The course is taxation

Sharjah University Taxation and Zakat

Midterm exam – assignment 1 Assignment: 1

Total marks: 25

Due date: 7 May 2020

Task 1 (marks 15)

We have discussed free zone and mainland concepts during our lectures. Among others we referred Jebel

Ali Free Zone Area (JAFZA) for many examples. A similar kind of free zone is available in Fujairah and you

have been approached by ABC to help them from the UAE customs perspective.

ABC Trading Company (“ABC”) is a 100% subsidiary of a Saudi based company which trades refined, liquid

chemical and polymer products. ABC has a branch in Fujairah Free Zone (“FFZ”) in UAE with a commercial

license since 2015. The branch is an entity with no employees or an actual office. ABC is engaged with a

third-party storage provider, to store its hydrocarbon products which are imported and exported out of

the FFZ. Some blending activities are taking place in storage. ABC is currently analyzing its global

operations and is considering several options to set up an overseas office. One of these options is to set

up a separate legal entity in the FFZ with an office and its own employees. The FFZ is located in the

northern Emirate of Fujairah adjacent to the port of Fujairah and is administered by FFZ Authority. The

new legal entity in the FFZ will manage the storage of hydrocarbon products and arrange for ship-to-ship

transfers globally. ABC has requested you to prepare a high-level set of slides outlining the benefits and

implications of operating in a free zone from a customs duty perspective.

Please consider the following points whilst preparing the slides (PPT):

► Customs registrations requirements to operate in the FFZ

► Import of goods into the FFZ from outside of the GCC (“Rest of the World” or “RoW”)

► Import of goods into the FFZ from other GCC Countries

► Import of goods into the FFZ from the Mainland UAE area

► Export of goods from the FFZ to outside of the GCC (RoW)

► Export of goods from the FFZ to other GCC countries

► Export of goods from the FFZ to the Mainland UAE area

► Transfer of goods from the FFZ to other free zones in the UAE

► Transfer of goods within the FFZ to companies in the FFZ

► Purchase of services from outside of the GCC (RoW), within GCC, from the UAE Mainland area, and

from within the FFZ

Task 2 (marks 10)

XYZ is a global leader in international engineering and services business dealing in manufacturing of

elevators. XYZ HQ exports electronics goods and parts thereof to XYZ UAE, which are classified under

specific HS tariff code. XYZ UAE operates under a valid trade license. The commercial register of XYZ UAE

covers only two HS codes:

Sharjah University Taxation and Zakat

Midterm exam – assignment 1

 Heading 8428 of the UAE tariff - for elevators

 Heading 843131 of the UAE tariff – for elevators parts

The spare parts portfolio of XYZ UAE covers various types of products and therefore are classified in

different HS tariff codes, apart from the HS tariff codes 8428 and 843131. Based on the WCO HS rules,

various elevators parts, even if manufactured solely or principally for the elevators are not classified under

the HS code 843131. XYZ HQ found that commercial register of XYZ UAE covers only aforementioned HS

codes and therefore, they asked XYZ UAE to manually modify the documentation, which consequently

may impact the customs duty percentage. XYZ UAE refused to make any changes to their existing process

and emphasized to classify the goods according to already practiced two HS codes.

Please analyze the above situation and convince XYZ UAE for the significance of using correct HS code

from a future perspective whilst highlighting any risks arising from incorrect tariff classification of goods

from the UAE customs standpoint. Please use PPT or Word doc for answering this question.