United Arab Emirates: Selling

Customs Procedures

Import Procedures

The importer submits the Import Declaration application for UAE Customs clearance online through dubaitrade.ae. In case of restricted goods or duty-exempted cargo, the importer arranges for the necessary permits from the designated permit issuing authority before filling out the Customs Import Declaration.
For import of goods from outside the country into UAE the following original documents are required:

• Commercial invoice from the exporter addressed to a licensed importer in the country detailing total quantity, goods description and total value for each item (in triplicate);
• Certificate of origin approved by the Chamber of Commerce in the country of origin detailing the origin of goods; 
• Detailed packing list as per weight, method of packing and HS code for each individual article contained in the shipment;
• Import permit from the competent agencies in the event of importing restricted goods or duty- exempted goods;
• Original bill of loading;
• A form or letter of exemption from customs duties in cases where exemption requirements are fulfilled, including a Local Purchase Order (LPO).

For more information on the UAE Customs, please visit the website of the Federal Customs Authority.

Specific Import Procedures

Certain goods such as animals, medicines and weapons can be imported/exported only after receiving necessary permits from the competent authorities.
All imported meats - beef and poultry products - require a health certificate issued by the country of export and a "halal" slaughter certificate issued by an approved Islamic centre in that country. Some products require a sanitary or phytosanitary certificate or, for processed products, an export certificate confirming fitness for human consumption; and others a non-irradiation certificate for certain products (optional for European products).

Importing Samples

The United Arab Emirates joined the ATA Carnet system on 1 April 2011, accepting goods for fairs and exhibitions. The United Arab Emirates typically limit the duration of carnets to six months, with the possibility of extension.  UAE customs may charge a regularisation fee* (up to 5,000 AED) under specific conditions.
For more information, click here.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

Shipments valued under AED 1000 enter free from duty and tax. Gifts carried by passengers travelling to UAE and whose value do not exceed AED 3000 are also exempt from customs duties.

Average Customs Duty (Excluding Agricultural Products)

With the adoption of a common tariff for the GCC countries, customs duties have been fixed to 5% of the CIF value of most products. However, alcoholic products are subject to 50% duty and tobacco products are assessed a 100% customs duty.
For more information, please click here.

Products Having a Higher Customs Tariff

- 50% of the CIF value of the product for alcohol imports
- 100% of the CIF value of the product for tobacco imports.

Preferential Rates

Effective January 1, 2003, the UAE acceded to the GCC Customs Union, which equalizes the duties paid upon entry of an item to any member state, regardless of the country of destination within the GCC and establish a free trade area between member states.

Customs Classification

The system has been harmonised since the setting-up of the free trade area between the GCC countries in 2003.

Method of Calculation of Duties

Customs duties are calculated based on the CIF value of the product.

Method of Payment of Customs Duties

Duties can be settled in different ways. Once paid, duties cannot be returned (except in case of an error on behalf of UAE authorities).

Import Taxes (Excluding Consumer Taxes)

There are none.

Labeling and Packaging Rules

Packaging

There are no special rules. The labels should be difficult to remove or to falsify and the information which they contain should be clear and easy to read.

Languages Permitted on Packaging and Labeling

An Arabic translation should appear on the packing in addition to other languages used. An Arabic sticker is admissible if it does not hide the mandatory wordings.

Unit of Measurement

Metric system is used.

Mark of Origin "Made In"

Origin marking is obligatory. The country of origin of the product and the name and address of the manufacturer or packer must be indicated.

Labeling Requirements

The label should include:

- a complete list of ingredients in decreasing order of their proportion with the mention "ingredients after preparation" for dehydrated products
- name and brand of the product
- all the food additives used
- water content should appear on the label unless water enters the composition of one of the ingredients.
- the transport and storage conditions should appear on appear on frozen products
- name and address of the manufacturer and packer
- country of origin
- method of preparation for consumption if required
- if the product contains animal fat or gelatine, it should be specified as to which animal they originate from
- manufacturing and expiry dates: day/month/year for a preservation period more than 3 months, month and year for a preservation period less than 3 months.

Specific Regulations

The specification 'halal' (slaughtered according to the Muslim ritual) should be mentioned  for meat products. Alcohol and pork may not enter in the composition of food products. Municipalities have established a list of food additives or colourings authorised in the Emirates.

Distribution Network

E-commerce

Internet access

United Arab Emirates, with its 9.5 million inhabitants, has the 7th largest population size among 14 countries of the Middle East. The country occupies nevertheless the second position in the region in terms of the internet penetration rate,  one of the highest in the world, estimated at around 90% (Internet World Stats). Emirati internet users, both local and expatriate, (8.5 million people) account for 5.8% of total internet user population in the Middle East (4th highest). Internet penetration has reached near maturity and now grows at an average rate of 4% (Hootsuite). UAE has the highest smartphone penetration in the world (81% in 2017) and 82% of the total population are active mobile internet users. Internet use is also extremely frequent with 89% of users reported to access the internet every day (Google Consumer Barometer). The share of mobile in web traffic is the highest (57%) and continues to increase rapidly at the expense of personal computer and tablets (-16% and -13% y-o-y respectively). As far as search engines are concerned, Google dominates the market with a 96.72% share, followed by Bing at 1.48% and Yahoo at 1.42% (Statcounter - 2017).

E-commerce market

Emirati e-commerce has one of the highest growths in recent years, and is the most dynamic market across the MENA region, as well as the e-commerce leader among GCC states. Between 2013 and 2017, online retail sales are believed to have grown from US$ 490 million to US$ 1.6 billion. The total value of the e-commerce market is expected to rise exponentially in 2018, ranging between US$ 8.98 billion and US$ 10 billion according to forecasts. Overall, the market is expected to grow at an average rate of 25% per year by 2020. Growth in the e-commerce market is forecast to be fuelled to a large extent by mobile, as the UAE have the highest smartphone penetration rate in the world (81% in 2017 according to a Newzoo survey). Smartphone usage is reported to be even higher among millennials (over 90% according to a Google survey). The share of mobile use in regular online purchases is already higher than laptops and desk computers (47% as opposed to 39% - Hootsuite). Cross-border shopping is extremely popular in the UAE, with 46% of consumers saying they have purchased from foreign websites in 2017 (PayPal 2018). American websites were by far the most visited e-commerce platforms, followed by Indian and Chinese websites. Souq.com, Cobone.com and Sukar.com are the largest locally-based e-commerce websites. The acquisition of Souq.com by Amazon, and the launch of Noon.com by Emaar Group in 2017 are believed to further invigorate the Emirati e-commerce market.

Social media

United Arab Emirates has the highest social media penetration rate in the world (99% - Hootsuite 2017). Emirati users are also among the most active on social media and spend on average 3 hours and 24 minutes per day on social media platforms, and 7 hours and 55 minutes online. Facebook and YouTube are the most popular social media networks in the UAE, with about 8.7 million users each. These two are followed by WhatsApp (7.2 million users) and Instagram (5.7 million). According to the UAE Social Media Survey and MidEast Media Survey, the ranking is different when considering only local Emiratis. In that case, WhatsApp is the most popular network, used by 96% of Emiratis (1.7 million people), followed by Instagram (78% or 1.4 million), Facebook (70% or 1.2 million) and Snapchat (62% or 1.1 million). Social media is mainly used for entertainment purposes (nearly 70% of users), while only half of users access social media to get and share news. Twitter is the top social media platform for news, while YouTube is the main platform for entertainment, according to MidEast Media Survey.

Direct Selling

Evolution of the Sector

According to the World Federation of Direct Selling Associations, 2016 direct retail sales in the UAE reached USD 11 million, a 15% increase compared to 2015. The country also has 552,321 independent representatives in the industry. Euromonitor International claims direct selling continues to grow but is a marginal part of overall retail sales. This said, increased cost of living derived from a new VAT implementation is expected to attract stay-at-home mothers and part-time representatives into direct sales.

Opportunities exist for direct selling companies to introduce organic health and beauty products focused on weight loss and skin care. Oasis Water was the largest direct selling company in 2017. Forever Living has also left a dent in the industry with its natural products and detox programmes. Direct selling competition is still low, creating an ideal scenario for companies for new entrants to succeed.

The Direct Selling Association (DSA) collaborates with the Dubai Chamber of Commerce and Industries to strengthen and regulate the industry; a secondary objective is attracting new companies to the country. In this sense, the Middle East Direct Selling Forum in 2017 promoted direct selling in the Middle East and North Africa. Companies currently enrolled the DSA include DXN, Forever Living, Edmark, PMI, Unicity, Jeunesse, LEO, Juice Plus, Thermomix, Phygicart, and Evergreen.

Commercial Intermediaries

Trading Companies

 

• Type of Organization

This solution is more widespread than direct selling. There is no legal distinction between a commercial agent and a distributor. It is important to have a local intermediary because according to local culture, face to face contact is important for trade. Long distance trading is uncommon.

• Main Actors

Al Ghurair Retail, Al Jaber International, Al Khaja Group, Al Tayer Group.

Wholesalers

 

• Type of Organization

This type of company is increasingly important, especially in Dubai. In the past, bulk trade was limited to the food sector. Today, it is developing also in the new technologies sector (mobile telephones, computers, etc.). Wholesalers also often function as importers and distributors.

• Main Actors

The Lifco and LuLu groups dominate the food distribution sector. Al Futtaim electronics dominates the wholesale of electronic equipment. Aptec online, Axiom Telecom - which is part of the Bannai group - and CADD dominate the bulk sale of computers and mobile phones.

Useful Resources

Directory of UAE companies

Using a Commercial Agent

The Advantages

Hiring a commercial agent is ideal when creating a business in the UAE. 

Where to Be Vigilant

It is difficult to terminate a commercial contract. In fact, it is generally impossible for the principal to terminate a commercial contract unilaterally once it has been registered with the Ministry of Economy, even if the contract has a limited duration. Further, only UAE nationals or companies fully owned by UAE nationals can register as local commercial agents with the Ministry of Economy.

Elements of Motivation

Commercial agents are interested in receiving an attractive commission on transactions. 

The Average Amount of Commission

The commercial agent is entitled to receiving a commission on all the transactions executed in the country, including the ones where the agent may not have played an active role. Some companies like the Gulf Commercial Agency are well-known in this field, but most of the market is shared between small enterprises.

Breach of Contract

Commercial agents are legally speaking independent traders and can thus delegate a part or all of their activities to a sub-agent. One must consequently be very careful while drawing up a contract to avoid being represented by someone who has not been chosen. Regarding the contract, it is recommended to specify a sufficiently long probation period, and to cooperate with a well-established local lawyer in preparing the contract. The contract should be registered with the Ministry of Economy by the agent in order to avoid that any other unauthorised agent sells the company's products. The UAE legal system distinguishes two forms of commercial agents - the registered and the unregistered commercial agent. In some instances, agents have been appointed on a project basis, with the relationship restricted to the specified project, terminating automatically upon reward or completion.

Setting Up a Commercial Unit

The Advantages

The creation of a commercial unit in the country is attractive as it enables to be in direct contact with consumers and develop a better understanding for their taste. This brings companies closer to the market and allows them to adapt their products better.

Where to Be Vigilant

The fees for establishment and working are very high.

Different Possible Forms of Settlement

 

• A Representative Office

The representative office serves as a link between the foreign company and its local partners. It also facilitates the promotion of the company's products and services. It is not authorised to receive receipts and carry out commercial activities. This is a clerical organisation. The creation of a representative office necessitates the nomination of an Emirati service agent (called sponsor in the past). The agent can be remunerated in two ways, either through receiving a percentage share on the sales turnover, or through a fixed sum, which averages between AED 25,000 and 150,000. It is recommended to opt for the fixed-sum remuneration, and the service agent himself is not directly involved in the commercial activity and should hence not have his remuneration tied to it. Since 2005, foreign companies have to provide a bank guarantee of AED 50,000 in order to obtain or renew the office license.

• A Branch Office

The creation of a branch requires a local service agent. Service agents are usually registered as commercial agents. It should be specified clearly in the contract that the service agent is not designated as the commercial agent of the company. Branch offices do not require UAE national ownership, but do necessitate the involvement of a UAE national as sponsor. Some sectors are excluded from this type of establishment: these are banking activitites, insurance, commercial agencies, and passenger road transport. The creation of a branch also requires the arrangement of a bank guarantee of AED 50,000. Nevertheless, foreign companies are allowed to open a branch in free zones with the possibility of full ownership and repatriation of capital and profits.

• A Company

The establishment of a subsidiary requires a partnership with Emirati nationals (individual persons or legal entities) who will necessarily have a majority stake in capital (at least 51% of the shares). Any attempt to by-pass this obligation will lead automatic invalidation by local courts of justice. Nevertheless, foreign companies are allowed to open a subsidiary in free zones with the possibility of full ownership and repatriation of capital and profits.

Franchising

Evolution of the Sector

Local and international franchise brands continue to grow exponentially in the U.A.E. across a variety of sectors including food and beverage, fashion retail, and convenience stores.  A combination of factors has spurred this growth, including: an attractive tax-free environment, world-class infrastructure,  improved intellectual property legislation, U.A.E. government efforts to diversify the economy, a growing population with a sizeable proportion of expatriates, changing consumption patterns, increasing penetration of international retail players, increasing income with higher propensity for leisure and consumer spending , an increasing number of business and leisure visitors,  the country's emergence as a popular shopping destination, and Dubai's designation as the host of the Expo 2020 (postponed due Covid-19).
 
Aside from the key provisions that are normally incorporated into franchising agreements, companies should pay particular attention to the period, area specification, third-party transfer rule, dispute resolution mechanisms, and termination mechanisms.  Companies must be aware of relevant trade barriers, such as the Arab League Boycott of Israel which bans any goods originating from Israel.  In this way, a partner could potentially also request the company to sign a declaration that it has not/will not trade with Israel. However Section 999 of the " Internal Revenue Code " makes it unlawful for foreign companies to comply with such agreements.
 
In order for a contract to qualify for registration with the Ministry there are a number of criteria which must be met, the main ones being: the franchisee must be a UAE national or an entity that is wholly owned by UAE nationals; the franchise agreement must grant exclusivity over all or a part of the UAE; and the franchise agreement must be notarized. It is recommended to register trademarks with the Ministry of Economy in advance of entering into the UAE market.

For many years the franchise market in the United Arab Emirates has been well represented by the main western retail and fast food brands. In fashion retailing, these include Zara, Mango, Bershka, H&M, Promod, Nike, Calvin Klein, Claire's, MAC, Pandora and Monsoon and in fast food, iconic brands such as McDonald's, Starbucks and Yum! brands dominate. Given the long-term presence and relative saturation of these brands in the UAE market, UAE franchisors are looking for development opportunities in a number of new foreign concepts such as online commerce, product customisation, provision of healthy and environmentally friendly services and home delivery and consulting.

Some Big Franchises

Pizza Hut, pizzeria
H&M, clothing
Starbucks, coffee
Zara, clothing

Finding Assistance

Export Trading Companies

Al Nabeel Perfume Trading
The Halal Trade & Marketing Center (HTMC)

Recommended Resource

Dubaï Trade Portal