Technology transfer and how it is done
Iran counts almost 78 million inhabitants and showed an economic growth of 6 to 8% on average between 2006 and 2008. Economic growth has dropped in the last years as a consequence of international sanctions against Iran. This negative trend might be broken.
The European Council Regulation 1263/2012 introduced a prohibition on EU financial and credit institutions transferring funds to or from Iranian financial and credit institutions, without advance authorization.
The following transfers (amongst others) between EU and Iranian banks may be authorized by the competent authorities of Member States:
- Transfers regarding foodstuffs, healthcare, medical equipment, or for agricultural or humanitarian purposes.
- Transfers below 100.000,00 EUR: no prior authorization needed;
- Transfers equal to or above 10.000,00 EUR: must be notified in advance;
- Transfers equal to or above 100.000,00 EUR: require prior authorization of the competent authority of the Member State concerned.
- Transfers regarding personal remittances.
- Transfers equal to or below 40.000,00 EUR: no prior authorization needed;
- Transfers equal to or above 10.000,00 EUR: must be notified in advance;
- Transfers equal to or above 40.000,00 EUR: require prior authorization of the competent authority of the Member State concerned.
- Transfers in connection with a specific trade contract equal to or above 10.000,00 EUR, provided that such transfer is not prohibited under the Regulation: require prior authorization of the competent authority of the Member State concerned.
Transfers of funds below 10.000,00 EUR do not require prior authorization or notification under the Regulation.
Today, the EU sanctions relief for Iran goes into force, which in fact means that several sanctions will be suspended or eased for six months:
- An increase on the EU authorization thresholds for transactions for non-sanctioned trade: the above mentioned amounts are consequently multiplied by ten (except for the amounts mentioned under 1.b. and 2.b.), so e.g. for transfers regarding foodstuffs below 1.000.000,00 EUR no prior authorization is needed anymore.
- The establishment of a financial channel to facilitate humanitarian trade for Iran's domestic needs using Iranian oil revenues held abroad. Humanitarian trade is defined as: transactions involving food and agricultural products, medicine, medical devices, and medical services incurred abroad involving specified foreign banks and non-designated Iranian banks.
It goes without saying that this will have a positive influence on export to Iran.
Further on, we are aware of the fact that Iran is trying to improve its economic position on the international market. The Iranian authorities only allow business and the necessary product registration in Iran if a technology transfer clause is stipulated in the agreement between a European contract manufacturer and the Iranian party. This is in order to attract and maintain know-how.
A European contract manufacturer will have to sign a contract with the partner in Iran in which the terms of technology transfer are stipulated. This contract between the parties has to be presented at the responsible ministry (e.g. Ministry of Health in the food sector) at the time of product registration.
Furthermore, it is defined in what way and timeline the technology transfer has to take place.
E.g. in the food industry a five-year plan was used as the basis of the agreement. Whereas in the first year the European contractor is fulfilling the entire production. In the second year a first part of the production is to be outsourced to an Iranian contractor under the supervision of the European company. Under the terms of the contract the Iranian contractor has to have similar quality standards as the European contractor.
In the third and fourth year only the first production step, e.g. bulk production is done in Europe and the rest of the production is moved to Iran.
The ideal is to produce the entire product under the same conditions in the fifth year in a fully certified and equipped production company in Iran.
In the meantime the European contractor is being encouraged by the Iranian ministry to stay closely involved and supervise every step of the way.
In order to make the contract beneficial for the European party, despite the fact that the business is eventually moved out of their facility, it is essential to include provisions for reimbursement of the European company in and after the fifth year.
