Import and Export Business in the UAE
The recent trends of globalization and international cooperation have provided the conditions for almost unrestricted movement of goods and services between countries. As a result, the companies engaged in the import and export business have seen an increase in their scale of operations, as well as the number of available markets. However, the lack of knowledge of rules and regulations related to these processes, especially in the countries the legal environment of which is quite different from that of the Western states, including the UAE, may result in significant financial losses and cessation of one’s business activity in the region. Therefore, to prevent such scenarios from occurring, it is necessary to examine the peculiarities of the export and import business in the UAE, specifically in terms of its legal environment. This problem will be reviewed in the three sections of the paper, with the first one focusing on the relevant trade laws of the country, the second one analyzing its free trade zones, and the third one discussing peculiarities of import and export business in the UAE.
The UAE Trade Laws
In the UAE, the import and export trade is regulated by several laws, which ensure the safety of business operations. The first of those legislations is the Federal Law on Commercial Companies of 2015, which regulates the processes related to the establishment and operation of commercial enterprises that are engaged in various types of activities, including the issuing of trade licenses. It also defines the groups of enterprises that are subject to governmental regulation. These companies include various financial institutions, industrial projects, hospitals, companies engaged in the field of air transportation, publishing and printing, advertising, photography, education and training, agriculture, customs clearance, freight forwarding, and cargo handling services, providers of telecommunications equipment, insurance companies, legal advisors, and engineering enterprises (Federal Law No. 2 on Commercial Companies, 2015). At the same time, the provisions of this law may not affect the companies that operate in the free trade zones of the country, provided that the regulations of the latter cover the topic of interest (Federal Law No.2 on Commercial Companies, 2015). Therefore, the entrepreneur operating under such conditions is required to possess knowledge of both the Federal Law on Commercial Companies of 2015 and the local legislation to operate efficiently and avoid confrontation with the authorities.
Next, it is possible to identify the Electronic Transactions Law of 2016, which regulates the cashless payments between the enterprises that are registered in the country and their foreign partners. It should be noted that, in general, the authorities of the UAE do not restrict the movement of capital within the country, but the risks associated with the use of electronic transactions still need to be addressed. In particular, the reviewed law requires all the records on cashless payments to be open, for example, they are to be published or displayed in their original format (Dubai International Financial Center, 2016). Under such conditions, the monitoring agencies are capable of identifying the illegal deals almost immediately, which reduces the risks for both sides of the deal. At the same time, this means that the entrepreneurs must maintain their electronic records in case an inquiry is made by the authorities.
Finally, the Common Customs Law of the Gulf Cooperation Council (GCC) member-states of 2008 controls the movement of commodities into the country and identifies the products, the imports of which are prohibited, as well as the ones that are subject to the particular limitations, quotas, and conditions. In the first case, the entrepreneurs are forbidden to supply such goods as electronic cigarettes, narcotics, used tires, fishing nets made of nylon and consisting of three or more layers, and any products from Israel (Dubai Customs, 2015). Thus, it is possible to state that the primary goal of the law is the protection of the well-being of the country, with it also being a political tool that reflects the current policy of the UAE governmental agencies, specifically the Israeli Boycott Office. In the second case, the range of products includes living animals and animal products, fresh fish, and alcoholic beverages (Dubai Customs, 2015). These restrictions arise from the need to protect the environment of the UAE, which may be affected by the goods described above, as well as the religious provisions. Moreover, according to this law, all the products passing the customs service must be examined. In most cases, the examination requires the presence of the owner of the commodities. However, in the case the customs office has a suspicion related to the presence of illegal goods, the inspection may be carried out immediately, for example, before the notification of the owner of the products or its representatives (The Cooperation Council for the Arab States of the Gulf, Secretariat General, 2008). In other words, illegal activity, such as smuggling or trade-in restricted and prohibited goods, is likely to be difficult to conduct for the entrepreneurs doing business in the UAE.
Free-Zone Structures of the UAE
The organizations that are involved in the import and export trade in the UAE can be a part of the associations that guide in terms of compliance with the laws and regulations that were described above. In this regard, the free trade zones of the UAE tend to be prominent due to several reasons. First of all, the UAE’s free trade zones occupy an important place in the economy of the country, since their proper implementation is an efficient way to develop and industrialize the latter. They also attract foreign direct investment, particularly in the manufacturing sector, create jobs, and generate and diversify the exports. Such advantages are possible because the free trade zones offer certain benefits to their members, including duty-free imports and simplified customs procedures for businesses that are located on their territory (Pauceanu, 2016).
In the case of the UAE, the most popular free trade zones are located in Dubai. They include Jebel Ali Free Zone, Dubai Silicon Oasis Free Zone, and many others. Each of the zones focuses on one or several core activities, the acquaintance with which will help the entrepreneur to determine the best place for the establishment of business (Pauceanu, 2016). For example, Jebel Ali Free Zone is near one of the largest ports in the world, which receives 15 million containers and serves more than 170 shipping lines on an annual basis. To ensure uninterrupted transportation, it also offers a common customs corridor that connects the port of Jebel Ali and Al Maktoum Airport (International Business Publications, 2016). It also offers various types of deals to do business in the UAE. In particular, the entrepreneurs can rent land, warehouses, exhibition halls, offices, shops, and facilities in the park of high technologies, and accommodations for the workers. As a result, nowadays, this zone has more than 7,000 companies registered, and its business model is well-established (International Business Publications, 2016). The other free trade zone, Dubai Silicon Oasis, has positioned itself as a high-tech park. It aims to promote the high technologies to create an analog of the Silicon Valley in the UAE. It covers an area of 7.2 million square meters and features a modern infrastructure, including the three-tier data center that is available to the companies (International Business Publications, 2016). As a result, it is most suitable for the organizations engaged in the field of high technologies, technical professionals, and engineers.
It is necessary to note that each of the free trade zones has its set of rules and regulations, which define the requirements presented to the entrepreneurs. For example, for Jebel Ali Free Zone, there are no limitations related to the minimum size of the company’s authorized capital, with is determined by the founders. On the other hand, an organization established in Dubai Silicon Oasis must have the minimum authorized capital of 50,000 dirhams (around 13,500 dollars), which is to be formed in a bank account (International Business Publications, 2016). Once again, these facts signify the importance of the knowledge of the legal environment of the UAE for entrepreneurs. At the same time, all free trade zones do not require a partnership with the local businessmen for the establishment of the company, for example, the share of its original owner may reach 100% instead of 49%, and devoid of the organization of tax burden (International Business Publications, 2016). As a result, these areas of the UAE can be considered as the associations that guide the entrepreneurs that deal with export and import operations in the country. The numerous benefits they provide to their members allow the latter to get accustomed to the local business and legal environment before establishing an organization based on collaboration with the UAE partners.
Import and Export Business in the UAE
As it was mentioned before, the UAE houses numerous free trade zones and has one of the largest seaports in the world, the port of Jebel Ali. It is also located in the heart of the Middle East region, at the crossroads of major trade routes between continents. The government attaches great importance to the improvement of air and maritime transport and invests heavily in the development of its infrastructure, with the UAE being among the leaders in the application of advanced technologies (Pauceanu, 2016). The management system in the import and export business is based on the Western example with the involvement of an increasing number of qualified employees from Europe and the United States of America. Moreover, the lack of bureaucracy also stimulates commercial activity, with paperwork being performed carefully, precisely, and in an incredibly short amount of time. The financial system of the country is also quite attractive and efficient, with the national currency being both convertible and stable. Moreover, the representatives of the world’s leading banks and local financial institutions provide all types of necessary services. In addition, the UAE imposes no restrictions on the movement of capital, import and export profits, and currency exchange (Pauceanu, 2016). All these factors attract traders and suppliers engaged in the fields of trade from all over the world.
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Naturally, the presence of numerous foreign entrepreneurs, including those engaged in the import and export business, dictates the need for the establishment of monitoring and control over their operations. As a result, this field of activity is overseen by several authorities, with the Ministry of Economy and its Department of Legal Affairs being the most significant of them. This agency enacts the laws that regulate that trade in the country, including the ones reviewed above, and defines the general direction of the economic development of the UAE (International Business Publications, 2016). In other words, all the organizations engaged in the fields of foreign trade are direct dependence on its decisions and directives. For example, with the recent boycott of Israeli products (Dubai Customs, 2015), those specializing in them have to switch to other types of goods and search for new suppliers or, in the case such activities are either impossible or unfeasible, leave the market. Thus, it is necessary for the entrepreneur dealing with the import and export of goods in the UAE to monitor both the economic and political situation in the country to avoid financial losses in the long-term perspective.
Additionally, the numerous authorities of the UAE define the products that cannot be imported, collaborating with the customs service of the country. For example, the Central Bank monitors the cash flows, prohibiting the inflow of counterfeited and fake money, which is also considered a product in the UAE, into the country (Dubai Customs, 2015). On the other hand, the Ministry of Environment and Water restricts the imports of live animals and animal products while the National Information Council oversees the trade in materials, such as print media and works of art, that may contradict the Islamic teachings or decencies, as well as those that may potentially undermine the national security of the UAE (Dubai Customs, 2015). Thus, the import and export business in the country is subject to comprehensive regulation by numerous authorities with this process being carried out based on collaboration. In other words, the failure to comply with the requirements of a particular governmental agency may result in the involvement of the other ones, potentially leading to devastating consequences for the lawbreakers in terms of credibility, profitability, and competitiveness.
In the UAE, the import and export trade is a profitable field of business activity, especially for foreign entrepreneurs due to the presence of numerous free trade zones and the developed transportation infrastructure, such as sea ports and airports. However, it is also heavily regulated by numerous governmental agencies, which is reflected in many limitations imposed on imported goods. For example, even such a mundane commodity as a nylon fishing net may become the reason for penalties for the business and even its shutdown, depriving its owner of the opportunities provided by the state, including the absence of taxes. Moreover, the political and religious factors are also to be taken into account when importing goods to the UAE, as some of the restrictions and limitations are based on religious and ethnic peculiarities.
Therefore, the knowledge of the trade laws of the UAE is important for any entrepreneur doing business in the country. In this regard, the information obtained in the course of research on the topic can be utilized to formulate a plan of action for the establishment of an enterprise that will be successful in the long-term perspective in the UAE. In particular, the first step will be to examine the existing free trade zones and identify the one best suiting for one’s needs. Next, it will be possible to try to conduct business in one of the markets of the UAE while having an advantage in terms of taxation. Finally, provided that the business environment is studied well enough, companies can consolidate their position in the UAE by establishing a partnership with the local entrepreneurs and potentially optimizing the costs. Additionally, the discovered information can be applied to almost any other country, meaning that the person owning it will understand the importance of the trade laws and the effect they may have on the commercial enterprise.
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