Gulf states to keep 95% of customs duties

CUSTOMS DUTIES: Gulf states plan to bring in a region customs union in 2009. (Getty Images)

Each Gulf state will keep 95 percent of the customs duties it collects at ports of entry and transfer 5 percent to a central account at the Gulf Cooperation Council (GCC) under proposals for a regional customs union, a UAE official said on Thursday.

Saeed Khalifa Al-Marri, deputy director general of the UAE Federal Customs Authority, said member states are likely to scrap import duties for a simplified customs duty collection system in 2009, the last step in implementing a regional customs union.

Al-Marri said Saudi Arabia, the UAE, Oman and Kuwait are supporting a plan to introduce the system.

The GCC would then redistribute the funds it collects to each of the six states - which also include Qatar and Bahrain - based on a pre-determined formula.

"We are looking at scrapping the final destination system, this is the final phase of the customs union," Al-Marri told Reuters in an interview.

The decision, which has to be unanimous, now sits with Gulf finance ministers, who are due to meet next in Jeddah in September, he said.

"Our target is that by Jan. 1, 2009, we should implement the final phase of the customs union," Al-Marri said.

The six Gulf states that comprise the world's biggest oil-exporting region introduced a customs union in 2003 as one preparatory step to the formation of a regional common market.

The main feature of the union was the introduction of a consistent 5-percent tariff charged at the first Gulf port of entry, after which the goods can move freely through the region.

Under the final destination framework, tariffs collected at the first port of entry are pocketed by the country of final destination.

The new system would simplify this policy by eliminating the transfer of funds, and would mainly benefit the UAE - a Middle East trade and re-export hub which handles about 70 percent of customs cash settlements in the Gulf.

Under the final destination system, about 3 percent of Gulf customs duties are currently redistributed, mainly from the UAE, which paid about 748 million dirhams ($204 million) to its neighbours last year, up from 135 million dirhams in 2003, Al-Marri said.

Its total customs duty income probably exceeded 5.5 billion dirhams last year, he said.

Implementation of the customs union - which initially envisioned a three-year transition period - has been fraught with hurdles as the Gulf customs authorities struggled to raise awareness of the rules among traders, Al-Marri said.

GCC states except Oman are also striving to meet a 2010 deadline to negotiate a single currency, but policymakers including the Saudi central bank governor have said the deadline would be very difficult to meet. (Reuters)

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