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Syria, Cuba, Iran - Axis of medical equipment?

by Brendon Nafziger, DOTmed News Associate Editor | September 30, 2010


Iran

Why is it embargoed? The U.S. has had a dicey relationship with Iran since the 1950s, when a CIA-orchestrated coup overthrew the prime minister and installed the Shah. Shortly after the Shah was later himself overthrown by the 1979 revolution of Ayatollah Khomeini, students invaded the U.S. embassy and held U.S. diplomats hostage for more than a year. Various sanctions came and went over the years, and in April 1995, President Clinton signed Executive Order 12957, effectively a total embargo against Iran. In the following year, the Iran-Libya Sanctions Act passed (Libya has since been dropped from the act). These rules have been clarified and expanded in new orders issued over the past decade.

Market size: Iran's medical device market relies almost entirely on imports. This past year, imports accounted for almost 98 percent of the total market, according to Espicom Healthcare Intelligence. In 2008, the value of the imports was estimated at $598 million, with Germany and the UK the leading suppliers. In fact, in part because of U.S. sanctions, European Union countries supplied about 66 percent of the total. Now, in 2010, Iran's medical device market is estimated to be worth $702 million, but per capita spending is low, only $9 a head. Over the next five years, the market is predicted to grow to $1.19 billion.

Export rules:

As one source who deals with Iran put it, "It's very complicated."

To ship to Iran, companies need a license from the Office of Foreign Assets Control (OFAC), a division of the Department of Treasury that handles trade to embargoed countries.

But depending on the device, it might first need a "commodity classification" from the Department of Commerce's Bureau of Industry and Security. If the device does not already have EAR99 classification, meaning it doesn't fall under the Commerce Control List's Export Administration Regulations (illustrative list of devices here: http://tinyurl.com/23vo6n8 ), the company will generally need to file this separate application, which has about a one-month turnaround time.

But even if you get an OFAC license, you can't just send to anybody. The OFAC license is issued for a specific distributor - and a specific end-user, with a non-restricted end use, in the country. Companies have to make sure the end-user is not on the "Specially Designated National" list - essentially a black list of people and companies for whom U.S. trade is verboten, either because they're suspected of having misused products in the past, belong to hostile regimes or are after weapons of mass destruction. These entities can't be on the license.

Turnaround time on the license varies. According to some, it takes around nine months to a year to get a license, although others have had it in fewer than four months.

Still, the chances of approval are very good. In an article in MDDI, Michael Gershberg, an associate with the law firm Steptoe & Johnson LLP, said in the first two quarters of 2009, OFAC received more than 400 applications for medical device exports, and only rejected four of them.