GCC Customs Union Poses Threat To Dubai Re-Export Sector

by Lorys Charalambous, Tax-News.com, Cyprus

06 January 2003

Concerns have been expressed in Dubai over the implications of the recently introduced GCC customs union on the jurisdiction's re-export business.

Reporting on the union, introduced in the New Year, the Gulf News Online service explained that although Dubai's low customs tariffs played a major role in the emirate's growth, Dubai possesses many other adavantages, including an high-class and efficient infrastructure, which will allow it to retain its position as regional hub. The report, published on Friday, went on to add that:

'Although the tariff union officially took effect only in the New Year, member states with higher rates had already brought down their customs duties to the levels agreed under the unification plan and, therefore, Dubai's trading business is not expecting any visible impact immediately. In fact, they expect the initial phase to show a boom in business, as the unified system offers a much larger market for them to tap.'

However, Gulf News went on to explain that there are some concerns as to practical issues related to the collection of duties and the division of customs revenue among GCC member states. Although the initial plan was to share the revenue on the basis of a formula determined by long-term trade patterns within the region, under the system currently being proposed, customs revenue would be shared out according to the final destination of the imports.

As the news service pointed out:

'This is an issue that is particularly relevant to Dubai as the emirate's hub status is also linked to its advantages as a logistics centre. Dubai traders often pool their requirements to convenient order sizes while bringing in the goods and then redistribute these according to specific market needs, all of which need not be within the GCC.'

The report concluded: 'There is a need for clarity on cases where only a part of the merchandise is re-exported to Gulf countries while the rest may be meant for destinations outside the region. There is a divergence of views about the long-term implications of rate unification on Dubai's re-export business.'

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