Iran: Executive Directives to the Law Concerning Maximum Use of Iranian Technical Engineering and Manufacturing Capabilities

On 29^th April 2002, the Executive Directives has been formulated, by the State Management and Planning Organization (SMPO), relating to the supervision over the implementation of Articles of the Law Concerning Maximum Use of Iranian Technical Engineering and Manufacturing Capabilities for Projects Implementation and Provision of Facilities for Export of Services, approved on March 3, 1997 by the Islamic Consultative Assembly (ICA).

The Executive Directives of Article 3 of the Law on Maximum Use of Iranian Technical, Engineering Capabilities is as follows:

In order to exert general supervision over the implementation of Articles of the Law Concerning Maximum Use of Iranian Technical Engineering and Manufacturing Capabilities for Projects Implementation and Provision of Facilities for Export of Services, approved on March 3, 1997 by the Islamic Consultative Assembly (ICA), a responsibility which is included in the duties of the State Management and Planning Organization (SMPO), the executive directives have been formulated, which have been reflected according to Circular Letter No. 105/18089 dated April 29, 2002 communicated to government executive organizations.

The Executive Directives on the manner of assigning consultant engineering services, contractor services, and service activities of the projects which could be assigned both individually and jointly are as following:

2-1 It shall be authorized to assign various works of projects, either individually or collectively, exclusively to Iranian companies and institutes.

2-2 If after having made the necessary consultations and co-ordinations with the SMPO or after having made the required inquiry or having held the tender, the executive organizations shall come to the conclusion that no competent Iranian company or institute is available or that competent Iranian companies/institutes are not sufficient in number, such executives organization, upon production of a well-reasoned and justified report and after having obtained the authorization of the Council of Economy, shall be authorized to assign and cede their projects to Iranian-foreign joint ventures, provided that the share or participation interest of the Iranian company or institute in the Iranian-foreign joint venture shall not measure less than 51% of the value of contract compensation of the work so assigned.

2-3 In the tender and inquiry notices to be published, it shall be required to clearly and unequivocally reiterate that Iranian companies and institutes may declare their readiness to participate in the tender either independently or in the form of civil partnership with foreign companies, on condition that the share and participation interest of the Iranian company or institute in the civil partnership shall not measure less than 51%.

2-4 The Iranian-foreign joint ventures established in the form of civil partnership which shall be willing to take part in the tender shall be required to submit to the executive organization a copy of their letter of agreement or understanding, simultaneous with the production and submission of their bids.

2-5 It shall be authorized to assign work exclusively to the bidders who shall propose to execute and implement 51% of the value of the work utilizing the equipment, accessories and services which are already produced and rendered in Iran or which are capable to be provided in Iran. It shall be authorized to assign works to the bidders who shall either propose or undertake to execute inside Iran less than 51% of the value of work, only after having obtained the required authorization and approval of the Council of Economy (mentioned in Note 1 under Article 3 of the Law on Maximum Use).

2-6 In order to gain thorough knowledge as for the contractual value of the work to be executed and performed inside Iran, the executive organizations shall be required to clearly and unequivocally mention the following items in the tender documents, requesting the bidders to provide unambiguous and clear marks in response.

2-6.1 Concerning engineering and procurement (EP) projects or engineering, procurement, construction and management (EPCM) projects, it shall be required to mention the amount and contractual value of the engineering work to be performed inside Iran by Iranian entities.

2-6.2 Concerning the amount, value and supplier of the commodities, raw materials or bulk materials, it shall be required to mention the standardized items which are manufactured in Iran and which shall be utilized in the course of implementation of the project.

2-6.3 It shall be required to mention the amount and value of the equipment the manufacture or fabrication of which shall be assigned to Iranian manufacturers or producers, together with a list of Iranian vendors to which the manufacture or fabrication of such equipment shall potentially be assigned.

2-6.4 The amount and value of the work which shall be executed in Iran directly by the Iranian company being a party to the contract (either independently or in the form of an Iranian-foreign joint venture).

2-6.5 The amount and value of the equipment and machinery which are not manufactured in Iran but the foreign partner shall undertake to make the necessary arrangements in order to have such equipment and machinery manufactured in Iran by foreign manufacturers (either independently or jointly with Iranian manufacturers).

2-6.6 A thorough list of what shall be developed and what shall eventually remain in Iran as benefit for Iran, upon assignment of the work to the Iranian-foreign joint venture, and after implementation of the subject of the contract.

2-7 If it shall not prove possible and practical to acquire the license and to assign the basic engineering to the nominated license holder through Iranian companies or institutes, it shall be authorised to do so through foreign companies, upon approval of by the highest ranking authority of the ministry or the executive organisation concerned.

3- It shall be required to obtain the authorisation to be issued by the Council of Economy under the following circumstances:

3-1 To assign work to an Iranian-foreign joint venture provided that the value of the share and participation interest of the Iranian partly shall not be less than 51%.

3-2 To assign work to an Iranian company or institute and/or an Iranian-foreign joint venture which shall undertake to perform and execute inside Iran less than 51% of the value of the contract.