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Businesses unaware of GCC customs savings.

MANAMA: Bahrain businesses are losing money by ignoring potential savings in GCC customs duties, a leading analyst has said.

According to KPMG in Qatar and Bahrain head of tax and corporate services Craig Richardson there are a number of ways that importers can challenge incorrect assumptions about GCC trade incentives, customs duties, domestic concessions and free trade agreements to take advantage of substantial untapped savings.

Since 2005, the Greater Arab Free Trade Area (GAFTA) has fully liberalised the trade of goods by relieving its 17-member countries (including all members of the GCC) of customs duties - an important step toward the establishment of the Arab Common Market.

Furthermore, the GCC is embarking on a comprehensive new free trade agreement with Singapore, and is in similar negotiations with a number of other countries.

"On the surface, customs duties in the GCC seem straightforward - a five per cent entry duty on imports, and goods can be shipped anywhere within the GCC without further customs charges," Mr Richardson said.

"Many companies treat customs charges as routine and inescapable costs of doing business.

"In fact, there are ways to manage customs costs by reducing or deferring import and export charges.

"Companies that do not take the time to plan their customs import and export activities could be leaving significant amounts of money on the table," he added.

He said one of the biggest sources of potential savings is better management of how goods are valued for customs purposes.

Many costs associated with movement of goods can be excluded - typically those incurred after importation, such as installation, construction and transport costs, domestic taxes and many more, he added.

Other savings could be realised by taking advantage of concessions available in special free zones.

"For example, when imported goods are shipped to free zones in Bahrain and Dubai, payment of import duties can be deferred until the goods are actually released from such zones," Mr Richardson said.

For high value goods that will not be put to immediate use, the duty deferral can produce cash flow benefits.

These zones also provide an ideal distribution point, he said.

Duty is not only deferred - if the goods are exported out of the country or customs territory, duty may not be paid at all.

"Whilst customs brokers are key to the import and export business, their main priority is to clear goods from local customs departments as quickly as possible and as a result, may not necessarily help customers identify saving opportunities," he added.

Importers should proceed with caution though, he said.

If there is doubt in the credibility of the customs value of the goods, customs officials have broad powers to adjust the dutiable value.

The authorities can also change the classification of goods, which can result in higher customs duty from zero to 5pc.

"Importers also risk extra charges and penalties for compliance problems and offences," he added.

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Publication:Gulf Daily News (Manama, Bahrain)
Geographic Code:7BAHR
Date:Jul 2, 2014
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