Located in the tropical region, Indonesia an archipelagic country is blessed with immense natural sources. The fact that Indonesia has many volcanoes make the country’s land fertile enough for various plants to grow. No wonder, Indonesia is rich in agricultural commodities as well as minerals. In 2020 Indonesia’s top export product was palm oil valued at US$20.72 billion, followed by coal at $17.27 billion. Other notable export products are iron and steel ($10.85 billion), electronics ($9.23 billion), jewellery ($8.22 billion), automotive and auto parts ($6.6 billion) and rubber products ($5.62 billion). Meanwhile, Indonesia’s top five export destinations are China ($31.8 billion), the United States ($18.6 billion), Japan ($13.7 billion), Singapore ($10.7) and India ($10.4 billion). With yearly product exports of $197 billion, Indonesia is currently ranked the 28th largest export economy in the world.
Depending on the destination, the customs zone in the UAE can be classified into two zones namely the General Customs Zone and the Free Trade Zone. There are several distinguishing factors for goods entering one of these zones. In general, goods destined for the General Customs Zone are subject to obligations under the GCC Common Customs Law. Meanwhile, goods destined for the Free Trade Zone are exempted from import duty. There are about thirty-seven Free Trade Zones scattered in this country. For goods destined directly to the general customs zone in the UAE or to the Free Trade Zone destined for sale in the UAE market and / or goods re-exported to the GCC countries, import duties are subject to import duties according to the GCC Common Customs Law.
Based on this, the delivery of goods is possible from one member country to another GCC member country without being subject to import duties again when the goods arrive at the customs territory of another member country. However, the Export Statistics Declaration received by the GCC member country where the goods are in transit, must be included and must be legalized by the customs at the place of transit with a “Makasa Stamp” (set-off mechanism) when the goods enter the customs area of other GCC members who are the final destination of the item. This is done to avoid paying import duties again when the goods arrive at the country of final destination. An “Import to Local from GCC” declaration document is required for this type of shipment.
Goods imported into the Free Trade Zone are exempt from the obligation of import duty. In addition, re-exports from the UAE Free Trade Zone to third market destinations outside the GCC customs zone are also exempt from any obligations. However, a deposit or guarantee from a bank which is equivalent to the amount of the rate applicable to the goods must be pledged as a substitute for import duty. For this procedure, the required declaration document is “Import for Re-Export to Local from ROW”. This document is only required for shipments of goods that have a value higher than AED 20,000 or approximately USD 5,500 with the exception of vehicle-type items.
There are no duty-free provisions regulating the entry of component parts or factory machinery parts. However, because the import duty costs for these types of goods are relatively low, this is not a major obstacle for the manufacturing industry in this country. In general, imports of goods into the UAE for re-export purposes within six months are exempt from import duties. However, the UAE customs requires a deposit or application for a bank guarantee as long as the goods are in the UAE customs area. The deposit or bank guarantee will be returned or issued by the UAE customs authorities after the goods have been re-exported. Any goods that are in the UAE customs area for more than six months will be subject to excise rates as applicable.
There are certain goods which cannot be imported, exported, transit or require permission from the competent authority. Restrictions and prohibitions on goods are determined in accordance with the GCC Customs Tariff Codes. Items that fall into a special category require a permit when filing a Customs Declaration online.
The list of prohibited items that enter the UAE territory, namely:
- Any narcotic substance (hashish, cocaine, heroin, hallucination pills, etc.).
- Goods intended to be imported from boycotted countries.
- Goods from the state of Israel or that bear the Israeli trademark or logo.
- Elephant ivory and rhino horn.
- Gambling tools and machines.
- Three-layer net fishing gear.
- Original carvings, prints, lithographs, sculptures and figurines in any material.
- Used, reconditioned and ornamental tires.
- Radiation-contaminated substances.
- Printed publications, oil paintings, photographs, pictures, cards, books, magazines, stone carvings and mannequins, which are contrary to Islamic teachings or wisdom.
- Other goods, the import of which is prohibited under the customs or other laws of the UAE.
- Counterfeit and duplicate currency.
- Cooked and homemade food.
Permitting Authority for Limited Items
- Ministry of Climate Change and Environment (Live Animals and products of animal origin)
- Ministry of Interior (Explosives, Weapons, Ammunition and parts / accessories thereof)
- Dubai Municipality (Vegetable Products, Fast Food, Chemical Products)
- Dubai Police (Alcoholic beverages)
- Ministry of Economy (Industrial Raw Materials)
- Ministry of Health (Pharmaceutical products and medical / surgical instruments and equipment)
- Emirates Authority for Standardization and Metrology (Tires and Drinking Water)
- National Media Council (Printed Books, Newspapers and similar products, Artworks, Antiques)
- Dubai Multi Commodities Center Authority (DMCC) (Pearls, diamonds and rough diamonds)
- Telecommunications Regulatory Authority (Telecommunication Equipment)
- Federal Authority for Nuclear Regulation (Nuclear reactors and radio transmitters)
- United Arab Emirates Coast Guard Group (Boat, cruise)
The consignee / agent must obtain a shipment list from the shipping agent and submit the original standard trade documents as follows:
- Invoice - Generated by the exporter and addressed to the importer providing details including quantity, description of goods and total value of each item imported.
- Certificate of Origin (SKA / COO) - This document provides information about the country of origin of the goods and has been approved by the Chamber of Commerce in the country of origin.
- Packing List - The packing list must also include weight, packing method, and HS code for each type of item shipped.
- Import Permit - This permit must be obtained from the relevant competent authority if the imported goods fall into the category of limited goods or goods that are exempted from import duty.
- Bill of Entry (Sea Route) or Airway Bill (Air Line) - For food and beverage products, several additional certificates are required
The Gulf Standardization Organization (GSO) establishes a framework for packaging and labeling requirements in the UAE. The GSO technical requirements for food exports state that all food imports shipped to the GCC region must provide information in Arabic, either as part of the package or as an affixed label. In addition, the packaging must also specify:
- Product and brand names
- Identification number / lot number
- Production and expiration date
- Country of origin
- Factory name
- Instructions for storage and use
- Address of the manufacturer
- Net content weight in metric units
- List of ingredients and additives in order of proportions
- All fats and oils used as ingredients
- Product barcode
- Name of food, packer, distributor or importer
Labels must be in Arabic only or Arabic and English. Arabic labels made in the form of stickers are allowed. The production and expiration date must be printed on the original label that was produced. Business actors must also consider cultural norms and values when designing and developing product packaging.
In 2001, the UAE has established the Emirates Authority for Standardization and Metrology (ESMA) as its national standardization body under UAE Law No. 28/2001. ESMA serves to develop and adopt standards prepared by its technical committees at the request of governments, industry and consumers. In general, ESMA standards are developed in accordance with existing international and regional standards (Gulf Cooperation Council / Gulf Standards Organization). However, if there is no international standard that applies to a type of goods, ESMA develops its own standard. The draft standard will then be circulated to relevant bodies for input. There is no central body that coordinates the preparation of technical regulations in the UAE. Technical regulations can be developed or designed by the ESMA in a standard that will later be mandatory or can be drafted directly by the Ministry. All technical regulations are approved by cabinet decrees as legal decisions. ESMA monitors the implementation of technical standards and regulations and runs the Emirates Conformity Assessment Scheme (ECAS). This program determines whether the import of a good has met national or international standards. ESMA also operates the Emirates National Accreditation Scheme (ENAS) accrediting conformity assessment bodies. ESMA is a member of the International Laboratory Accreditation Cooperation (ILAC), International Organization for Standardization (ISO), Codex Alimentarius Commission (Codex), International Electrotechnical Commission (IEC), Arab Industrial Development and Mining Organization (AIDMO) and Standardization Organization for the Gulf Cooperation Council (GSO). ESMA is also an investigative body for Technical Barriers to Trade (TBT) in the UAE which is recognized by the World Trade Organization (WTO). ESMA reports directly to the UAE cabinet. ESMA activities are led by a Director General. Governments (national and emirate level), regulatory bodies, and professional associations also review the requirements of the standards issued by the ESMA. The ESMA also functions as a national accreditation body to accredit testing and calibration laboratories and acts as a certification body. In an effort to promote transparency and input from the industry and stakeholders, ESMA has established technical committees in the fields of food products, construction and building materials, electrical and electronic products, chemical and plastic products, mechanical products, petroleum and lubricating products, metrology, and information technology.
CONFORMITY ASSESSMENT & PRODUCT CERTIFICATION
The ESMA conformity assessment department is responsible for implementing special programs such as marking and certification of conformity and quality of a product, according to internationally approved methods. Certificates of Conformity are issued for products that comply with both national and GSO standards. In the event that these standards are not available, ESMA uses international or foreign standards suitable for the UAE. ESMA applies ECAS as a system that combines conformity assessment and certification of products in local markets. In addition, exporters can choose to obtain certificates of conformity for their exported goods. Currently, ECAS is applied to a number of products. More information about ECAS can be found at http://www.esma.gov.ae/en-us/Services/Pages/ECAS.aspx. Any proposed additions to the regulated product list will be published at least two months prior to implementation, to allow sufficient time for the assessment as well as due diligence of the product. The ECAS procedures and guidelines describe the steps required for compliance, how a certificate of conformity can be obtained, the requirements associated with the declaration, and the registration process. ESMA can provide full details on the scope of products regulated under ECAS and can be contacted for any clarification regarding the regulated product. In addition, ESMA can issue a formal clarification letter to explain whether a product is regulated or not in ECAS. This letter is valid for a period of one year from the date of issue to prove the status of the product and can be changed if there are changes to the regulated product regulations.
Test reports from an accredited or recognized laboratory must be submitted to the ESMA. These reports must be reviewed and the level of compliance with the standards will also be assessed. If there are some important requirements that are not met, the ESMA will inform the applicant of the relevant standards and / or the steps required to fulfill the essential requirements. These steps also include the type of testing or modification of the product according to the differences observed. The ESMA Laboratory oversees and manages a scheme for monitoring laboratory performance that supports all requirements according to ECAS. An approved laboratory is a laboratory that meets one of the following requirements:
- Accredited by a nationally recognized organization - Approved by the Authority based on an evaluation of their ability - Accredited by the National Accreditation Board Another laboratory nominated by the manufacturer
The labeling requirements in the UAE apply primarily to toys, cigarettes and food products. All warning labels on toys must be in Arabic or Arabic and English. Cigarette packs require special health warnings in Arabic. ESMA has released labeling requirements for energy efficiency, specifically for air conditioning equipment. In addition, ESMA implements the Emirates Quality Mark (EQM). EQM is a conformity mark given to products that comply with UAE National Standards, regional (GCC / GSO) and / or international standards and are created by organizations that implement an effective quality management system to ensure ongoing compliance. The stages of obtaining a license to use EQM involve a thorough evaluation of the product as well as the quality system used by manufacturers in production through testing and inspection. More information about EQM can be found at http://www.esma.gov.ae/en-us/Services/Pages/Emirates-Quality-Mark.aspx.
Foreign business actors who wish to do business in the UAE (outside the Free Zone Area) must have a local sponsor, agent, or distributor. Once selected, sponsors, sales agents, or distributors are granted exclusive rights to market non-food products (Agency laws do not regulate food products).
Termination of cooperation with agents or distributors is a very difficult step in the UAE. In March 2010, the UAE passed Federal Law No. 2 of 2010 which amends several provisions of the Law on Trading Bodies. The 2010 amendments have also restored the role of a special Commercial Agencies Committee which was repealed in 2006. The Commercial Agencies Committee has jurisdiction over disputes involving registered commercial agents. Any commercial disputes must be referred to the Commercial Agencies Committee in advance.
The amendments prevent the termination of cooperation from commercial agents unless the principal party has material reasons to justify the termination of the agreement. Furthermore, it is not possible for a principal to re-register a commercial agent on behalf of another agent even though the previous period of cooperation with the agency is only valid for a certain period, unless: (i) the termination of the cooperation is carried out amicably by the principal and the agent; (ii) the termination of cooperation is carried out for reasons that can be justified and convincing for the Commercial Agencies Committee in the UAE; or (iii) a final judgment issued by a court ordering the termination of cooperation with the agency.
Subsequently in 2011 the UAE Cabinet issued Resolution No. 3 of 2011, regarding this committee. This resolution assigns responsibility to the Committee to accept applications to resolve agency disputes and is responsible for the cancellation of the registered agent. The committee is permitted not to resolve referred disputes and can advise the parties to refer the matter to litigation. A party may challenge the Committee's decision by submitting their agency cooperation issue to the court within thirty (30) days of receipt of notification of the resolution from the Commercial Agencies Committee. The court established the process for filing an agency dispute application and charged a fee of USD 1,634 (AED 6,000) before the application was recorded. Once recorded, the Committee must schedule a date to examine the dispute within sixty (60) days. The committee is permitted to seek assistance from experts or "appropriate parties" to carry out its duties. The Committee also reserves the right to obtain further information and documentation related to the dispute.
In order for foreign entrepreneurs to participate in government tenders, the UAE government requires companies to pre-qualify, and of course it must be a registered company. UAE government tenders are not conducted according to generally accepted international standards. Government tenders in the UAE can be conducted repeatedly, often three or four times. To enter a government tender, the supplier or contractor must be a UAE national company or a company in which a UAE citizen owns at least 51 percent of the share capital in the company. The government tender must be accompanied by a bond offering in the form of an unconditional bank guarantee of 5 percent of the bid value. However, this regulation does not apply to winning large projects or projects in the defense sector, in the condition that no local company can provide the goods or services required in the project.
The UAE government is working hard to encourage more jobs for its citizens. More and more private companies are being asked, even forced to recruit UAE nationals, in order to maintain the percentage of local workers in their companies.
The UAE has been part of a number of bilateral and multilateral trade agreements, including with partner countries in the GCC. Under the Greater Arab Free Trade Area Agreement (GAFTA), the UAE has had free trade agreements with Syria, Lebanon, Iraq, Morocco and Jordan. The UAE has also signed agreements with other countries such as: Islamic Republic of Pakistan (2006), Republic of Algeria (2007), Republic of Azerbaijan (2011), Republic of India (2012), Republic of Kazakhstan (2012), Republic of Armenia (2013)), Republic of Maldives (2014), Republic of South Korea (2015), and Kingdom of the Netherlands (2015). In June 2009, the GCC signed an FTA with the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland), which will be implemented from 1 July 2015.
In addition, the UAE has signed free trade agreements with Singapore and New Zealand and is conducting negotiations for the establishment of a free trade zone with the European Union, Japan, China, India, Pakistan, Turkey, Australia, New Zealand, Korea, Brazil, Argentina, Uruguay. and Paraguay. The UAE has also signed a number of agreements on protection and promotion of investment and prevention of double taxation. The UAE also entered into a General Agreement on Tariffs and Trade in 1994, and then became a member of the World Trade Organization in April 1996.