LC Waikiki has begun to trial sourcing of garments from Iran in a move that could see the Turkish fashion brand import up to EUR20m (US$23.3m) worth in the next 18 months.

The company has been in talks with Iran's Ministry of Cooperatives, Labor and Social Welfare and the Ministry of Industries, Mining and Trade over the last eight months and is understood to have surveyed around 70 apparel factories and manufacturing units in the country.

A small order has now been placed with Ronak Jeans on a trial basis, so that LC Waikiki can assess its abilities, Fatih Almaz, local production investments director, told just-style.

He said they chose Iran due to the country's regulations, which allow foreign brands willing to sell their product in the Iranian market to directly apply for a permit to acquire sales outlets in the country without having to use a middleman. The law means that at least 20% of the value of the imported goods will be produced inside Iran for the first two years. After this, the company is required to export 50% of the apparel produced domestically. This will increase by at least 5% from the third year onwards.

According to Iran's Financial Tribune, the country's annual production demand currently stands at around 510,000 tonnes per year, while its production capacity is around 300,000 to 320,000 tonnes.

Iran has around 1,500 clothing production units, creating direct jobs for 500,000 workers. However, domestically-produced garments and textiles have a high price tag, partly due to the country's reliance on raw material imports. Nearly 12% of the end price is made up of value-added tax.

Iran also struggles with a high volume of illegal imports, with clothing top of the list for goods smuggled into the country.

Almaz also told just-style LC Waikiki is looking at investing in the country but at present does not have any concrete plans to do so.

"We have increased our efforts to improve the producers there rather than invest, but we have to point out that our work is not easy. In addition, the law is not only exclusive to us but will also seriously affect other brands in Europe who are doing retail business in Iran."