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Customs Procedures: Egyptian customs procedures are complicated and rigid in areas such as duty rates. Customs procedures are subjective when it comes to identifying whether a commodity fits in one tariff category or another. In February 1994, Egypt implemented the Harmonized System (HS) which replaces the previously used CCCN (Customs Commodity Classification Nomenclature). This should help eliminate the arbitrariness because it identifies items by a ten-digit code which allows simpler and more accurate classification of commodities. Tariff valuation is based on the so-called "Egyptian selling price” based on the commercial invoice that accompanies a product the first time it is imported from any source, although some allowance is given on an ad hoc basis for different sources of supply (such as expensive versus cheap-labor source countries). Customs authorities retain information from the original commercial invoice and expect subsequent imports of the same product to have a value no lower than that noted on the invoice from the first shipment. As a result of that expectation, and the belief that under-invoicing is widely practiced, customs officials routinely increase invoice values from 10 to 30 percent.
The government does not abide by tariff rates outlined in the GATT, and in late 1991, importers began to experience difficulties with customs officials who refused to apply the lower rates that Egypt had offered in GATT for imports from GATT member countries. Subsequent to customs authority actions, the Government submitted to GATT a request for a waiver of its obligation to provide these lower ratcs. The waiver was approved with the Government pledging to negotiate new rates with its GATT partners. 6. Export Subsidies Policies
Direct export subsidies do not exist in Egypt. Exporting industries, including Investment Law 230 projects, may benefit from duty exemptions on imported inputs (if released under the temporary release system). Alternatively, these industries may receive rebates on duties paid on imported inputs at the time of export of the final product (if released under the drawback system). Under its commitments to the World Bank, the Egyptian Government has increased energy and cotton procurement prices, and has abolished privileges enjoyed by public sector enterprises (subsidized inputs, credit facilities, reduced energy prices and preferential custom rates), thus reducing the indirect subsidization of exports. 7. Protection of U.S. Intellectual Property
Egypt, as a party to the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property (inter alia), has undertaken to protect U.S. intellectual property. Egyptian law provides protection for most forms of intellectual property rights (IPR). However, IPR enforcement, although improving, is still ineffective. The Egyptian government passed an improved copyright law in 1992 and added software protection in early 1994. A new patent law is currently under consideration. Due to Egypt's progress on copyright protection, the U.S. Trade Representative lowered Egypt from the "Priority Watch List" to the "Watch List” in April 1994. The U.S. Government is work. ing closely with Egypt to improve intellectual property rights protection.
Patents (product and process): Egypt's 1949 Patent Law excludes certain categories of products and contains overly-broad compulsory licensing provisions. Industrial designs also receive protection under the patent law through registration with the Bureau of Industrial Designs in the Ministry of Supply. Pharmaceuticals and food products are among those excluded from patent protection under Egyptian law. In addition, for patentable products or processes, the term of patent protection is limited to 15 years from the application filing date. A five-year renewal of a patent may be obtained, but only if the invention is of special importance and has not been worked adequately to compensate patent holders for their efforts and expenses, Compulsory licenses, which limit the effectiveness of patent protection, are granted if a patent is not worked in Egypt within three years or if the patent is worked inadequately. In 1994 U.S. officials conferred with Egyptian officials as they considered revisions to the existing patent law. At the end of the year, the GOE had made substantial progress toward a draft law. However, the U.S. government continues to express its concern that the new law include adequate patent protection for prod. ucts not currently covered (including pharmaceuticals, food products and agricul. tural chemicals) and that the new law be consistent with international conventions to which Egypt is a party, particularly the Paris Convention.
Trademarks: Trademark protection is provided by Law 57 of 1939. Egypt is a member of the Paris Convention for Protection of Industrial Property of 1883, the Madrid Convention of 1954, and the Nice Convention for the Classification of Goods and Services. Instances of trademark infringement have been cited by U.S. and other foreign firms operating in Egypt. The Trademark Law is not enforced strenu
ously and the courts have only limited experience in adjudicating infringement cases. Fines amount to less than USD 100 per seizure, not per infringement, although criminal penalties are theoretically available.
Copyrights: In response to calls for improved legal protection for copyrighted works, the Government passed Law 38 of 1992, amending the 1954 Copyright Law. The amendments did not resolve all areas of U.S. concern, however. The Berne Convention, to which Egypt acceded in 1977, is self-executing according to Egypt's Constitution. Thus, in cases where the coverage of the Egyptian copyright law may be vague or non-existent, such as protection for satellite or cable transmissions and data banks, and on
the question of retroactivity, U.S. copyright holders may be able to rely directly on Berne Convention provisions in the Egyptian courts. As a result of U.S. lobbying, in March 1994, the Egyptian government passed Law 29 which amended some provisions of Law 38 to ensure that computer software was afforded protection as a literary work (allowing it a 50-year term of protection). In addition, in April 1994, the Government issued a ministerial decree which clarifies rental and public performance rights, protection for sound recordings, and the definition of personal use. Copyright piracy is still widespread and affects all categories of works. Although motion picture piracy (in video cassette format) has declined over the past year, holders of copyrights on sound recordings, printed matter (notably medical textbooks), and computer software continue to suffer harm. Most piracy seems to be for the local market, with some imports of pirated works from Lebanon and the Gulf States.
New Technologies: There is no separate legislation protecting semiconductor chip layout design, although Egypt signed the Washington Semiconductor Convention. Further, plant and animal varieties do not receive protection under current law.
Estimated 1993 trade losses due to piracy of U.S. intellectual property were USD 84 million of which approximately USD 11 million were due to video piracy (a sig. nificant drop from the 1992 level of USD 37 million prior to the passage of Copyright Law 38/92), and USD 52 million in losses due to computer software piracy. U.S. officials continue to stress the need for better enforcement efforts by Egyptian authorities and to underscore the importance of following police activity with court decisions and prosecutions. 8. Worker Rights
a. The Right of Association.—Egyptian workers may, but are not required to, join trade unions. A union local, or worker's committee, can be formed if 50 employees express a desire to organize. Most members, about 25 percent of the labor force, are employed by State-owned enterprises. The law stipulates that "high administrative officials” in Government and the public sector may not join unions. There are 23 industrial unions, all required to belong to the Egyptian Trade Union Federation (ETUF), the sole legally recognized labor federation. However, the International Labor Organization (ILO) has long noted that a law requiring all unions to belong to a single federation infringes on a worker's freedom of association. The Government has shown no sign that it intends to accept more than one federation and ETUF leadership asserts that it actively promotes worker interests and that there is no need for another federation. ETUF leadership has close relations with the ruling National Democratic Party: some ETUF leaders are members of the legislature. While ETUF leaders speak vigorously on behalf of workers' concerns, public confrontations between ETUF and the government are rare. Disputes are often resolved by consensus behind closed doors.
b. The Right to Organize and Bargain Collectively.—The Government has drafted a new labor law which is under discussion in committee in the People's Assembly. The proposed law provides statutory authorization for collective bargaining. Under the current law, unions may negotiate work contracts with public sector enterprises if the latter agrees to such negotiations, but unions otherwise lack collective bargaining power in the public sector. Under current circumstances, collective bargain. ing does not exist in any meaningful sense because the government sets wages, benefits, and job classifications by law. Larger firms in the private sector generally adhere to such government-mandated standards. Labor law and practice are the same in the export processing zones as in the rest of the country.
c. Prohibition of Forced or Compulsory Labor.–Forced or compulsory labor is ille. gal and not practiced.
d. Minimum Age of Employment of Children.—The minimum age for employment is. 12. Education is compulsory until age 15. An employee must be at least 15 to join a labor union. The Labor Law of 1981 states that children 12 to 15 may work six hours a day, but not after seven p.m., and not in dangerous activities or activities requiring heavy work. Child workers must obtain medical certificates and work permits before they are employed. A 1988 survey found that 1.4 million children be
tween the ages of 6 and 14 work in Egypt. A 1989 study estimated that two-thirds of child labor, perhaps 720,000 children, work on farms. However, children also work as apprentices in repair and craft shops, in heavier industries such as brick making and textiles, and as workers in leather factories and carpet-making, which largely supply the export market. While local trade unions report that labor laws are wellenforced in state-owned enterprises, enforcement by the Ministry of Labor in the private sector, especially in family-owned enterprises, appears quite lax,
e. Acceptable Conditions of Work-For government and public sector employees, the minimum wage is approximately USD 20 a month for a six-day, 48-hour work week. Base pay is supplemented by a complex system of fringe benefits and bonuses that may double or triple a worker's take home pay. It is doubtful that the average family could survive on a worker's base pay at the minimum wage rate. The minimum wage is also legally binding on the private sector, and larger private companies generally observe the requirement and pay bonuses as well. Smaller firms do not always pay the minimum wage or bonuses. The Ministry of Manpower sets worker health and safety standards, which also apply in the free trade zones, but enforcement and inspection are uneven.
f. Rights in Sectors with U.S. Investment.-There are U.S. investments in the following industries (inter alia): petroleum, food and related products, metal
, non-electric machinery, electric and electronic equipment, and transportation equipment. Rights available to workers as described in the foregoing sections also apply to workers in these industries.
Extent of U.S. Investment in Selected Industries.-U.S. Direct
Investment Position Abroad on an Historical Cost Basis-1993
1 Suppressed to avoid disclosing data of individual companies.
Key Economic Indicators
Key Economic Indicators Continued
Yeurs ending March 20
1991-92 992–93 GDP by Sector: (pct. of GDP) Manufacturing
35.5 36.0 36.0 Money and Prices: Money Supply (M1billion rials)
14,300 17,000 N/A Interest Rate on Short-term Deposits (pct.)
7.0 N/A Wholesale Price Index (1985 = 100) End-Year .. 417.1 547.6
712 Consumer Price Index. (1985 = 100) End-Year
346.6 411.0 534 Exchange Rate (IR per USD) Basic Rate
67.4 67.1 1,740 Floating Rate
1,440 1,540 2,200 Balance of Payments and Trade: (millions of U.S
18,415 19,280 15,400 Exports to U.S. 2
30.5 Total Imports (FOB)
24,975 24,000 17,800 Imports from U.S. 2
3169 Trade Balance
-6,560 - 5,720 - 2,400 Current Account 1
- 10,300 --5,000 -5,000 N/A- Not available. 1 Estimate. 2 Year ending December 31. 3 January-August, 1994. 1. General Policy Framework
In 1994, Iranian President Rafsanjani's political opponents blocked and even rolled back several important elements of his economic reform program. Military spending continued to burden the economy. Reschedulings of $10 billion of Iran's official debt brought temporary relief, but the country is finding it difficult to obtain significant new credits and may face a new debt crisis.
Economic uncertainty and parliamentary opposition to economic liberalization resulted in the postponement of the regime's second Five-Year Plan (FYP), which was originally to have gone into effect in March, 1994. The government now states that it will have the FYP in place by March, 1995. In late 1994, senior government and parliamentary figures were highlighting features of the new FYP which emphasizes social justice concerns over economic liberalization.
Rafsanjani's administration had to retreat from one of its hardest-fought victories of 1993—the unification of exchange rates--when the Iranian rial plunged from an open market value of about 1,400 to the dollar in March 1993 to over 2,500 to the dollar in the spring of 1994.
The large influx of imports which came with postwar reconstruction after 1989 abated due to the 1993 credit crunch. The government's efforts to improve its credit position have led to a significant import compression.
There are no diplomatic relations between the United States and Iran. The current state of political relations has acted generally to discourage a U.S. business presence in Iran. Moreover, U.S. trade restrictions and the Iranian foreign exchange shortage are major deterrents to reviving significant economic ties with the United States. Despite these problems, there is a modest trade relationship; U.S. exports to Iran peaked at $749 million in 1992. However, because of its economic problems, Iran's purchases of U.S. products have been steadily declining since then. 2. Exchange Rate Policies
Iran moved from its former three-tiered system of legal exchange rates to a unified exchange rate of on March 20, 1993. However, because of public outcry at the declining international purchasing power of the rial, the government intervened throughout the summer of 1993 in an effort to hold the exchange rate at about 1,700 rials to the dollar, using up billions of dollars in scarce foreign exchange. When, in the spring of 1994, the rial dropped as low as 2,800 to the dollar, the government reimposed complicated import controls which amount to foreign exchange rationing for most transactions. There has also been a return to government-subsidized preferential exchange rates for the import of selected consumer goods, another drain on scarce foreign exchange resources. 3. Structural Policies
The banking, petroleum, transportation, utilities, and mining sectors are nationalized. The government has announced its intent to begin limited privatization in banking and finance, but so far has not been able to implement its plans. At the time of the revolution, radicals were put in charge of bonyads (foundations) which inherited much wealth confiscated from the former elite. They retain control of many large industrial and trading enterprises, and are politically powerful opponents of privatization.
The petroleum sector is the economy's traditional mainstay. Iran's current maximum sustainable capacity is around four million barrels per day (mbd), according to the government. Iran's OPEC quota is 3.6 mbd. Capacity is constrained by the natural decline in the productivity of major onshore fields, delays in implementing necessary gas re-injection projects, and a shortage of experienced personnel. Without large infusions of capital, the oil sector may have difficulty maintaining current production, much less achieving the government's publicly-stated goal of five million barrels per day (mbd) of sustainable capacity..
The government did not meet its projected petroleum revenues in 1994 due to soft oil prices. The government sells petroleum products domestically at about 10 percent of the world price, thus cutting exports and encouraging over-consumption. 4. Debt Management Policies
During the eight-year war with Iraq, Iran contracted almost no external debt. From 1988 through 1992, Iran borrowed large amounts, primarily in the form of short-term trade credits (often covered by creditor government guarantees), in order to increase domestic living standards, rebuild its petroleum and industrial sectors, and modernize its armed forces.
The credit crunch of 1993–94 crippled Iran's trade. A series of bilateral reschedulings with official creditors in 1994 did not include significant new credits. Several export credit guarantee agencies, including those of Japan, France, Germany, and Italy, have either suspended coverage for Iran or are considering new loans only on a case-by-case basis. 5. Significant Barriers to U.S. Exports
The U.S. prohibits the export of items on the U.S. Munitions List, crime control and detection devices, chemical weapons precursors, nuclear and missile technology, and equipment used to manufacture military equipment. As a result of the Iran-Iraq Nonproliferation Act, passed by Congress and signed by the President on October 23, 1992 all goods exported to Iran which require a validated export license are subject, upon application, to a policy of denial. This affects all dual use commodities. Iranian exports to the United States were prohibited by order of the President on October 29, 1987. Exceptions to the embargo of imports of Iranian oil are allowed in connection with payments to U.S. claimants awarded by the U.S.-Iran Claims Tribunal at The Hague. U.S. sanctions have had a deleterious effect on U.S. exports to Iran. However, Iran's current financial problems can be considered the most signisicant barrier to the export of U.S. goods and services to Iran. 6. Export Subsidies Policies
In a countervailing duty investigation on Iranian pistachios, the U.S. pistachio industry alleged that a foreign exchange subsidy was available to exporters in Iran. Although countervailing duties were imposed, the U.S. Department of Commerce was never able to verify the existence of this program because of a lack of cooperation from the Iranian authorities and a paucity of information from the growers. 7. Protection of U.S. Intellectual Property
Iran is not a member of the World Intellectual Property Organization, but is a signatory to the Paris Convention for the Protection of Industrial Property. Patent protection is below the level of protection in the United States. Iran has not adhered to any of the international copyright conventions. 8. Worker Rights
a. Right of Association.- Article 131 of Iran's Labor Code grants workers and employers alike the right to form and join their own organizations. In practice, how. ever, there are no real labor unions. À national organization known as the “Worker's