participation in tenders is currently very problematic, especially as a result of banking sanctions against Iran. If one of the conditions for participation in the tender is the payment of a guarantee (which is the case in the vast majority of cases), then cooperation with a local partner is basically a must. Only the Iranian partner is able to pay the bid bond for its foreign partner.

Payment terms, payment ethics and resolution of commercial disputes

The most used payment method is a letter of credit. Due to ongoing US sanctions against Iran and related banking restrictions, payments to Iran are currently mostly made through a few foreign banks and their branches in third countries that are still willing to communicate with Iran. Alternatively, payment in cash can be agreed upon.

Under normal circumstances, the payment morale of Iranian customers is at a good level based on the established methods of payment (L/C against documents, against acceptance of shipment, etc.) and their average payment period is in the order of weeks at most. However, this standard became significantly more complicated after the re-imposition of American economic sanctions in 2018. In the following two years, the value of the rial fell several times against currencies, which in many cases weakened the ability of Iranian companies to pay previously agreed currency obligations. Therefore, the basic recommendation is to insist on paying for the goods in advance.

If disputes arise, it is recommended to always seek a solution by agreement, even if it may be disadvantageous. The court process is lengthy, financially costly and does not guarantee success even in the case of a positive court decision. In contracts, it is necessary to specify the law according to which the dispute will be assessed, possibly also the place where the dispute will be resolved and the specific court. Current practice is that domestic Iranian courts will always rule in favor of Iranian entities. There is a Trade Partner Dispute Resolution Center in the country, which was established under the Tehran Chamber of Commerce: No.18 Mirza Hassani Alley, Ghaem Magham Str., Tehran, +98 21 887 180 22, e-mail: [email protected]

Visas, fees, specific conditions for traveling to the territory

Current conditions of entry into Iran in connection with the Covid-19 pandemic:

We recommend that you follow the information on this matter on the website of the consular section of the Embassy of the Czech Republic in Tehran. This information is continuously updated.

General conditions for traveling to Iran:

A visa is required for travel to Iran. It can be applied for electronically on the E-Visa website operated by the Iranian Ministry of Foreign Affairs. The visa is then processed by the Iranian embassy in Prague, to which the required physical documents are also delivered, and where an interview or fingerprinting is carried out. The applicant is informed by email about all requirements and changes in the process of processing the application. Visa processing usually takes about two weeks, but the waiting period exceeding one month is not an exception. The visa fee is charged according to the type of application submitted. For up-to-date information on visa requirements, we recommend contacting the Embassy of Iran in Prague. A visa can also be applied for through a number of Iranian travel agencies. We strongly advise against relying on visa issuance while waiting at Imam Khomeini International Airport (IKA) in Tehran.

In order to obtain an Iranian visa, a passport valid for at least 6 months after the visa expires. A resume containing previous employment and education may also be required. Some professions, such as journalists, have to apply for specific types of visas, the processing of which takes longer (even two to three months). Additional travel health insurance is also a requirement. With the exception of the Covid-19 vaccination, no other vaccinations are required, especially those who plan to travel around Iran, visit more remote areas and spend more time in the country than the average tourist, but should get the Jaundice A vaccination well in advance and B, typhoid and rabies, vaccination against meningitis is also recommended.

Upon arrival in the country:

Tehran Imam Khomeini International Airport (IKA) is located about 70 kilometers south of the city on the highway in the direction of the city of Qom. The airport continues to operate without public transport connections. Transport from/to the airport therefore operates exclusively by passenger cars. It is always better to confirm the price of the ride with the taxi driver in advance. If you have the option, insist on paying in Rials. Prices in euros or dollars are often three times higher. For cheaper travel in Tehran, we recommend using the Snapp application (the Iranian version of Uber) for smartphones with the Android operating system (unfortunately, the application is not available for iOS systems).

Upon arrival in Iran, it is necessary to register for residence at the relevant foreign police department if the traveler stays in one place for 7 days or more. If the traveler stays in a hotel, the registration obligation is transferred to the accommodation facility.

Foreign payment cards such as Visa or MasterCard do not work in the country at all. It is therefore absolutely necessary to bring enough cash in euros or dollars. Exchange offices usually cannot exchange amounts higher than 200-300 USD / EUR. If a larger amount is needed, it is necessary to give the exchange office time to procure cash in rials.

We definitely do not recommend drinking tap water, not even in quality hotels or restaurants. If it is not possible to tap filtered water, then it is necessary to buy bottled water in stores.

For reasons of national security, foreigners are completely prohibited from visiting border areas – i.e. all border towns of Khorasan province; parts of the province of Sistan and Baluchistan bordering Afghanistan; all border towns of the provinces of West Azerbaijan and Kermanshah near the border with Iraq (among others, minefields from the time of the Iran-Iraq war are still located here); the cities of Saqez, Báneh and Mariván in Kurdistan Province; the cities of Šavár, Mehrán and Dehlorán in the province of Ilam. Only with a special permit can you pass through and leave Iran on the routes Sanandaj-Mariván-Bášmách, Orúmíjeh-Píránšahr-Háj Omrán-Sardasht, Farímán-Tájbád-Doghárún, Záhedán-Zábol-Mílak. Prohibited areas also include all military areas, which are not always well marked. In case of violation of the prohibited areas, there is a risk of expulsion from Iran, but also prison.

Employment of citizens from the Czech Republic

Procedure for obtaining a work permit (so-called Parváne card):

The work permit is issued by the Iranian Ministry of Labor and Social Affairs (specifically the General Directorate for Employment of Foreign Nationals). To issue a work permit, you first need to obtain a type F work visa, which is issued by any Iranian embassy abroad (preferably in Prague, however). To obtain this visa, either the applicant’s employer in Iran (if only an employee) applies on his behalf for a work permit (if approved, a letter will be sent to the selected Iranian embassy confirming that an F-type visa can be issued), or for the applicant’s Iranian company in Iran (if owned) to apply for a work permit on his behalf (if approved, a letter will be sent to the selected Iranian embassy confirming that the F-type visa can be issued).

After the F-type work visa is issued, the applicant can travel to Iran. Subsequently, it is necessary to apply for a work permit within 30 days (the validity period of the visa), again through the Iranian Ministry of Labor and Social Affairs. A work permit is usually valid for 1 year.

Social insurance for an employee is 30% of his salary (of which 23% is paid by the employer and 7% by the employee himself). Health insurance for state employees is fully covered by the state. For employees of private companies, health insurance is generally paid for by these companies and is mandatory. The minimum monthly wage set by the state is 41,790,000 Iranian Rials (IRR) in the current fiscal year 1401 (March 2022 to March 2023), which is equivalent to approximately €166.

Documents required to obtain a work permit:

  • completed forms that the applicant will receive at the office of the Ministry of Labor and Social Affairs (specifically at the General Directorate for Employment of Foreign Nationals);
  • original or copy of passport;
  • founding documents of an Iranian company;
  • a letter on letterhead from an Iranian company requesting a work permit;
  • documents on the highest education achieved (translated into English and super-legalized by the Iranian embassy in the Czech Republic, then translated into Persian in Iran);
  • passport photo;
  • proof of payment of the related fee.

Fairs and events

The most important Iranian fairs with the traditional participation of Czech companies:

  • Iran Health (May 24-27, 2022) – a trade fair for medical and dental technology and pharmaceutical products;
  • Watex, in full name Iran International Water and Wastewater Exhibition (October 29 – November 1, 2022) — international fair for water management and waste management;
  • Minex, in its full name Iran Mines and Mining Industries Exhibition (1-30 September 2022) — a prestigious trade fair for mining and mining technology;
  • IInEx, full name Industry International Exhibition (October 2022) — an international engineering fair in Tehran.

A continuously updated list and dates of individual trade fairs in Tehran can be viewed on the Calendar of Internal Exhibitions website .

The list of trade shows planned in 2021 in Isfahan can be found on the Trade Shows in Isfahan 2022-2023 website.

Iran Market Entry