Beyond Borders: The UAE's Dynamic Approach to Free Trade Agreements and Export Growth
Transport & Insurance Focus
By doing so, FTAs create more opportunities for exporters to access new markets, increase their competitiveness, and diversify their products and services.
Law Update: Issue 366 - Transport & Insurance
Sakher Al AqailehSenior Counsel,Transport & Insurance
Bassam Al AzzehSenior Associate,Transport & Insurance
Ameen KimAssociate,Transport & Insurance
In the ever-increasing web of international trade, Free Trade Agreements ("FTAs") play a key role in shaping economic relationships between nation states and global movement of products across borders. The FTAs are key instruments to encourage trade and increase exports and imports between countries,. The United Arab Emirates (UAE) has signed and is negotiating with various countries and regions around the world bilateral and multinational FTAs and this has enabled the UAE to become a leading hub for trade in the international community.
The FTAs aim to reduce or remove barriers to trade, such as tariffs, quotas, subsidies, and restrictions, between the member states of an FTA.
By doing so, FTAs create more opportunities for exporters to access new markets, increase their competitiveness, and diversify their products and services. FTAs provides an added value for traded products between the contracted parties as well as preferential treatment. FTAs enables the UAE to increase the exports, enhance competitiveness in foreign markets, and regulate fair competition. On the other side, FTAs entail certain challenges for exporters, such as complying with the rules of origin, obtaining the necessary permissions and certificates, and benefit from what the FTAs offer.
In this article, we will explore some of the main features, benefits, and challenges of the UAE's FTAs, and provide some practical tips for exporters to leverage them effectively.
The UAE, as a member of the Gulf Cooperation Council (GCC), operates within the GCC framework for all of its FTAs. The GCC is a regional political and economic bloc that consists of six Arab states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. The GCC member states signed economic agreement (the GCC-EA) among themselves, so they have a common external tariff which means that products can move freely within the GCC without any customs duties.
The GCC has signed two major FTAs, the first one with Iceland, Liechtenstein, Norway and Switzerland (GCC-EFTA), and the second one with Singapore (GCC- Singapore), so the UAE benefits from those two FTAs.
In addition, the UAE is a member of the Greater Arab Free Trade Area (GAFTA), which is a regional FTA that includes all Arab countries excepts Jubbuti, Mauritania, Somalia, and Union of Comoros. The UAE recently signed bilateral agreements with different several countries.
The UAE's FTAs offer significant opportunities for exporters to expand their horizons, increase their competitiveness, and diversify their products and services. UAE's FTAs allows exporters to benefit from the reduced customs tariff rate if the product has undergone substantial transformation and achieved certain percentage of the local value addition in the FTA partner country. For example, vehicles received preferential treatment and 0% customs duties if the vehicles incorporate at minimum the following percentage of the local value addition:
The GCC-EA, and GAFTA is 40%,
GCC-EFTA is 60%
The GCC-Singapore FTA is 35%, and
The UAE-India FTA is 45%.
The Comprehensive Economic Partnership Agreement between India and the UAE (“UAE-India Agreement”) includes product specific rules of origin. For example, “Jewellery of gold set with precious and semi- precious stones other than diamonds” should achieve only 6% value-added on the basis of FOB value. Both parties also agreed to eliminate customs duties on goods that are re-imported after being temporarily exported for repair or alteration, provided that they are not subject to any operation other than that necessary to restore them to their original condition.
In the UAE, free zone production facilities such may benefit from the UAE's free trade agreements with other countries, such as the European Free Trade Association (EFTA), India or Singapore. However, these free zone facilities need to obtain a Producer Qualification Certificate (Producer QC) and Product Qualification Certificate (the “Product QC”) from the Ministry of Economy (the “MOE”). Factories in free zone areas do not benefit from GAFTA and the GCC-EA because the the MOE does not qualify producers in free zone areas to benefit from these two agreements. Exporters in the UAE, on the other hand, should also obtain the Certificate of Origin (CoO) from the MoE and not from the Chamber of Commerce, so they can benefit from the UAE's free trade agreements.
The UAE's FTAs are a powerful tool for exporters to achieve their trade and investment objectives. However, FTAs also entail some challenges and requirements for exporters, such as complying with the rules of origin, obtaining the necessary permissions, and facing competition from other FTA partners. Exporters need to engage proactively with relevant authorities, ensuring that they meet all regulatory requirements. Staying up to date of the frequently changing compliance landscape is key, as regulatory frameworks frequently evolve, affecting trade dynamics and eligibility criteria.
Al Tamimi & Company's Customs & Logistics team has extensive experience in advising on international trade and customs matters in respect the wider GCC region. In addition, we have rights of audience before the courts across in Bahrain, Egypt, Iraq, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, and UAE, as well as local insights have enabled us to represent clients in complex local and multi-jurisdictional claims, defences, and commercial transactions. For further information on this sector or for any inquiries for assistance, please contact our team.
For further information,please contact Omar N. Omar, Sakher Alaqaileh, Bassam Al Azzeh, or Ameen Kim.
Published in March 2024
