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Country Commercial Guides FY 1999: United Arab Emirates

CHAPTER VI.  TRADE REGULATIONS AND STANDARDS

Trade Barriers, Including Tariffs, Non-Tariff Barriers, and
Import Taxes

The UAE maintains a free exchange and liberal trade system. The
Gulf Cooperation Council (GCC), grouping the UAE, Saudi Arabia,
Kuwait, Bahrain, Qatar, and Oman has been discussing a common
external tariff for some years.  In a step toward establishing a
common external tariff, the UAE in 1994 took the decision to
raise its import duties from one to four percent.  However, over
75 percent of imports still enter duty free.  GCC talks on
establishing a current external tariff continue.  

Each emirate operates its own customs authority, but tariffs and
general policies are coordinated through a national committee. 
Only firms with the appropriate trade license can engage in
importation.  Documentation requirements follow international
standards and delays in custom clearance have been infrequent. 
The competition for business between the port facilities of the
different emirates has kept user rates to a minimum and put a
premium on services.  There are no duties on exports.  For
religious and security reasons, there are various restrictions on
import of alcohol, tobacco, firearms, and pork products.

The UAE maintains non-tariff barriers to trade and investment, in
the form of restrictive agency/sponsorship/distributorship
requirements, lack of adequate intellectual property rights
protection, and restrictive shelf-life requirements for food
stuffs.

In order to do business in the UAE outside of one of the free
zones (see below), a foreign business must have a UAE national
sponsor, agent, or distributor.  Once chosen, sponsors, agents,
or distributors have exclusive rights.  They cannot be replaced
without their agreement.  Government tendering is not conducted
according to generally accepted international standards. 
Retendering is the norm, often as many as three or four times. 
To bid on federal projects, a supplier or contractor must either
be a UAE national or a company in which at least 51 percent of
the share capital is owned by UAE nationals.  Federal tenders are
required to be accompanied by a bid bond in the form of an
unconditional bank guarantee for five percent of the value of the
bid.

The UAE has no requirement that a portion of any government
tender be subcontracted to local firms.  There is a ten percent
price preference on procurement and tenders.  The UAE requires a
company to be registered in order to be invited to receive
government tender documents.  To be registered, a company must
have 51 percent UAE ownership.  However, these rules do not apply
on major project awards or defense contracts, where there is no
local company able to provide the goods or services required.  

The UAE is on the USTR's Special 301 Watch List because of
deficiencies in the protection of Intellectual Property Rights
(IPR).  In April 1998, the USTR recognized that the U.A.E. had
made significant strides in reducing copyright piracy and limited
progress on trademark protection.  However the report cited
inadequate progress towards the enactment of a new patent law. 
The UAE joined the World Trade Organization (WTO) in 1996.  The
three UAE IPR laws do not conform with GATT TRIPS standards and
will need to conform with WTO standards.  The UAE has recently
joined the Paris Convention for the Protection of Industrial
Property, the first treaty for the protection of IPR to which the
UAE has acceded.  It is also a member of the World Intellectual
Property Organization (WIPO).  While the U.A.E. has made great
strides in combating computer software piracy, the lack of
product patent protection for pharmaceuticals remains a
significant problem.

Agricultural Trade Barriers

There are few trade barriers facing imported food products. 
Shelf life requirements and the need for production and expiry
dates, perhaps pose the greatest problems for U.S. suppliers. 
There are no import duties levied on food products.

Customs Valuation

Maximum duty in the U.A.E. is 4 percent for most goods, with
duties of 100 percent levied on alcohol and 70 percent on tobacco
products. Many essential items, including foodstuffs and
pharmaceuticals, are allowed duty free status.  The duty on
tobacco will increase to 100% in 2000. 

Import Licenses
All imported beef and poultry products require a health
certificate from the country of origin and a halal slaughter
certificate issued by an approved Islamic center in the country
of origin.

Export Controls

All goods exported or reexported from the U.A.E. must have proper
documentation issued by the Ministry of Economy and Commerce and
the various Chambers of Commerce in the respective individual
emirates. U.S. firms seeking to export or reexport goods from the
U.A.E. should consult the appropriate legal authorities for
specific guidelines.

Import/Export Documentation

Standard trade documentation, including certificates of origin,
bills of lading and various government/embassy attestations must
be presented for all imports and exports.  A Guide to Doing
Business in the U.A.E. which details documentation requirements
is available from all U.S. Department of Commerce District
Offices, the Department in Washington, and the U.S. Commercial
Offices in Abu Dhabi and Dubai. 

Temporary Entry

Goods may be imported duty free and stored in any of several free
zones in the U.A.E..  Goods which enter the U.A.E. from these
free zones must pay the (minimal) duty noted previously.  There
is no provision for duty free entry of parts or components which
are intended for manufacture of products which are subsequently
exported. In practice, as duties are already so low, this has not
been a major impediment to manufacturing industries in the U.A.E.

Labeling

Food labels must contain product and brand names, production and
expiry dates, country of origin, name of the manufacturer, net
weight in metric units, and a list of ingredients and additives
in descending order of proportion.  All fats and oils used as
ingredients must be specifically identified on the label.  Arabic
labeling is now also required.


Prohibited Imports

Irradiated food products are prohibited.  Imports of alcohol and
pork products are strictly regulated.

Standards

The U.A.E. currently has no central standards authority. 
However, both the national and emirate governments, as well as
professional associations, are reviewing standards requirements. 
This is particularly true for the construction industry. 
Currently, government agencies and private firms stipulate the
standards required on a project-by-project basis.  This allows
for a wide range of acceptable product performance, makes health
and safety monitoring difficult, and permits the use of low
quality products and manipulation of tender specifications.  A
U.A.E. company first qualified for ISO 9000 certification in
1993.  Since then, more have received the designation, and the EU
is funding a standards center in the U.A.E. to implement ISO 9000
certification. 

Free Trade Zones

There are at present ten free zones in the U.A.E., at varying
stages of development.  Since U.A.E. tariffs are low and are not
levied against most imports, the chief attraction of the free
zones is the waiver of the requirement for majority local
ownership.  In the free zones, foreigners may own up to 100
percent of the equity in an enterprise.  Most free zones also
provide 100% import and export tax exemption, 100% exemption from
commercial levies, 100% repatriation of capital and profits,
multi year leases, easy access to sea and airports, pre-built
buildings for lease, energy connections, and assistance in labor
recruitment.  The largest and most successful of the free zones
is the Jebel Ali Free Zone (JAFZ) in Dubai.  In addition, for a
nominal fee the zone authorities provide significant support
services, such as sponsorship, worker housing, dining facilities,
recruitment, and security.

Within the JAFZ, three types of licenses are issued.  The
licenses are valid while a company holds a current lease from the
free zone authority and are renewable annually as long as the
lease is in force.  They are the general license, the special
license, and the national industrial license.  The special
license is issued to companies incorporated, or otherwise legally
established, within the free zone or outside the U.A.E.  In such
cases, no other license is required, and the ownership of the
company may be 100 percent foreign.  The license is issued for
any activity permitted by the free zone authority, including
manufacturing.  A company with a special license can operate only
in the Jebel Ali Free Zone or outside the United Arab Emirates,
but business can be undertaken and sales made in the U.A.E.
through or to a company holding a valid Dubai Economic Department
license.  However, a company with a special license can, itself,
purchase goods or services from within the U.A.E.


Membership in Free Trade Arrangements

The UAE is a member of the Gulf Cooperation Council (GCC).  In
1981, the GCC issued the Unified Economic Agreement, a plan for
complete economic integration among the six member states (Saudi
Arabia, Kuwait, the UAE, Bahrain, Qatar, and Oman).  In practice,
the provisions of this agreement have not all been implemented.  

Under the agreement, all agricultural, animal, industrial, and
natural resource products from member states are exempt from
duties and other charges when traded among member states.  To
qualify as a GCC national product, the value added in a GCC
member state must not be less than 40 percent of the final value,
and produced in a factory with at least 51 percent local
ownership, unless 100 percent is owned by GCC nationals, and
licensed by the respective Ministry of Finance and Industry.  All
intra-GCC shipments claiming this exemption must be accompanied
by a duly authenticated certificate of origin.

The GCC has been conducting talks with the European Community on
the subject of establishing a free trade agreement between the
respective blocks for a number of years, but so far with little
progress.  The GCC also conducts economic dialogues with Japan
and the U.S.

 
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