Procedures and steps for implementation of the Customs Union of the GCC States

The Supreme Council, in its 23rd Session held in Qatar (21 - 22 December 2002 A.C.), approved the launch of the Customs Union of the GCC States as of 1/1/ 2003 A.C. It also approved the procedures and steps recommended by the Financial and Economic Cooperation Committee (the GCC Ministers of Finance and Economy) for the establishment of the Customs Union of the GCC States.

These procedures and steps comprise the following:

I. The date of setting up the Customs Union of the GCC States:

The GCC Customs Union shall be implemented on 1/1/2003 A.C.

II. Principles and Concept of the Customs Union of the GCC States:

1. Customs Union is the territory wherein customs duties “taxes” as well as regulations and procedures restricting trade among the member States are abolished and wherein unified customs duties “taxes” and trade and customs regulations for trade with the non-member States are implemented.
   
2. The GCC customs union is based on the following principles:
   
   • a. A Common External Customs Tariff for products imported from outside of the GCC Customs Union
     
   • b. A Common Customs Law .
     
   • c. Unified customs regulations and rules applicable in all member States in related fields.
     
   • d. Unification of the internal customs, financial and administrative regulations and procedures relating to importation, exportation and re-exportation in the GCC States.
     
   • e. Single entry point where unified customs duties are collected.
     
   • f. Free movement of goods among the GCC States without customs or non-customs restrictions, while taking into consideration the implementation of the veterinary and agricultural quarantine regulations and the prohibited and restricted goods.
     
   • g. Treatment of the goods produced in any of the GCC States as national products.

Second: Single Point of Entry into the GCC States:

The Single Point of Entry is one of the most important principles for the formation of the customs union of any economic community. The following are the most important requirements of the single point of entry into the GCC States:

1. Any land, sea or air customs port of the GCC States that has connection with the external world shall be deemed as a point of entry of the foreign goods into any member State.
   
2. The first customs port of the GCC States vis-à-vis the external world shall conduct the inspection of goods imported to any member State, verify their conformity to the required documents, ensure that they do not contain any prohibited commodities and collect the applicable customs duties.
   
3. Unification of the restrictions imposed on the goods permitted to be imported subject to the fulfillment of certain conditions in all the GCC States.
   
4. Adoption of unified rules for importation and movement of government imports and of exemptions from customs duties.
   
5. The goods which importation is prohibited in certain member States while permitted in other member States shall be directly imported through the importing State or through another member State that permits entry of such goods provided that such goods shall not transit the territories of the member States that prohibit importation of these goods.
   
6. Foreign goods imported into the GCC States from the free zones shall be subject to the customs duties when exiting in these zones and shall be treated during movement to the other member States the same as other foreign goods.

Third: Unification of the Customs Tariff of the GCC Customs Union toward external world:

1. The common customs tariff of the GCC Customs Union shall be 5 % on all foreign goods imported from outside of the Customs Union with effect from 1/1/2003 A.C.
   
2. The attached list (Appendix No. 1) incorporating 417 commodities (subheadings) shall be exempted from all customs duties "taxes", in addition to the exemptions provided for in the Unified Customs Regulation "Law" of the GCC States.
   
3. Ad valorem or specific customs duties "taxes" imposed on tobacco and products thereof in the member States of the Customs Union shall be 100 % (Products of chapter 24 of the H.S.- based Unified Customs Nomenclature for the Commodity Description and Coding of the GCC States). The maximum limit of the specific duty or weight in the GCC Unified Customs Tariff shall be adopted. The customs revenues levied on tobacco and products thereof shall be considered the same as the revenues from any other commodity whose customs duties are collected within the common customs revenues of the Customs Union member States.

Fourth: Common Customs Law of the GCC States:

All customs administrations of the member States shall implement the Common Customs Law of the GCC States, its Rules of Implementation and Explanatory Notes.

Fifth: Collection of the customs revenues in the GCC customs union:

1. Customs duties are collected at the first customs point of entry of the GCC States with the external world as of 1/1/2003 A.C. The shares of the member States of the customs proceeds shall be distributed according to the final destination of the goods for the first three years following the establishment of the GCC Customs Union (Transitional Period) according to the following mechanism.
   
2. This mechanism shall be adopted for the movement of goods among the member States of the GCC Customs Union based on the final destination of the goods for the distribution (allotment) of the customs revenues during the transitional period of the GCC Customs union (that has been previously determined at maximum three years ):
   
3. If the source of the goods is the First Point of Entry:

1. Whole consignments:

1. All customs procedures (i.e. lodgment of the unified customs declaration, inspection of the goods, collection of customs duties) shall be conducted on the goods imported into the GCC States at the first customs point of the GCC States with the external world.
   
2. The whole consignments imported from outside of the GCC States shall leave the first point of entry, after completion of the customs procedures and collection of the applicable customs duties, to their final destination either directly or through one member State or more after affixing the customs seals and under a copy of the import declaration stating their value and the payable customs duties in favor of the country of final destination.
   
3. The copy of the import declaration shall be endorsed to indicate exit of the goods and passage through the member States.

2. Partial consignments

1. If the goods to be transported among the GCC States constitute a part of a consignment which customs procedures have been completed at the point of entry and the importer wants to transport a part of it to another GCC State or through its territory prior to leaving the customs office for its final destination, the goods in this case shall be transported under the GCC approved statistical customs declaration along with a copy of the original customs declaration after affixing the customs seals.
   
2. Intra- GCC customs offices shall endorse the statistical customs declaration indicating the entry or exit of the goods. Copies of the goods documents shall be maintained for the purpose of clearing among the member States.

3. If the source of the goods is local markets:

Foreign goods purchased from the local markets of the member States and destined for a member State, either directly or through another member State, shall be treated during the transitional period as follows:

1. The goods that have been imported into the GCC States before 1/1/2003, and the source of which is the local markets the GCC States, shall have their customs duties collected at the customs office of the final destination of the goods.
   
2. The goods that were imported into the GCC States after 1/1/2003 and whose owners have submitted customs certificates issued by the first point of entry proving the payment of the applicable customs duties after formation of the customs union shall not be subject to any more customs duties.
   
3. The goods that have been imported into the GCC States after 1/1/2003 and whose owners have not submitted evidence proving payment of the applicable customs duties after formation of the Customs Union, shall have their customs duties collected at the point of entry of the country of final destination. • Goods that are imported into any of the GCC States and are exempted from customs duties under free trade agreements with another country shall have their customs duties collected at the border point of the country into which they will be re-entered.
   
4. The customs declaration approved within the framework of the GCC States shall be used for the purposes of redistributing and clearing the customs revenues among member States.
   
5. The customs declaration for statistical purposes shall be completed by the owner of the goods or his representative and shall be approved by the exit customs office, to be accompanied by the local GCC Common Customs Law Page 39 of 44 invoices indicating the actual value of the goods and their country of origin.
   
6. The Entry/Exit customs office which the goods pass through shall endorse the customs declaration indicating the entry/exit of the goods.
   
7. The customs declaration, for statistical purposes, shall be computerized depending on the technical potentials available in each Member State to facilitate the task of the customs offices of monitoring the intra-GCC trade and providing the accurate data for the clearing authority.
   
8. The decision of the Financial and Economic Cooperation Committee taken in its 58th meeting “that in the event of movement of the foreign goods from the local markets, the value t the first point of entry shall be adopted irrespective of the period that has elapsed since the entry of the goods into the first point of entry, subject to facilitation of procedures and the required forms” shall be adopted for clearing purposes.

Sixth: Customs functions of the intra-GCC customs offices after formation of the Customs Union

Customs functions of the intra- GCC customs offices after formation of the Customs Union shall be defined according to the following phases:

First Phase:

This phase commences with the formation of the Customs Union according to the timetable (January 1st, 2003 A.C., and lasts for one year ending on December 31st, 2003). The functions of the intra-GCC customs offices focus on completion of the customs procedures relating to the formation of the customs union as follows:

1. Procedures of exportation, re-exportation and transit shall be abolished at the intra-GCC customs offices in member States.
   
2. Import documents of the foreign goods imported from outside the GCC region are appropriately matched with goods to ensure that customs duties have been collected and that the goods do not contain any goods prohibited in the transit country or the final destination country.
   
3. Ensuring that the non-customs procedures applicable to the importation of certain goods have been completed according to the regulations in force in the importing country based on the documents accompanying the good.
   
4. The above mentioned procedures shall apply to the foreign goods directly transported from the customs border points of the GCC States with the external world to the other member States and to the goods transported from the local markets of one member State to the other member States. Local invoices and the documents agreed upon within the framework of the Council pertaining to foreign goods shall be sufficient for customs purposes.
   
5. National products shall be allowed to move freely among the member States accompanied by their local invoices and statistical declaration.
   
6. Periodic reports on the results attained from the application of these procedures in this phase shall be submitted to the committee assigned to monitor implementation of the customs union of the GCC States.

Second phase:

This phase commences with the beginning of January 2004 and lasts for one year (ending by December 2004). Functions of the intra- GCC customs offices shall focus on strengthening the GCC Customs Union and the enhancing its credibility and benefiting from the positive results of the first phase, as follows:

1. Import documents shall continue to be matched with the foreign goods imported from outside of the GCC States to ensure that applicable customs duties have been collected and that the goods contain no goods prohibited in the transit or final destination country.
   
2. Procedures of verification that non-customs procedures specific to the import of certain goods have been completed according to the regulations applicable in the importing country based on the documents accompanying the goods shall be abolished, with the exception of the procedures set forth in Article (1) of the GCC Economic Agreement.
   
3. Intra-GCC customs offices shall allow passage of the foreign goods transported from the markets of one member state to the other member States against presentation of the local invoices and the statistical declaration relating to such goods.
   
4. Periodic reports on the results attained from the application of these procedures shall be submitted to the committee assigned to monitor implementation of the Customs Union of the GCC States.

Third phases:

This phase commences with the beginning of January 2005, wherein the customs functions of the intra-GCC border offices shall be abolished in the light of the results attained in the previous phases based on the periodic reports of the committee assigned to monitor implementation of the customs union of the GCC States, taking into account the provision of paragraph (d) of Article (1) of the Economic Agreement of the GCC States. These transitional periods shall give the customs administrations of the member States sufficient time to accommodate to the new situation and overcome any difficulties, if any, that hinder implementation of these phases as agreed upon leading to the final status of the customs union of the GCC States.

Eighth: Allowing the customs brokers to get engaged in the customs clearance in the GCC States:

Nationals of the GCC States shall be allowed to engage in the business of customs clearance in the GCC States pursuant to Article (109) of the GCC Common Customs Law entitling GCC nationals to engage in the business of customs clearance in the member States.

Ninth: Internal Regulations of the member States governing importation, exportation, re-exportation and transit:

Matters closely related to the process of goods transportation in the GCC Customs Union member States and the principle of the Single Point of Entry shall be dealt with as follows:

1. Government Exemptions, Special Exemptions and Diplomatic Exemptions: Government exemptions, special exemptions and diplomatic exemptions shall be limited to the provisions of the Common Customs Regulation "Law" of the GCC States approved by the Supreme Council. Any other exceptions shall be cancelled unless collectively agreed upon.
   
2. Exemptions under International Agreements: When discussing such agreements, the GCC States shall take into account that these agreements are in line with the requirements and plan of the GCC Customs Union and the provisions of the GCC Economic Agreement.
   
3. Availability of information relating to Commercial Registration in the customs offices at the implementation of the GCC Customs Union: The importance of the availability of the following key information about the commercial Registration at the Single Point of Entry of the GCC customs border ports with the external world for purposes of customs clearance according to the following mechanism approved within the framework of the Council:
   
   1. Name of establishment.
      
   2. Owner of the commercial registration (CR).
      
   3. CR No. and place of issue.
      
   4. Date and validity of CR.
      
   5. Temporary Admission/Exportation: The subject of temporary admission and exportation under the Customs Union and the principle of the single point of entry of the GCCStates shall be dealt with in the light of the provisions of the GCC Common Customs Regulation "Law".
      
   6. Import licenses: The prerequisite of obtaining an import license for importing any commodity into any of the GCC States shall be abolished because it goes into conflict with the requirements of the formation of the GCC customs union and the principle of the single point of entry.
      
   7. The goods whose documents are received through the banks at the implementation of the Customs Union and the single point of entry: The goods whose documents are received through the banks at the implementation of the Customs Union and the single point of entry shall be dealt with according to the provisions of the GCC Common Customs Regulation "Law".
      
   8. Treatment of the customs duties “taxes” collected under deposit on the foreign goods at the implementation of the Customs Union and the single point of entry: The customs duties “taxes” collected under deposit on the foreign goods in the GCC Customs Union shall be refunded according to the mechanism approved by the Council.
      
   9. Controls of Drawback (Refund of customs duties “taxes” on the foreign goods re-exported to outside the GCC States): Refund of customs duties “taxes” collected on the foreign goods re-exported to outside of the GCC States shall be in accordance with the provision of Article (16) of the Rules of Implementation of the GCC Common Customs Regulation "Law".
      
   10. Mechanism of handling the in-transit goods under the GCC Customs Union: In-transit goods in the GCC Customs Union shall be dealt with as follows:
       
   • The GCC States in the Customs Union are considered as a single economic community and shall apply the provisions of the international transit agreements in force when dealing with non-member States.
     
   • Abolishment of the transit of goods among the member States after implementation of the Customs Union.
     
   • Application of technical conditions and procedures provided for in the Arab Transit Agreement signed by the member States when handling transit with the external world.
     
   • The transit procedure for goods imported into the GCC States shall be finalized at the first customs port (sea, land or air customs port) and normal customs procedures, i.e. inspection and collection of customs duties, shall be completed the same as other goods.
     
   • Transit for the goods exported or re-exported from any GCC State shall commence from the last customs port (sea, land or air port).
     
   • Goods that have been originally imported into the GCC States under the transit procedure shall be transported to any of the other GCC States upon finalization of their customs procedures the same as the other goods without any obstacles.
     
   • The goods that are subject to restrictions at their importation into any of the GCC States according to the list of the restricted commodities to be agreed upon by the GCC States shall be transported from one member State to another member State(s) under the approved mechanism for the movement of such goods within the GCC States, which ensures their arrival to the importing country if their nature so requires.
     
4. Mechanism for facilitation of the flow of vegetable and animal products and live animals imported into the GCC States: The mechanism for facilitation of the flow of vegetable and animal products and live animals imported into the GCC States shall be implemented according to the controls agreed upon by the GCC States.
   
5. Treatment of the duties of the goods of special nature within the GCC Customs Union: Goods whose importation is prohibited in some of the member States and permitted in the other member States are to be directly imported to the importing country or through a member State that permits their entry provided that such goods shall not pass across the territories of the member States that prohibit the importation of such goods and that the customs duties “taxes” applicable to such goods shall be collected by the importing country. These revenues shall be the right of the importing country and shall be excluded from the common customs proceeds of the Customs Union. The member States that import such goods shall unify the customs taxes "duties" levied on such goods.
   
6. Controls for exempting the industry imports from customs taxes "duties": Imports of the industrial installations in the GCC States, including machinery, equipment, spare parts, raw materials, semi-manufactured materials and packing materials directly required for the industrial production, are granted exemption from customs taxes "duties" according to the controls agreed upon by the Council, provided that the customs office in any of the GCC States through which the goods have been imported shall facilitate the entry of imports whose certificate has been issued by the competent authority in any of the GCC States.
   
7. Treatment of the prohibited and restricted commodities in the member States under the GCC Customs Union: A consolidated list of the prohibited imports and another list of the restricted imports are to be agreed upon by all the member States. Each member State shall have its own list of the prohibited and restricted commodities which shall be observed by other member States during the movement of such commodities among the constituent states of the GCC Customs Union.
   
8. Restrictions and controls of the importation and release of medicaments and pharmaceuticals: A maximum period of twenty-four months shall be granted for the application of the unified GCC procedures for the importation and release of medicaments and pharmaceuticals in the single point of entry at the commencement of the GCC Customs Union provided that the Drug Registration Committee shall develop a unified mechanism for the customs release of the medicaments and pharmaceuticals including the unified drug registration under the GCC Customs Union.
   
9. Conditions and controls of the importation of foodstuffs: A maximum period of thirty-six months shall be granted to reach standard conditions for the importation of foodstuffs to be applied at the single point of entry upon the formation of the GCC Customs Union, provided that the Food Safety Committee of the GCC States shall adopt a common mechanism for the movement of foreign foodstuffs among the GCC States and refer, for guidance, to the mechanism of the flow of vegetable and animal products, and live animals imported into the GCC States. However. It will be necessary to build up advanced technical centers and laboratories in the GCC States, whether inside the State or at the frontier points to expedite the flow of these goods and avoid their deterioration at the customs offices.
   
10. Treatment of the means of transportation on which customs duties have been collected in one of the member States and their owners want to replace the plates thereof in another member State: Customs duties shall be levied on the means of transportation and vehicles in the Customs Union of the GCC States and all customs procedures shall be finalized at the single point of entry. Like the other goods, such means of transportation and vehicles shall move among the member States without being subject to any customs duties.
    
11. Unified Customs Declaration: The unified Customs Declaration (importation, exportation, re-exportation, temporary exportation, transit, free zones, statistical purposes) shall be used by all customs administrations of the GCC States for customs and statistical purposes.
    
12. Prequalification of the GCC industrial producers for the exemption of their products from customs duties: Prequalification of GCC industrial producers for the purpose of exemption from customs duties shall be abolished with the implementation of the Customs Union of the GCC States as of January 1st, 2003.

Thirteenth: Application of the specifications and standards under the implementation of the Customs Union and the single point of entry:

The principle of mutual recognition of the national specifications and standards in the GCC States shall be adopted until the GCC unified standards for all national and imported commodities have been completed which would facilitate the flow of goods within the Customs Union.

Fourteenth: Protection of national industries after the formation of the Customs Union of the GCC States including anti-dumping and countervailing measures and safeguards:

• a. Member States that are currently imposing a protective duty on the products similar to some of their national manufactures shall be given the right to keep on collecting such protective duties during the transitional period specified at three years ending by 2005, provided that the member States shall agree, during the year 2003, on a unified list of the commodities to be subjected to collective protective duties by the GCC States.
  
• b. The first port of entry shall collect an amount of 5% ( according to the mechanism of the final destination of the product for the allotment of the customs proceeds among the member States during the transitional period.) if the commodity is not protected in the country and the difference in the duties shall be collected by the country of the final destination of the commodities that are subject to protective duties at the inter-frontier port of that country.
  
• c. The amount of 5% collected by the first port of entry shall be subject to the clearing system.
  a. The adoption of the Common Regulation "Law" of Anti-dumping and Countervailing Measures and Safeguards as a reference advisory Regulation "law" for three years as of January 1st, 2003 A.C.

Fifteenth: Procedures for registration of the intra-GCC trade for statistical purposes:

• a. The statistical declaration shall be one of the forms covered by the approved automated unified customs declaration comprising several declarations (i.e. import, export, re-export, temporary exportation, free zones and transit).
  
• b. Boxes in the unified customs declaration to be used for statistical purposes shall be marked either with a certain color or by coloring the printing font of the declaration.
  
• c. The member States that do not have an automated customs system shall continue to manually complete the customs declaration for statistical purposes until the operation of their automated system is completed.
  
• d. Application of the unified customs declaration for statistical purposes shall commence with the implementation of the GCC customs union.

The Supreme Council in its 23rd Session had instructed the competent ministerial committees to double their efforts in following up the implementation of the Customs Union during 2003 in order to ensure good progress of operation, to reduce the approved transitional periods and to facilitate the flow of goods among the GCC States and remove the customs and non-customs barriers that restrict the movement of trade among them.

Allocation mechanism of funds collected as customs revenues among the members States in the GCC member States

The GCC Financial and Economic Cooperation Committee decided in its 60th meeting, held in Doha – Qatar - on Rabi` Al-Awwal 5, 1424 A.H/June 5, 2003 A.C. approval of the mechanism of allocating funds collected as customs revenues among the GCC member States (clearance mechanism) according to the following formula:

1. The Customs administration in each Member State shall deposit customs revenues collected from the first of January, 2003 A.C., in the Ministry of Finance account assigned for this purpose, in monetary agency or central bank in respective state.
   
2. 2. The Ministry of Finance in each Member State shall open a clearing account in the monetary agency or central bank in respective state.
   
3. 3. The customs administration in the state of first entry port shall conduct a preliminary register of each Member State's quotas in whole or partial consignments, in addition to customs duties collected on them; these shall be compared to the data provided by the final destination country later.
   
4. 4. In order to facilitate the clearing process amongst the Member States, the following procedures shall be conducted:
   
   • a. All member States shall apply the Unified Customs Declaration agreed upon within the framework of the GCC for customs and statistical purposes, in completion of the customs procedures imposed on goods imported to the GCC countries.
     
   • b. Copy of both the Unified Customs Declaration of customs purposes related to transit of complete consignments, and the Unified Customs Declaration of statistical purposes related to transit of split consignments, shall be sealed, as per form annexed hereto (Annex (1)) which includes data on cargo, value, and customs duties collected, for the purpose of clearing process according to the following mechanism regarding usage of the clearing seal:
     
     • b/1. In case cargo source is the first import point:
     • a. Complete consignments: Copy of the Unified Customs Declaration of customs purposes shall be sealed at the back by the first import point.
       
     • b. Partial consignments: Copy of the Unified Customs Declaration of statistical purposes shall be sealed at the back by the first import point.
       
     • b/2. In case that cargo source is local markets: The Unified Customs Declaration of statistical purposes shall be sealed at the back, by the export point or by the nearest customs port according to the procedures applicable in respective state.
       
     • b/3.To facilitate Clearing purposes: Member States shall adhere to filling in the Unified Customs Declaration of customs purposes with needed data, as well as the Unified Customs Declaration of statistical purposes, especially data related to cargo value, type and number, and collected customs duties.
       
   • c. Customs Intra-points through which cargo must pass to its final destination shall be provided with a copy of the Unified Customs Declaration of customs purposes or the Unified Customs Declaration of statistical purposes sealed by the first import point, provided that original sealed declaration shall be submitted to the final destination customs port as a document whereby customs duties shall be payable.
     
5. The customs administration of the final destination country shall collect data needed to identify its quota in customs duties collected by the first import point, as per the Unified Customs Declaration of the customs or statistical purposes.
   
6. Data shall be collected every 3 (three) months by the final destination customs administration, which data shall clarify funds due to the final destination country on Member States through which (first import point) goods passed to final destination, and shall be annexed with copies of the Unified Customs Declarations of customs and statistical purposes and copies of data sealed, as per paragraph (4/b) above.
   
7. Member States shall conduct necessary review to complete clearing process needed for customs revenue allocation amongst them on bilateral basis prior to meetings of the Clearing Committee, provided that the findings bilaterally concluded regarding each country's quota and suspended amounts.
   
8. The Clearing Committee shall be composed of representatives for the Ministry of Finance, Customs Administrations, any third party upon discretion of Member State, and the Secretariat General, and it shall meet every three months to make appropriate decisions on determining the funds due to each state (as a final destination state) on other Member States (first import point country). The first meeting of the committee shall be in the period 5 - 8 July 2003 A.C., for the purpose of identifying each country's dividend for the first five months of commencement of the GCC Customs Federation. Then, the committee shall meet every three year for the same purpose.
   
9. Member States shall fill in the form of "Accruals Clearing Statement" (Annex (2)), or any other form for the same purpose, and submit the same to the Secretariat General at least one month prior to the next meeting of the Clearing Committee, to be ‎generalized to Member States. Should any Member State have any comments, it shall directly contact relevant state or states prior to the meeting.
   
10. The Secretariat General shall pass findings concluded to by the Clearing Committee to Member States, for the Ministries of Finance to issue necessary instructions to the monetary agency or central bank in respective Member State to conduct necessary settlements with correspondent central banks or monetary agencies of the other Member States. Fund transfer procedures shall be conducted in no later than the first work day in the second half of next month after the meeting of the Clearing Committee, provided that transfer shall be in currency of State transferred to and current exchange rate on day of transfer.
    
11. In case that the Clearing Committee fails to reach an agreement regarding any claim, such claim shall be referred to the Execution and Follow up Committee (the Customs Federation Committee) for reconsideration, and if not settled yet, the same shall be submitted to the Financial and Economic Cooperation Committee.
    
12. Clearing processes amongst Member States shall be conducted using Calendar months.

Indeed, Allah is the Granter of success.