Legislations to the International Trade in Gold and Diamonds within the UAE
Transport & Logistics Focus
Sakher AlaqailehSenior Counsel,Transport & Insurance
Bassam Salah AlAzzehSenior Associate,Intellectual Property
Ameen KimParalegal,Transport & Insurance
Trading gold in the UAE is not only regulated by the UAE Federal Law No. 11 of 2015 on Monitoring Trade in Precious Stones, Precious Metals and their Hallmark (the “UAE Gold Law”) but is also regulated by a number of other laws and regulations. This article will shed light on some of the relevant legislations to the international trade in gold and diamonds within the UAE.
The UAE Gold Law and the UAE standard No. UAE.S. ISO 9202 on Jewellery – Fineness of Precious Metal Alloys, determines the legal fineness of gold with different karat levels assigned to different levels of purity. Gold is classified based on its purity into seven categories, namely 24, 22, 21, 18, 16, 14, and 12 karats. For example, 24-Karat Gold is pure gold, containing 999 parts of gold, while 12-Karat Gold contains only 500 parts of gold.
Article 5 of the UAE Gold Law states that precious metals, whether worked or unworked, and valuable stones cannot be exported unless they are accompanied by a certificate or identification tag as indicated in the provisions of the accompanying Implementing Regulation of this law. Subsequently, any entity that desires to engage in the export of gold or other precious metals need to obtain the required documentations from the relevant authorities. In practice, importers are required to submit a certificate of origin along with the customs declaration document. While it is sufficient for travellers to present purchase receipt for their belongings of golds/precious stones.
The Dubai Customs Policy No. 47/2020 on Customs Procedures to Apply Declaration System imposes restrictions on golds/precious stones that are brought to the country and requests importers, including travellers, to disclose to Customs Authority the golds and precious stones which, in value, exceeds 60,000 dirhams.
The Customs Authorities require importers and exporters of diamonds to present Kimberley Process (“KP”) Certification in order to clear shipments of rough diamond. It is worth to mention that the UAE has been a participant in the Kimberley Process Certification Scheme since 2003, and KP certificate is required to control conflict sourced diamonds that are used by rebel movements or their allies to finance terrorists or conflicts aimed at undermining legitimate governments.
In practice, importers are required to submit a certificate of origin along with the customs declaration document.
Traders can use any shipping company to transport gold and diamond from/to the UAE, however, shipping companies, from a practical point of view, request a certificate of insurance equivalent to the value of the gold and diamond in transit.
Furthermore suppliers/importers need to consider Tax and in this case two types of taxes: the Customs Duties and the Value-Added Tax. Gold bars, coins, and powder as well as rough diamond are exempted from Customs Duties while other worked or semi-worked gold/diamond jewellery including pearls are subject of 5% customs duties. Suppliers/importers should be minded of the 5% value-added tax on gold, diamond and precious stones while investment precious metals such as 24-Karat Gold shall be zero-rated on value added tax. Article (36) of the Executive Regulation of the UAE Gold Law states:
(The phrase “investment precious metals” means gold, silver and platinum that meet the following standards:
a. The metal is of a purity of 99 percent or more.
b. The metal is in a form tradeable in global bullion markets.)
In its efforts to enhance the international trade of gold, the UAE Ministry of Economy (the “MoE”) in August 2022, established due diligence regulations to ensure responsible sourcing of gold and thus prevent contributing to conflict, human rights abuses, or other such negative impacts (the “Due Diligence Regulations”). To successfully navigate the gold trade regulations in the UAE, businesses must obtain the necessary licenses, adhere to the anti-money laundering laws, and avoid engagement in prohibited goods and services.
The Due Diligence Regulations presents a comprehensive framework for ensuring compliance with the MoE. It details Review Protocol and Minimum Reporting Requirements to guide the Regulated Entities (gold market participants) and Reviewers (independent third-party auditors) in conducting Reviews and preparing the required reports.
a. Comprehensive Management Report: Prepared by the Reviewer, this report assesses the Regulated Entity's compliance with MoE Due Diligence Regulations for Responsible Sourcing of Gold. It covers the below five steps, which aim to ensure that gold is sourced responsibly and ethically, without contributing to conflict, human rights abuses, or other negative impacts:
Establish strong company management systems.
Identify and assess risks in the supply chain.
Design and implement a strategy to respond to identified risks.
Carry out independent third-party audits of supply chain due diligence.
Report annually on supply chain due diligence
b. Regulated Entity's Compliance Report: Prepared by the Regulated Entity, this report includes an overview of the findings from the Comprehensive Management Report. It discloses the overall and individual ratings for each Step of the MoE Due Diligence Regulations, showcasing the Regulated Entity's commitment to responsible sourcing practices.
c. Reviewer's Assurance Report: Prepared by the Reviewer, this report provides assurance of the findings in the Regulated Entity's Compliance Report. It serves as the basis for MoE's determination on the types of annual review, ensuring that the Regulated Entity is held accountable for its sourcing practices.
d. Mandatory Follow-Up Review: Required for entities rated as 'Not compliant with MoE Due Diligence Regulations for Responsible Sourcing of Gold - High Risk Deviations,' this review assesses the Regulated Entity's corrective action plan. It reports the outcomes, ensuring that the entity has taken adequate steps to address the identified high-risk deviations.
e. Breach of Review Protocol: Zero-tolerance breaches include inadequate access to locations, unethical methods to influence the Review, misrepresentation or falsification of documentation, and dealing with suppliers associated with conflict gold or other severe abuses. Reviewers must immediately and confidentially report any breaches to MoE, which will determine appropriate action.
Rule 1: The Review Report must detail the adequacy of the Policy and its implementation, considering Step 1, and the adequacy and implementation of KYC (Know Your Customer) requirements, considering Step 2
Rule 2: The Review Report must detail the number of transactions audited, the percentage of audited transactions compared to the total, the number of customer onboarding files reviewed, the total volume of Mined Gold or Recycled Gold in relation to transactions, any cash transactions and unrelated third-party payments, and the adequacy and implementation of track and trace mechanisms.
The report must also address geographical considerations, gold sourced from different locations, and transactions related to sanctioned or embargoed countries, entities, or individuals. It should also assess the alignment of the risk assessment methodology with Rule 2 above and any deviations from those requirements.
In conclusion, international trade of gold and precious stones in the UAE is regulated by several laws and regulations, including the UAE Gold Law, Customs regulations, Tax regulations, the UAE Standard on Jewellery. The UAE requires certification or identification tags for the export of precious metals and valuable stones, and importers must comply with customs procedures and disclose gold and precious stones exceeding a certain value. For rough diamond, the Kimberley Process Certification is mandatory for importers and exporters to ensure the control of conflict diamonds. Similarly, for gold, the UAE MoE has implemented its Due Diligence Regulations to promote responsible sourcing of gold and prevent negative impacts. Overall, adherence to these overarching regulations is essential for supply chain and export businesses engaging in the gold, precious stones and metals trade in the UAE to ensure legal compliance and responsible practices.
For further information,please contact Sakher Alaqaileh, Bassam Salah AlAzzeh or Ameen Kim
Published in August 2023
