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Britain’s Prince William views Dubai Customs’ experience in preventing wildlife trade

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Britain’s Prince William views Dubai Customs’ experience in preventing wildlife trade

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Prince William: He is visiting the United Arab Emirates for the first time - Then24
Britain’s Prince William views Dubai Customs’ experience in preventing wildlife trade

Expanding on the solid connection between the UK and the UAE, Prince William, Duke of Cambridge, visited Jebel Ali Customs Center, as a part of his first authority visit to the UAE.

The second-in-line to the British throne landed in Dubai Customs’ Jebel Ali Center on Thursday 10 February 2022.
The UK royal found out about Dubai Customs job in battling ill-conceived exchange merchandise that disregard the arrangements of the Treaty on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

Dubai Customs works together with the DP World to cut short such activities. The in-house built Smart Risk Engine intercepts suspicious shipments following a sophisticated 128-point system. A thorough scanning by the advanced container scanning system at Jebel Ali Customs Center follows this, which helps in aborting illegal wildlife trade.

The illegal wildlife trade is among the five most lucrative global crimes and is often run by highly organized criminal networks. Prince William founded United for Wildlife with The Royal Foundation to raise awareness of this serious organized crime and bring motivated leaders from business, law enforcement and charities together to bring about a more significant response than
conservations alone.

The DP World owns the Jebel Ali Port, the Principal Partner of United for Wildlife. They have been instrumental in recognizing this vision and raising awareness of action on this issue. The headquarter of the DP World is in Dubai and handles around 10% of global container traffic across its ports and terminals worldwide.
During his visit to Jebel Ali, They gave Prince William a port tour to see the scale of operations at the Middle East’s largest port. They showed his Royal Highness a live demonstration of cargo being unloaded from ships, the journey through customs, learning about how cutting-edge new technology can be deployed to identify trafficked wildlife items and support enforcement investigations.

Sultan Ahmed bin Sulayem, Group Chairman and CEO, DP World said “As a leading global logistics business, we recognize the important need to address the rising concerns posed by the
illegal wildlife trade, which not only impacts biodiversity but has ramifications for our planet and local communities. We are taking extensive measures to tackle the issues, including collaborating with United for Wildlife and technology companies to develop processes to improve the detection of illegal wildlife cargo.

Jebel Ali Customs Center completed 2.814 million declarations in 2021. Dubai Customs has recently seized 64 falcons that were being brought into the country. They have been found hidden in the back of a lorry as smugglers attempted to transport them across
the Hatta border.

In recent years, Dubai Customs made 197 CITES-listed seizures, and to enhance cooperation in this regard, it signed an agreement with the International Fund for Animal Welfare (IFAW) towards more cooperation in preventing illegal wildlife trade.

H.E. Sultan bin Sulayem, DP World Group Chairman & CEO and Chairman of Ports, Customs and Free Zone Corporation had earlier said “Fruitful cooperation between DP World and Dubai Customs in fighting illegal wildlife trade and trafficking of CITES-listed items has had tangible results, thanks to the advanced interception and inspection systems at Jebel Ali Customs Center and their highly professional teams”.

Dubai Customs’ experience in this regard has become an example to follow worldwide following the vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime
Minister and Ruler of Dubai.”

Following on the report, H.E. Ahmed Mahboob Musabih, Director General of Dubai Customs, CEO of Ports, Customs and Free Zone Corporation highly applauded Prince William’s efforts in protecting the environment. These efforts were culminated in launching the Earthshot Prize, an ambitious environmental program aimed at finding new ideas and technologies around the world to tackle the climate crisis and Earth’s most pressing challenges.

He later concluded by saying “Dubai Customs is committed to its role in implementing the CITES treaty provision, which the UAE joined in 1990. Our Smart Risk Engine is one of the most sophisticated systems in analyzing risks following well-studied plans. There are six inspection systems in place at Jebel Ali Customs Center, with a capacity of checking and inspecting 900 containers/hour.”

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Air Cargo, Archives, Dispatches, Global Trade Daily

United Airlines Moves Cargo Around the World in Cargo and Passenger Planes

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If you’ve been wondering who is filling commercial jetliners these days, we have the answer: some brave travelers and a whole lot of cargo.

United Airlines has played a vital role in helping keep the global supply chains stable during the COVID-19 pandemic by flying needed goods not only in its cargo planes but what are normally passenger planes as well.

In addition to current service from the U.S. to Asia, Australia, Europe, India, Latin America and the Middle East, United has added cargo-only flights to Dublin, Paris, Rome, Santiago and Zurich.

“Air cargo continues to be more important than ever,” explains United Cargo President Jan Krems. “This network expansion helps our customers continue to facilitate trade and contribute to global economic development and recovery. I’m proud of our team for mobilizing our cargo-only flights program that enables the shipment of critical goods that will support global economies.”

Since United Airlines began the program on March 19, more than 2,400 cargo-only flights have transported more than 77 million pounds of cargo.

Meanwhile, despite a three-year-old blockade on air, land and sea travel imposed on Qatar by its neighbors Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, Qatar Airways claims its share of the passenger and air cargo market has grown significantly over the past three months.

“Qatar can be proud that it is home to not only the Best Airline in the World but also the current largest passenger airline, the largest cargo airline and the Third Best Airport in the World,” states a company release.

The Middle East countries cut diplomatic and trade ties with Doha and imposed the blockade on June, 5, 2017, because Qatar allegedly supported “terrorism” and was too close to Iran. Calling the blockade “illegal,” Qatar rejects the claims and says there was “no legitimate justification” for the severance of relations.

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Archives, Global Trade Daily, News

Dubai’s Latest Report Confirms Non-Oil Foreign Trade Increased 6 Percent in 2019

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In the latest report by the Government of Dubai, the region was confirmed its efforts to achieve its 2025 trade target of AED2 trillion helped spur growth in trade last year. The report also confirmed that non-oil external trade saw an increase of 19 percent in volume from 91 million tons in 2018 to reach 109 million tons in 2019. Re-exports rose by a record 48 percent to reach 17 million tons, while exports rose by 45 percent to 19 million tons and imports grew by 9 percent to 72 million tons. These figures capped a prosperous decade for Dubai from 2010-2020, during which external trade grew by 70 percent.

Dubai achieved exceptional external trade growth in 2019 despite the headwinds from an intensified global economic downturn. In terms of value, Dubai’s external trade surged 6 percent to AED1.371 trillion from AED 1.299 trillion in 2018. Exports skyrocketed 22 percent to AED155 billion, re-exports grew by 4 percent to AED420 billion and imports rose by 3 percent to AED796 billion. Over the decade (2010-2019), the value of Dubai’s external trade went up by 52 percent thanks to the agility, versatility and flexibility of the external trade sector in the emirate, which discovered alternative markets and trade paths to make up for sluggish growth in some markets.

“Dubai’s external trade has contributed significantly to the emirate’s economic achievements, further raising its status as a global hub for trade, business, and tourism, giving it a solid platform for growth in the next 50 years and creating the optimal conditions for more sustainable development across sectors,” said Sheikh Hamdan bin Mohammed, Crown Prince of Dubai and Chairman of The Executive Council. “Inspired by the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, Dubai’s external trade sector is progressing steadily towards the 2025 trade target of AED2 trillion set by His Highness.

“All government entities are working seamlessly together to provide the best services, facilitate trade and foreign investments, and further develop infrastructure across the emirate, especially at airports and free zones, to galvanize its journey of excellence and enhance its role as a commercial bridge between the east and west. Furthermore, hosting mega-events such as EXPO 2020 will provide opportunities for the international trade sector to explore new possibilities and expand growth.”

Dubai’s foreign trade out of free zones in 2019 was a major contributor to the overall increase, accounting for AED592 billion, an 11 percent increase year-on-year. Direct trade saw a 2 percent growth to reach AED770 billion. Customs warehouse trade hit AED9 billion.

Land trade grew by 11 percent contributing to AED228 billion, air trade rose by 5 percent to AED641 billion and sea trade increased by 4 percent to AED502 billion.

Sultan bin Sulayem, DP World Group Chairman & CEO and Chairman of Ports, Customs and Free Zone Corporation, said: “Growth in Dubai’s external trade is the fruit of dedicated and well-planned work over the last few years, which helped us establish global leadership in different sectors. The future is promising and there are no limits when it comes to our expectations. We will keep growing and developing based on the latest and most advanced innovations and breakthroughs in AI smart applications following the vision and directives of our leadership.

“Hosting major international events will give our organizations a greater voice on the world stage, backed by our presence and strong network out of the 80 terminals that DP World operates worldwide, and our bold economic initiatives including the Dubai Silk Road.”

Bin Sulayem added: “Free zones in Dubai are a key factor behind the emirate’s trade success. The sophisticated infrastructure of our free zones, especially Jebel Ali Free Zone (JAFZA), has helped businesses benefit from different incentives and facilities, and attracted more foreign investments over the years.”

Bin Sulayem said Dubai Customs is continuously evolving to facilitate greater trade and provide more exceptional service to its customers. The number of customs transactions completed by Dubai Customs grew by a record 34 percent in 2019 to 13 million from 9.7 million in 2018. As part of the Dubai Silk Road strategy, Dubai Customs launched the World Logistics Passport, which links Customs World, DP World, and Emirates Group to enhance connectivity through Dubai and, through sharing of expertise and process development directly between partner countries. Dubai Customs also launched the second phase of the productivity engine, an initiative developed in-house and approved by The Executive Council with the aim of boosting productivity by 8 – 10 percent.

China remained Dubai’s largest trading partner, contributing AED150 billion. India was the second-biggest trading partner, contributing AED135 billion, followed by the USA with AED77.7 billion, and Switzerland with AED60 billion.

Saudi Arabia maintained its position as Dubai’s largest Arab trade partner. The country was the emirate’s fifth-biggest partner globally, contributing AED56 billion.

The highest traded commodity by value in 2019 was gold, jewelry, and diamonds which contributed AED370 billion, a growth of 7 percent from 2018. Gold took the lion’s share of trade with AED169.5 billion, followed by phones with AED164 billion, an increase of 9 percent from the previous year. The third-highest traded commodity was jewelry at AED116.6 billion, followed by petroleum oils which contributed AED85.4 billion in 2019, a growth of 55 percent, and diamonds which accounted for AED83.9 billion.

*Republished with permission

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Archives, Foreign Trade Zones, Global Trade Daily

The UAE Foreign Direct Investment (FDI) Law

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For a great many years, global businesses have viewed the United Arab Emirates as an attractive global investment market. With a strong presence of high-net-worth consumers and a geographically strategic location from which to distribute throughout the Middle East and North Africa, the UAE is rife with opportunity.

Yet, many international corporations could not own companies outright in the UAE and were restricted to a maximum ownership of 49%. Ownership laws, however, are now being revisited to diversify the country’s economy beyond the energy sector, which has been the source of UAE wealth for decades. But precisely the degree to which economic liberalization is taking place is very much based on one’s perspective.

Background

The United Arab Emirates (UAE), a federation of seven Emirates (member states), has served as a global centre for trade for centuries. However, most global businesses had often expressed discomfort with the country’s investment laws which, despite allowing 100 percent foreign ownership of businesses in the country’s Free Trade Zones (FTZs), stipulated that at least 51 percent of a company established  within the UAE, and outside a Free Trade Zone, must be owned by UAE citizens, or companies wholly owned by UAE citizens.

In addition, agency and distributor laws require that only a local commercial agent could sell products in the UAE market; and only UAE citizens or companies wholly owned by UAE citizens could register with the Ministry of Economy as commercial agents. Regulations also prevent the termination, or non-renewal, of a commercial agency contract unless the principal has a material reason to justify the termination or non-renewal; and the principal must often approach a court to terminate a contract.

Legislating Economic Diversification

The most recent Trade Policy Statement issued by the UAE through the World Trade Organization’s Trade Policy Review mechanism in 2016 stated the country aims to drive towards economic diversification by being less reliant on the oil sector and to increase its attractiveness to foreign investment.

The UAE enacted Federal Law No. 19, the Foreign Direct Investment Law (FDI Law) in November 2018. To promote and develop the investment environment and attract foreign direct investment in line with the developmental policies of the country, the Law established a framework for the country’s Cabinet to mandate which sectors and activities of the economy would be eligible for 100 percent foreign ownership. However, a list of eligible economic sectors and activities was not published by the UAE Cabinet until July 2019.

The list comprised of 122 economic activities across 13 sectors that would be eligible for up to 100 percent foreign ownership. The decision simultaneously conveyed that each emirate (member state of the UAE) could determine the percentage of foreign ownership under each activity suggesting that foreign ownership levels could vary from emirate to emirate. It was also clarified that oil & gas production and exploration sectors, air transport, and security and military sectors would be excluded from the purview of the FDI Law.

A Method of Recourse

It is also of interest that news reports indicate that for activities that are not included in the list of activities/sectors eligible for 100 percent foreign ownership, companies could approach the government for permission for a higher level of ownership; and that approvals may be granted on a case-by-case basis. The sectors that would allow 100 percent foreign ownership include:

-Space

-Renewable Energy

-Agriculture

–Manufacturing

-Road Transport & Storage

-Hospitality and Food Services

-Information and Communication Services

-Professional, Scientific and Technical activities

-Administration and Support Services

-Education

-Healthcare

-Art & Entertainment; and

-Construction

For those businesses that do qualify under the FDI law, their products will be treated as being of UAE origin and therefore, eligible for such treatment under international agreements to which the UAE is a party. This is a privilege that is not available to goods manufactured by foreign-owned companies based in UAE Free Trade Zones. In addition, they can transfer abroad operating profits and proceeds from sale of investment or other assets.

Measuring Success

The Emirate of Dubai has reported that it has attracted US $12.7 billion in foreign direct investment (FDI) in the first half of 2019 thereby ranking the emirate third globally in FDI capital flows into Greenfield Projects. Also, in October 2019, Dubai assumed the presidency of the World Association of Investment Promotion Agencies (WAIPA), a global entity that works for the smooth flow of cross-border investments.

Although it is still too early to gauge the impact of the FDI Law and other developments, the consensus is that the UAE has taken steps to accelerate foreign direct investment into the country. It remains to be seen whether further steps such as changes to the agency and distributor laws, and changes to regulations related to the termination of agency contracts will be implemented to enhance the attractiveness of the UAE to foreign investors.

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JC Pachakkil is a senior consultant in Global Trade Management at trade services firm Livingston International.

Archives, Global Trade Daily, Imports/Exports

Asia’s Ginger Market 2019: UAE Is Expected to Be the Fastest-Growing Export Market

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IndexBox has just published a new report: ‘Asia – Ginger – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the ginger market in Asia amounted to $3.2B in 2018, rising by 14% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

In general, ginger consumption continues to indicate a prominent expansion. The growth pace was the most rapid in 2010, with an increase of 56% against the previous year. Over the period under review, the ginger market attained its peak figure level in 2018, and is expected to retain its growth in the near future.

Production in Asia

The ginger production amounted to 2.7M tonnes in 2018, surging by 6.9% against the previous year. The total output indicated a strong increase from 2008 to 2018: its volume increased at an average annual rate of +6.8% over the last decade. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, the ginger production increased by +93.7% against 2008 indices. The growth pace was the most rapid in 2011, with an increase of 24% against the previous year. The volume of ginger production peaked in 2018, and is likely to continue its growth in the near future. The general positive trend in terms of ginger output was largely conditioned by a strong growth of the harvested area and a modest increase in yield figures.

Imports in Asia

The imports amounted to 410K tonnes in 2018, going up by 4.4% against the previous year. The total import volume increased at an average annual rate of +3.3% over the period from 2008 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded throughout the analyzed period.

In value terms, ginger imports stood at $385M (IndexBox estimates) in 2018.

Imports by Country

In 2018, Pakistan (93K tonnes), Japan (68K tonnes), the United Arab Emirates (47K tonnes), Malaysia (45K tonnes), Bangladesh (42K tonnes), Saudi Arabia (28K tonnes) and India (24K tonnes) represented the main importers of ginger in Asia, generating 85% of total import.

From 2008 to 2018, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by the United Arab Emirates, while the other leaders experienced more modest paces of growth.

In value terms, Japan ($103M), Pakistan ($83M) and the United Arab Emirates ($42M) appeared to be the countries with the highest levels of imports in 2018, together accounting for 59% of total imports.

Import Prices by Country

In 2018, the ginger import price in Asia amounted to $939 per tonne, remaining stable against the previous year. The import price indicated a moderate growth from 2008 to 2018: its price increased at an average annual rate of +2.6% over the last decade. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, the ginger import price increased by +25.2% against 2016 indices.

Import prices varied noticeably by the country of destination; the country with the highest import price was Japan ($1,513 per tonne), while Bangladesh ($279 per tonne) was amongst the lowest.

From 2008 to 2018, the most notable rate of growth in terms of import prices was attained by India, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

Archives, Global Trade Daily, Imports/Exports

Margarine Market in the Middle East – Trends, Analysis and Forecast

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IndexBox has just published a new report, the Middle East – Margarine And Shortening – Market Analysis, Forecast, Size, Trends and Insights. Here is a summary of the report’s key findings.

The revenue of the margarine and shortening market in Middle East amounted to $1.1B in 2017, growing by 11% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

The market value increased at an average annual rate of +2.8% from 2007 to 2017; the trend pattern indicated some noticeable fluctuations being recorded over the period under review. The most prominent rate of growth was recorded in 2011, with an increase of 37% y-o-y. In that year, the margarine and shortening market attained its peak level of $1.4B. From 2012 to 2017, the growth of the margarine and shortening market remained at a somewhat lower figure.

Production in the Middle East

In 2017, approx. 837K tonnes of margarine and shortening were produced in Middle East; growing by 2.4% against the previous year. The margarine and shortening production continues to indicate a relatively flat trend pattern.

Exports in the Middle East

In 2017, exports of margarine and shortening in Middle East amounted to 165K tonnes, coming down by -22.4% against the previous year. Overall, the total exports indicated a modest expansion over the last decade, increasing at an average annual rate of +1.9% from 2007 to 2017. In value terms, margarine and shortening exports stood at $183M (IndexBox estimates) in 2017.

Exports by Country

Turkey prevails in margarine and shortening exports structure, recording 141K tonnes, which was approx. 85% of total exports in 2017. It was distantly followed by Oman (13K tonnes), achieving 7.6% share of total exports. The United Arab Emirates (7.1K tonnes) followed a long way behind the leaders.

Exports from Turkey increased at an average annual rate of +2.3% from 2007 to 2017. At the same time, Oman (+22.5%) displayed positive paces of growth. Moreover, Oman emerged as the fastest growing exporter in Middle East, with a CAGR of +22.5% from 2007-2017. By contrast, the United Arab Emirates (-5.4%) illustrated a downward trend over the same period. From 2007 to 2017, the share of the United Arab Emirates increased by 3.1% percentage points, while Oman (-6.6%) and Turkey (-17.6%) saw their share reduced.

In value terms, Turkey ($149M) remains the largest margarine and shortening supplier in Middle East, comprising 82% of global exports. The second position in the ranking was occupied by Oman ($15M), with a 8.1% share of global exports.

Export Prices by Country

The margarine and shortening export price in Middle East stood at $1.1 per kg in 2017, increasing by 7.4% against the previous year. The the margarine and shortening export price continues to indicate a relatively flat trend pattern.

Average export prices varied somewhat amongst the major exporting countries. In 2017, the country with the highest export price was the United Arab Emirates ($1.5 per kg), while Turkey ($1.1 per kg) was amongst the lowest.

From 2007 to 2017, the most notable rate of growth in terms of export prices was attained by the United Arab Emirates (+3.4% per year), while the other leaders experienced mixed trends in the export price figures.

Imports in the Middle East

In 2017, the amount of margarine and shortening imported in Middle East totaled 353K tonnes, waning by -5.1% against the previous year. The total imports indicated a remarkable increase from 2007 to 2017: its volume increased at an average annual rate of +5.9% over the last decade. In value terms, margarine and shortening imports totaled $411M (IndexBox estimates) in 2017.

Imports by Country

In 2017, Iraq (99K tonnes), distantly followed by Saudi Arabia (64K tonnes), Syrian Arab Republic (41K tonnes), Turkey (38K tonnes), Iran (32K tonnes), the United Arab Emirates (21K tonnes) and Lebanon (16K tonnes) were the key importers of margarine and shortening, together comprising 88% of total imports.

From 2007 to 2017, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by Lebanon (+19.4% per year), while the other leaders experienced more modest paces of growth.

Import Prices by Country

In 2017, the margarine and shortening import price in Middle East amounted to $1.2 per kg, jumping by 4.7% against the previous year. Over the period from 2007 to 2017, it increased at an average annual rate of +1.3%.

Average import prices varied somewhat amongst the major importing countries. In 2017, major importing countries recorded the following import prices: in Turkey ($1.4 per kg) and the United Arab Emirates ($1.4 per kg), while Iraq ($965 per tonne) and Syrian Arab Republic ($1 per kg) were amongst the lowest.

From 2007 to 2017, the most notable rate of growth in terms of import prices was attained by the United Arab Emirates (+4.0% per year), while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

Archives, Global Trade Daily, News

Dubai Customs Adds 5.7 million Captagon Pills to Seizure List in 2019

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A combination of strategic planning, cooperation, a customs K-9 Dog unit, and smart inspection technology supported efforts to thwart an attempt to smuggle 5.715 million Captagon pills at Jebel Ali & Tecom Customs Center. Dubai Customs – also known for seizing an illegal shipment of 5 million Captagon pills back in January, confirmed this latest smuggling attempt utilized bags of red lentils to conceal the pills.

“We are vigilant and well prepared to all attempts of bringing these illegal contrabands into the UAE through Dubai entry points. The high sophisticated level that Dubai Customs reached in terms of infrastructure, equipment and the skills of their customs officers have led to more control over the emirate’s entry points and borders following the vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai,” Director General of Dubai Customs Ahmed Mahboob Musabih said.

This seizure brings the total number of Captagon pills confiscated by Dubai Customs to 10.715 million pills in less than five months. The high-levels of communication and coordination between Jebel Ali & Tecom Customs Center and the Dubai Customs Intelligence Center serves as major factor for successful confiscations of illegal shipments. Jebel Ali & Tecom Customs Center’s one-of-a-kind container detection system provided the information needed for the final determination of risk involved with the illegal shipment.

“The full X-ray container detection system, the first of its kind in the world, can process 150 containers per hour,” Yousef Al Hashimi, Director of the Jebel Ali Customs Centres Management said. “These achievements at the Jebel Ali Customs Centre Management support our preparations for the upcoming Expo 2020. We have a very advanced smart risk engine in place which we developed in-house to track all coming shipments and classify them based on their risk level” he concluded.

Archives, Global Trade Daily, International Trade

How global traders in UAE Free Zones can avoid the new Value Added Tax

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The recent imposition of a value-added tax (VAT) by the UAE raised concerns amongst global traders that the Gulf country was moving away from its traditional role of drawing in multinational investors, particularly those who use the region as a transfer hub for goods being re-exported to other destinations in the Middle East and beyond. The VAT would, after all, increase landed costs and in turn, generate a price spike for the end consumer, making products less competitive.

To ease investors’ fears, the UAE’s government has established a new, albeit complex, regime to allow global traders to continue to take advantage of the UAE’s traditional Free Trade Zones or FTZs where imports have not been traditionally subject to duties and taxes.

A Critical Region

The United Arab Emirates (UAE), by its location, has served as a centre for trade for centuries. In recent times, Free Trade Zones (FTZs) in the UAE have helped global enterprises to serve a market size of approximately two billion people who live within a four-hour flying distance from the UAE. The UAE’s considerable investments in FTZ infrastructure that support imports and re-exports through air, land and sea modes, have contributed in making the country a global logistics hub.

As with most FTZs, imported goods are not subject to import or export duties. Thus, goods meant for regional markets are imported in bulk into UAE FTZs from production facilities around the world and then redistributed after additional processing, packaging or having been broken down to market-determined transaction quantities. According to the UAE Central Bank, a total of $61.2 billion was exported from UAE FTZs in 2017, accounting for nearly 20 percent of the country’s exports that year.

Designated Free Zones

The new VAT regime implemented in 2018 applies a consumption tax on the supply of goods and services which take place within the territory of the UAE. Historically, FTZs have been considered outside the UAE territory for the application of import duty. However, for the purposes of VAT, the UAE has not extended a similar treatment to FTZs and they are deemed a part of the UAE territory for the purposes of VAT.

The UAE Cabinet has identified certain free trade zones, called Designated Zones, in which certain transactions are considered as being completed outside the UAE and, in turn, not subject to the VAT. However, businesses registered in Designated Zones have the same VAT obligations as non-Designated Zone businesses and must register, report and account for VAT under the VAT rules.

The Rules
Following are the main scenarios and the VAT treatment that applies to them from Designated Zones

Services rendered from within a Designated Zone to a UAE or Gulf Cooperation Council (GCC) consumer will have the VAT applied, while all services rendered to a consumer outside the GCC will not.

Goods sold within the Designated Zones are subject to VAT only if the goods are consumed within the same Designated Zone. If they are being purchased for the purposes of producing, modifying or forming a part of another good located in the same Designated Zone, they are not subject to the VAT.

Goods from outside the UAE to a Designated Zone are not subject to the VAT. However, it is expected that once VATs are applied by other GCC countries, goods entering UAE Designated Zones from those GCC countries will be subject to VAT.

Goods from within the UAE into Designated Zones are treated as being made in UAE territory and are not considered as an export from the UAE and, therefore, will be subject to the VAT.

A sale or movement of goods between Designated Zones will not have the VAT applied. However, the goods being transferred must not be released in whole or in part into domestic circulation during the transfer, and must not be used or altered in any way during the transfer between Designated Zones. The goods must also comply with the rules of Customs duty suspension (Goods in Transit) as per the Gulf Cooperation Council Common Customs Law.

Goods from Designated Zones to a buyer onshore in the UAE are subject to the VAT, because they are treated as an import into the UAE. It must also be noted that VAT could be charged again on a subsequent sale of the goods within the mainland if it is being made by a person subject to the VAT.

Goods in a Designated Zone on which VAT has not been paid and consumed by the owner of the goods will be treated as having been imported into the UAE and VAT will be applied accordingly.

The table below provides a high-level picture of the applicability of VAT on different types of transactions.

In short, with the introduction of Designated Zones, the UAE government has aimed to ensure that businesses based in these zones are not subject to VAT if the goods being traded are meant for markets outside the Gulf Cooperation Council countries.

JC Pachakkil is a senior consultant in Global Trade Management at trade services firm Livingston International.

Archives, Global Trade Daily, International Trade

Illicit Trade: The Fight Continues

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The United Arab Emirates is the latest region of focus in the fight against illicit trade after the The Transnational Alliance to Combat Illicit Trade (TRACIT) asked for increased efforts this week during a conference in Abu Dhabi.

The conference, hosted by Global Trade Development Week, consisted of industry leaders analyzing the illicit trade vulnerabilities in the wake of increased trafficking in the region of Jebel Ali Free Trade Zone.

The United Arab Emirates currently ranks 34th globally with an overall rank of 68/100 for structural capability to effectively address illicit trade according to 2018 Global Illicit Trade Environment Index.

“I’m not surprised that UAE has scored in the top third of our global rankings,” TRACIT Director-General Jeffrey Hardy said. “The country has demonstrated its commitment to wiping out corruption, standing up against money laundering and strengthening laws to fight against counterfeiting and other forms of IP Theft.”

With successful initiatives to-date for the region, Hardy continues to adamantly encourage the region to combat illicit trade efforts through  improved customs operations, rationalizing tax policies and overall cleaner operations in Free Trade Zones.

“Strengthening cooperation with neighboring countries and working with international organizations like INTERPOL can rapidly improve UAE’s ability to defend against illicit trade,”  Hardy said. “Similarly, the government can shift public perception and understanding of the negative impacts of illicit trade by improving public awareness and education.”

Source: tracit.org

 

Archives, Features, Global Trade Daily

What corporations should know about operating in Abu Dhabi

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Economists have long debated the effectiveness of laws enacted to spur economic development. But cities continue to try to create jobs and wealth, and some like Abu Dhabi seem to be doing something right.

The capital of the United Arab Emirates in 2015 created a financial district where it relaxed tax and regulatory requirements to attract foreign investment. In three years, the Abu Dhabi Global Market has emerged as a vibrant business community featuring financial services companies and professional advisers.

Writing laws conducive to growth has secured Abu Dhabi’s place as a global financial center. It’s ranked 25th in the Global Financial Centres Index, just behind better known European financial hubs Frankfurt, Luxembourg and Paris.

Governance and law in the Abu Dhabi Global Market was modeled after its UAE neighbor, Dubai. Using its newfound oil wealth in the 1970s, Dubai started upgrading its infrastructure to become a commercial center in the Middle East. The fundamentalism of Gulf Coast countries, though, was a deterrent to foreign investment in the Middle East. Leveraging a concept called “free zones,” Dubai developed economic areas that waived corporate taxes, allowed 100 percent foreign ownership and simplified start-up processes.

It took the idea a step further in 2004 by opening a free zone called the Dubai International Finance Centre with its own legal structure, financial regulator and courts. The DIFC, as it’s known, is governed by British common law rather than Sharia law. A transparent legal regime aligned with international best practices offered certainty and familiarity to global financial institutions and foreign investors.

The legal changes combined with business-friendly regulations, political stability and modern infrastructure have turned Dubai into a favored city for business in the Middle East and Africa. It’s also at the center of trade between the East and West, connecting the region to the economies of Europe, Asia and the Americas. The DIFC has a working population of more than 22,000 people and 2,000 companies, according to its website. It has attracted many of the world’s largest banks, as well as multinational corporations.

The DIFC now has healthy competition from within the UAE. Abu Dhabi seeks to exploit its oil wealth –estimated at 6 percent of the world’s proven oil reserves – to transform its economy and global competitiveness.

The Abu Dhabi Global Market is in the capital’s shiny new Al Maryah Island, a half square-mile piece of land being developed by Mubadala, one of the world’s largest sovereign wealth funds. Taking a page from the Disney corporate playbook, Abu Dhabi has carefully planned the growth and development of the island. The first phase was the financial district, a shopping mall, a luxury hotel and the world-class Cleveland Clinic hospital. Another shopping center, featuring department stores Macy’s and Bloomingdales, is expected to open later this year. Al Maryah is poised to become one of the world’s most luxurious neighborhoods.

The financial center, known as ADGM, is housed in glistening new towers and a low-lying central building shaped like an upside-down trapezoid. Like its Dubai counterpart, it has an independent financial services regulator and a court system built on English law.

The ADGM’s legal approach is more progressive than the DIFC’s by adopting specified English laws and related jurisprudence. It also reaches out to its community or to experienced advisers on new considerations or initiatives before launching white papers for public comment. This allows any new laws or regulations to be carefully considered, which is unique in the market.

The ADGM has also reduced the need for laborious notarization and legalization processes, which add time and significant cost for any new company entering the market or expanding. It is the only jurisdiction in the Middle East offering this.

While ADGM permits a range of financial services, from banking to insurance to wealth management, it has also launched several firsts in the region, including a private real estate investment trust regime, a new venture capital framework for fund managers and an aviation financing scheme.

The existence and interaction of federal laws, individual emirate laws and free zone laws can be quite complex and confusing, making it essential to seek out a local expert. For example, a foreigner wishing to conduct business outside the free zone must have a local partner owning 51 percent of the business. Other challenges include a small domestic market, risks of speculative bubbles, geopolitical instability in the Middle East and dependence on oil.

Foreign investment in Abu Dhabi and Dubai allowed the UAE to weather the slump in oil prices that began in 2014. UAE saw the inflows of foreign direct investment increase by nearly 8 percent last year, to $10.3 billion, according to the United Nations Conference on Trade and Development. In sharp contrast, inflows of foreign direct investment to the region, excluding Israel, fell by 16 percent in 2017.

The UAE’s favorable business climate, led by the ADGM, had a lot to do with that.

 

About Stephanie Williams:

Stephanie, who joined TMF Group in 2013, has been working in the Middle East for 10 years. She’s a specialist in business structuring and corporate governance, as well corporate secretarial services and communication. She has helped set up businesses in the UAE and has broad knowledge of the local complexities.