Duty dodgers exploit loophole

The GCC Customs Union is making it harder to fiddle duty on road shipments, so dishonest importers may be turning to the air and sea instead, says Tech Data.

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By  David Ingham Published  February 6, 2003

Customs fraudsters are turning to sea and air transportation, as it becomes harder and harder to dodge duty on road shipments, according to a senior executive with IT distributor, Tech Data.

Michael Vosper, the company’s operations director, says that new procedures brought in as part of the GCC Customs Union are making it very difficult for importers to fiddle duty on road shipments. To get round the procedures, dishonest importers are instead sending freight by air and sea, where the rules of the Customs Union have not yet been applied.

“Since Dubai Customs has implemented the collection of duty on shipments going to Saudi by road, the word is that road is no longer a preferred way of shipping while under invoicing,” explains Vosper. “What we’ve seen is a shift to both air freight and sea freight.”

The Customs Union stipulates that products entering the GCC are taxed 5% duty at the point of entry and then allowed to move freely throughout the Gulf. The 5% duty is based on the original manufacturers invoice, which is relatively difficult to forge.

So far, however, Dubai is only applying the rules to road traffic, so goods sitting in transit in Jebel Ali or Dubai Cargo Village can be re-exported by sea or air without paying duty in Dubai.

Fraudsters then use various methods to avoid paying full duty at the final destination, where customs collection procedures may be less efficient than they are in Dubai. Ways of dodging duty include ‘under declaring’ the value of a shipment or mixing higher value products in with lower value ones and not declaring them.

The problem is likely to be a temporary one, however, as Dubai’s customs authorities have every intention of eventually applying the rules of the Customs Union to air and sea shipments. The only reason they haven’t so far is that they, “are tackling the land borders first… and will roll out the processes to air freight and sea freight later on,” according to Vosper.

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