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Viewing cable 04ABUDHABI552, UAE BOOSTS EXPORTS TO GCC, THANKS TO CUSTOMS UNION

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Reference ID Created Released Classification Origin
04ABUDHABI552 2004-03-02 10:09 2011-08-30 01:44 CONFIDENTIAL Embassy Abu Dhabi
null
Diana T Fritz  03/15/2007 03:09:49 PM  From  DB/Inbox:  Search Results

Cable 
Text:                                                                      
                                                                           
      
CONFIDENTIAL

SIPDIS
TELEGRAM                                           March 02, 2004


To:       No Action Addressee                                    

Action:   Unknown                                                

From:     AMEMBASSY ABU DHABI (ABU DHABI 552 - ROUTINE)          

TAGS:     PREL, ETRD, ECIN, ETTC, ECON, KIPR                     

Captions: None                                                   

Subject:  UAE BOOSTS EXPORTS TO GCC, THANKS TO CUSTOMS UNION     

Ref:      None                                                   
_________________________________________________________________
C O N F I D E N T I A L        ABU DHABI 00552

SIPDIS
CXABU:
    ACTION: ECON 
    INFO:   P/M AMB DCM POL 
Laser1:
    INFO:   FCS 

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: DCM: RALBRIGHT
DRAFTED: ECON: CCRUMPLER
CLEARED: ECON: OJOHN; CGD:JDAVIS

VZCZCADI203
RR RUEHC RUEHGV RUEHZM RUCNWTO RUCPDOC
DE RUEHAD #0552/01 0621009
ZNY CCCCC ZZH
R 021009Z MAR 04
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 3355
INFO RUEHGV/USMISSION GENEVA 0544
RUEHZM/GCC COLLECTIVE
RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE
RUCPDOC/USDOC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000552 
 
SIPDIS 
 
STATE FOR NEA/ARP, NEA/PPR 
STATE PASS USTR - JBUNTIN 
USDOC FOR USPTO 
USDOC FOR 4250/DOC/MAC/ONE/CLOUSTAUNAU 
GENEVA PASS USTR 
 
E.O. 12958: DECL: 03/02/09 
TAGS: PREL KIPR ETRD ECIN ETTC ECON TC
SUBJECT: UAE BOOSTS EXPORTS TO GCC, THANKS TO CUSTOMS UNION 
 
REFS: A) 03 ABU DHABI 2218 
      B) 03 ABU DHABI 1756 
      C) 03 ABU DHABI 221 
      D) 02 ABU DHABI 6910 
 
1.  (U) Classified by Deputy Chief of Mission Richard A. 
Albright for reasons 1.5 (b) and (d). 
 
2.  (C) Summary and comment: One year after its creation, 
the GCC Customs Union is proving to be a commercial boon 
for the UAE -- exports and reexports to the GCC states 
increased by 33 percent in 2003.  Past disputes among GCC 
members regarding the unified tariff, revenue collection, 
and border inspections have been resolved (see refs A-C). 
Most importantly, the UAE Federal Customs Authority -- 
hastened in its creation by the implementation of the GCC 
Customs Union on January 1, 2003 -- has developed into a 
full-fledged UAE federal institution, allowing the 
individual emirate-level customs departments to speak with 
one voice in GCC fora.  We remain optimistic that the UAE 
Federal Customs Authority will regularize customs 
procedures across the UAE, and provide a single entity with 
which the USG can coordinate its wide range of export 
control initiatives. 
 
End summary and comment. 
 
----------------------------------- 
UAE Benefits From GCC Customs Union 
----------------------------------- 
 
3.  (SBU) The UAE's exports and reexports to the GCC states 
increased to about AED 6.8 billion (USD $1.85 billion) in 
2003 -- an increase of 33 percent over 2002 figures, 
according to the UAE Federal Customs Authority.  (Note: 
This total does not/not include the considerable volume of 
transshipped goods that passed through the UAE's free trade 
zones last year.  Exports and reexports include goods 
manufactured in the UAE, or items imported into the UAE, 
modified and reexported to a third destination.  End note.) 
UAE customs officials directly attribute the increase in 
export revenue to the implementation of the GCC Customs 
Union on January 1, 2003, and the subsequent reduction of 
tariffs on intra-regional trade. 
 
4.  (U) Some local businessmen here feared that the customs 
unification would neutralize Dubai's advantage as an export 
and reexport hub -- formerly, the UAE's external tariff was 
much lower than that of other GCC states -- but 2003 
statistics proved otherwise.  According to the Dubai 
Chamber of Commerce, the number of certificates of origin 
issued in Dubai increased 23 percent in 2003.  The total 
value of these exports equaled AED 47 billion (USD $12.8 
billion).  Dubai's comparative advantage no doubt lies in 
its ability to provide first-class communication, 
transportation, and logistical support to traders. 
 
5.  (U) Iran was Dubai's number one export destination in 
2003, according to the Dubai Chamber of Commerce, but 
interestingly, Saudi Arabia, Kuwait, Qatar and Oman, 
respectively, were ranked Dubai's other top export/reexport 
markets.  The prominence of GCC member states on the list 
of the UAE's most important trading partners is a marked 
change from previous years. 
 
---------------------------------------- 
UAE v. KSA: Can't We All Just Get Along? 
---------------------------------------- 
 
6.  (SBU) The GCC Customs Union has provided UAE traders 
with unprecedented access to the huge Saudi market. 
Indeed, General Director of the UAE Federal Customs 
Authority Mohammed Al-Mehairi told Econoff that earlier 
problems with Saudi Arabia have subsided (refs A-C).  The 
Emiratis last year threatened retaliatory trade measures 
against Saudi Arabia if Riyadh continued to levy heavy 
duties on UAE-origin goods or delay perishable items at the 
Saudi border.  Al-Mehairi said that many of these problems 
probably resulted from miscommunication between officials 
in Riyadh and customs officials at the border.  UAE traders 
continue to have problems exporting UAE-origin dairy 
products to Saudi Arabi, however.  Al-Mehairi intimated 
that certain Saudi royal family members had a vested 
interest in protecting the Saudi dairy industry, and UAE 
dairy products often spoiled at the border awaiting 
"customs clearances." 
 
7.  (SBU) Al-Mehairi also noted that the Saudis continue to 
levy duties on goods from the UAE's free zones.  Riyadh 
argues that goods from the free zones are not UAE national 
products under the GCC Customs Union agreement.  With 12 
free zones, and more than 10 others in various stages of 
development, the UAE asked the GCC to designate free zone 
items as entirely or partially UAE products.  To date, the 
GCC has remained silent on transshipments or products 
entering the GCC via free zones. 
 
------------------------------------------ 
UAE Federal Customs Authority Strengthened 
------------------------------------------ 
 
8.  (C) Separate from the GCC Customs Union, the UAE 
Federal Customs Authority was created in 2002 to represent 
the emirate-level customs departments in GCC fora.  A year 
later, the UAE Federal Customs Authority has a new office 
building, a Director General, and about 25 economists, 
lawyers, and support staff.  Most executive board meetings 
are held in Dubai, to reduce travel time for customs 
directors from the northern emirates. 
 
9.  (C) Al-Mehairi noted that the power shift toward the 
Federal Customs Authority during the last year was most 
difficult on Dubai and Executive Chairman of Dubai Ports, 
Customs and Free Zones Sultan bin Sulayem, who formerly 
wielded considerable independence and power in customs and 
trade matters.  Although the Customs Authority must obtain 
consensus of every customs director before taking a federal 
position, Al-Mehairi said that Shaykh Hamdan occasionally 
mediates disputes between the enigmatic bin Sulayem and the 
head of Abu Dhabi Customs Ali Al-Jabri.  Bin Sulayem 
reportedly was loath to relinquish responsibility to 
Federal Customs Authority inspectors in Dubai, but 
acquiesced at Hamdan's urging.  (Note: There currently are 
fewer than five federal-level inspectors in Dubai, but the 
Federal Customs Authority intends to double this number by 
end-2004.  End note.) 
 
10.  (C) In a recent meeting with the Consul General, bin 
Sulayem admitted that there is much more coordination 
between the emirate-level customs departments, thanks to 
the Federal Customs Authority.  He said that each Director 
of Customs Affairs retains some degree of independence 
under the new system, but safety and inspection procedures 
are completely regularized across the emirates.  Although 
there is supposed to be a harmonized federal system of 
customs valuation and revenue collection, bin Sulayem said 
such coordination is "nonexistent" in practice. 
 
11. (SBU) Al-Mehairi told Econoff that the Federal Customs 
Authority intends to deploy by 2005 a single electronic 
network among customs departments and with the GCC 
countries to unify the technical customs procedures.  He 
admitted, however, that there is considerable debate about 
which electronic system to use -- the system currently used 
by Abu Dhabi or Dubai Custom's system -- and is an example 
of the challenges he faces in coordinating even minor 
details among customs departments.  Al-Mehairi said that 
the Abu Dhabi system is user-friendly and aggregates data 
quickly.  The Dubai system, however, is more elaborate and 
can collect a broader variation of data, and already is 
installed in some of the northern emirates customs 
departments. 
 
Wahba