Overview of the UAE
The UAE (United Arab Emirates) economy is currently experiencing limited growth due to the OPEC-mandated oil production cuts. However with Dubai hosting the World Expo in 2020 and oil prices projected to raise growth is expected to pick up in the medium term (source: worldbank.org).
The UAE is an open economy which is seeking to move away from crude oil and traditional commodities to more diversified market sectors. Indeed The UAE’s strategic plan for the next few years focuses on promoting the UAE as a global tourism and trade, developing industry, and creating more job opportunities for nationals through improved education and increased private sector employment.
The UAE has a population of 9.9 million with 88% of the total population being made up of immigrants (source cia.gov).
In January 1, 2015, the GCC customs union came into full effect. The members of the Gulf Cooperation Council (GGC), consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
In January 2018, the UAE will impose a 5% value added tax (VAT); the tax is intended to be imposed throughout the GCC, although implementation may vary by country. The tax will apply to almost all goods and services except basic food items, education and healthcare.
UAE’s Business culture
Quotes should be in US dollars CIF.
In the currency for UAE is the AED (The Emirati Dirham). The AED is pegged to the US$ at a rate of AED3.671=US$1 since 1980. The authorities believe this promotes stability and confidence in the currency. Interest rates in the UAE tend to parallel those in the U.S.
English is the language of choice when negotiations are conducted. If companies wish to conduct business with the government, it can be an advantage to have business cards in both English and Arabic.
The Arab custom of small talk is vital for building trust and must not be hurried or dispensed with. In introductory business conversations, talk often centres on the health and wellbeing of the other person, but never about wives and female relatives.
Refreshments (e.g. coffee, tea) should always be accepted. Coffee is offered to guests in order, if known, of their position.
Refrain from expressing extreme views, as this may be seen as a sign of inflexibility. Rarely will your host initiate the business discussions, you will normally be expected to commence with a proposal and keep descriptions short and to-the-point.
As with quite a few countries getting a ‘yes’ means that your point is understood but it does not necessarily confirm agreement.
The dress code for men is business suits. Women should dress conservatively and avoid wearing short skirts or revealing blouses, the head does not need to be covered.
The exchange of small corporate items such as pens and brochures is common practice.
Setting up in the UAE
In most sectors, foreign firms seeking to establish themselves within the UAE market must have a local sponsor or agent and are limited to a minority ownership position. Finding the right local agent/distributor can be a critical first step for success.
Banking and Finance
The UAE banking and finance sector is highly developed, with both local and international banks providing a full range of services. All institutions are licensed by the UAE Central Bank.
Banks in the UAE fall in four broad categories: commercial, merchant or investment, Islamic, and industrial.
The Dubai International Financial Centre (DIFC) was established in 2004 as an economic ‘free zone’, with its own world class legal and regulatory framework. The DIFC offers a zero rate of tax and full foreign ownership.
Tariffs and Regulations
Generally imported products into the UAE carry a 5% duty. However some luxury goods such as tobacco can incur a levy of 50% to 70%. Some essential product categories such as agricultural products and pharmaceuticals are exempt.
Tariffs and duty rates are constantly revised and are subject to change without notice. It is recommended to reconfirm rates prior to selling to the United Arab Emirates (UAE)
A number of UAE ‘free zones’ have been established, where customs duties are not payable, such as Dubai International Financial Centre (DIFC) or Jebel Ali port. Goods may only be imported by an entity which is registered in the UAE.
Only companies in the UAE that have the appropriate trade licence can import products into the country.
Import controls exist for a number of products including alcoholic beverages, pork and pork products, medicinal substances, printed matter such as magazines and videos, photographic material, firearms and fireworks.
The entry of many kinds of products has been banned in accordance with the local values, religious beliefs and morals. The following items are prohibited:
- Pornographic Materials
- Goods made in Israel
Special permission is required for the import of:
- Ammunition and Explosives
- Agricultural Pesticides
- Industrial Alcohol-Denatured
- Methyl Alcohol
- Methylated and Medicated Spirits.
Product certification, labelling and packaging
Label requirements vary in accordance to the product category. Special label requirements will apply to food, beverage, agrochemicals, pharmaceuticals and cosmetics and may have to be approved by regulatory bodies.
The UAE adheres to the GSO’s (Gulf Standardization Organization) framework for the packaging and labelling requirements. GSO’s labelling requirements state that all food imported into the UAE must have its information in Arabic, either as part of the packaging or as an affixed label, detailing the:
- Product and brand names
- Lot identification/lot number
- Production and expiry dates
- Country of origin
- Manufacturer name
- Instruction for storage and use
- Manufacturer address
- Net content weight in metric units
- List of ingredients and additives in descending order of proportion
- All fats and oils used as ingredients
- Product barcode
- Name of the food, packer, distributor or importer
UAE health authorities require Islamic Slaughter Certification for all shipments of food products containing meat and poultry.
Products should be labelled in metric units or show a metric equivalent.
Methods of quoting and payment
Quotes should be in US dollars CIF or CIFC (Incoterms 1990) and may be requested in the form of Proforma invoices to facilitate opening of letters of credit.
Documentary & Clearance Requirements
The consignee/agent should obtain a delivery order from the Shipping Agent and submit original standard trade documentation as per the following:
1. Commercial Invoice from the exporter addressed to the importer with details about quantity, goods description and total value of each imported item.
2. Certificate of Origin, stating:
- The country of origin.
- Approval by the Chamber of Commerce in the country of origin.
3. Detailed Packing List including:
- Method of packing
- HS code for each item.
4. Import Permit from the competent agencies in case of importing restricted goods or duty exempted goods.
5. Bill of Entry or Airway Bill with the following:
- May be made out To Order.
- The appropriate tariff number should be shown. This should ensure the correct freight rate is applied to the items shipped.
- Original copy must be furnished (two original copies minimum).
- Original bill if ladings have to be endorsed by the shipper. In case they are not endorsed, a full set (usually three) of originals need to be surrendered to the line.
For all food products, the following certificates are required in addition to the above:
- Original health certificate issued by the appropriate government agency in the exporting country, attesting to the product’s fitness for human consumption.
- Original Halal slaughter certificate for meat and poultry products.
Public health requirements
- Livestock are inspected upon arrival.
- Agricultural pesticides may only be imported by a registered importer holding a valid import licence.
- Imports of pharmaceutical products are subject to specific transport regulations.
- Food containing cyclamates is prohibited from entering Abu Dhabi and although there is no legislation prohibiting such food from entering Dubai, it is not accepted.
Only companies in the UAE that have the appropriate trade licence can import products into the country.
It is essential to have all Customs documents in complete order. Products can get delayed if any of the documents are not properly completed.
Duties, Taxes & Fee’s for formal entry clearance:
There are two possible destination zones in the UAE. These zones are called UAE Customs Zones or UAE Free Trade Zones. The main difference for each zone is:
- Products which are sent to the UAE’s Customs Zones are subject to duty under the GCC’s (Gulf Cooperation Council) Common Customs Law.
- Products which are sent to the UAE’s Free Trade Zones are exempt from duty. Goods being imported into Free Trade Zones are exempt from duties. Also, re-exports from UAE Free Trade Zones to a third market destinations beyond the GCC Customs Zones are also exempted from any duty.
UAE Free Trade Zones
The UAE is home to approximately 37 Free Trade Zones (www.uaefreezones.me).
The free zones in UAE are located in Dubai, Sharjah, Abu Dhabi, Ajman, Fujairah, Um Al Quwain and Ras Al Khaimah. These free zones come under the categories of mainland, airport and sea port free zones. Each free zone is specifically created for various operations like industrial, healthcare, finance, media, research, maritime, logistics and IT services for investors looking to start up a business in UAE.
For goods which go from a Free Trade Zone for sale in the UAE and/or re-exports to GCC Countries are subject to customs import tariff as per GCC Common Customs Law that sets the framework for the UAE’s Import Regulations.
Intra GCC (Gulf Cooperation Council) Tariffs
Where customs import tariffs has already been paid for goods in one GCC country and the goods are being moved to a different GCC country then the following is required:
- A Statistical Export Declaration must have been cleared from the exporting GCC country for inward movements of such goods.
- A copy of the declaration must also be submitted to the Customs Office of the importing country and must carry the “Makasa Stamp” (set-off mechanism) on the Declaration in order to avoid the repeated payment of Customs Duty at the destination Country.
- The Declaration type “Import to Local from GCC” needs to be cleared for such transaction
Companies are advised to spend time investigating the UAE market, obtain professional advice where appropriate and thoroughly investigate the issues in entering the market and before establishing business relationships.
Companies wishing to operate in the UAE should commit to the highest level of corporate behaviour and familiarise themselves with the laws of their country and the penalties pertaining to bribery of foreign officials.
Intellectual Property Protection
The UAE has a good national intellectual property rights, such as patents, copyrights and trademarks. Moreover, recognition of worldwide international property rights is largely ensured by virtue of the UAE’s membership of various international conventions:
- Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
- Patent Cooperation Treaty (PCT)
- Madrid Convention
- World Trade Organization (WTO).
Confidentiality and protection of trade secrets does not currently have its own law, but general contract law may still protect these. Accordingly, specific legal advice should be sought to ensure your intellectual property is protected in the UAE.
The Ministry of Economy handles registration of intellectual property and the system can be complex.
Arbitration is generally the initially preferred method of dispute resolution. The UAE has established several arbitration centres to facilitate this.
In the UAE dispute resolutions using local Courts can take place. Cases in these courts can be lengthy and the subsequent enforcement of a judgement can be a difficult process. It is worth noting that for these cases a qualified local advocate must be appointed, and the proceedings will be conducted in Arabic. Although court fees are relatively low cost, the system is not ideal for difficult cases.
The DIFC (Dubai International Financial Centre) Courts are another alternative. They practice English common law principles and are administered by international judges in English. Although the courts were primarily established for the DIFC, jurisdiction can be invoked for commercial and civil disputes which relate to a dispute which arise outside the DIFC.
UAE Web Resources
- Abu Dhabi Chamber of Commerce and Industry
- Sharjah Chamber of Commerce and Industry
- UAE Federal e-Government
- UAE Department of Finance
- Dubai Customs
About the Author
Aidan Conaty is founder of TCI China & Goodada. Aidan’s background is in Supply Chain Consultancy and he is a qualified accountant.