Introduction
Nowadays, the area of self-care continues to expand, with people becoming more conscious of their appearances. In such cases, perfumes and their increasing variety are of particular interest to many businesses. For the given assignment, a unisex perfume, Shaghaf Oud Ahmar by Swiss Arabian, founded in the United Arab Emirates (UAE), is chosen as the preferred product. More specifically, 2,000 bottles of the given goods will be ordered from the UAE and transported to the U.S.
Fragrances, particularly those with distinctive aromas such as Shaghaf Oud Ahmar, may be considered an investment opportunity. The plan is to purchase the perfume at a discount and resell it at a markup once market demand rises. A further explanation for purchasing so many bottles of perfume could be a personal interest.
As with collecting art or classic cars, perfumes are often collected by enthusiasts. With my passion for unique perfumes, I plan to collect several bottles. Overall, given that there are no trade restrictions and the U.S. will impose a $305 import tax, the perfume will cost AED 312,000 ($88,240) and will be transported by sea freight.
Currency
To purchase the given product, it is crucial to consider its price in domestic currency and convert it to the preferred currency, such as the United States dollar. The official currency of the United Arab Emirates is the UAE Dirham (AED). As of November 23, AED 1 equals USD 0.27 (Forbes, n.d.). Meanwhile, according to the official website of Swiss Arabian, one bottle of Shaghaf Oud Ahmar costs AED 156 (Swiss Arabian, n.d.). As a result, 2,000 bottles of the product would cost AED 312,000.
After making calculations, it can be estimated that the cost of one bottle of perfume, when converted to United States dollars, equals $0.27 * AED 156 = $44.12. Then, 2,000 bottles of the perfume would cost $44.12 each: $44.12 × 2,000 = $88,240. Thus, it can be confirmed that 2,000 bottles of Shaghaf Oud Ahmar purchased from the United Arab Emirates would cost AED 312,000, or $88,240.
Trade Barriers
Another point worth consideration is trade barriers, which often arise when dealing with imports. Trade barriers are limitations imposed by nations on imports to safeguard their own enterprises (Lussier & Sherman, 2022). There are a few trade barriers, mainly industry-related limitations imposed by the Food and Drug Administration (Anderson et al., 2020). There is a robust trade relationship between the U.S. and the United Arab Emirates (Anderson et al., 2020). In general, the U.S. perfume industry is regulated, requiring compliance with numerous requirements.
At the same time, the regulations are not as strict as in some other countries. For example, in the United States, not every cosmetic brought into the country is examined or tested (U.S. Food & Drug Administration, 2022). The Food and Drug Administration issues Import Alerts to inform examiners of trends in noncompliance, enabling inspection efforts to be directed most effectively (U.S. Food & Drug Administration, 2022).
Import Alerts cover a variety of products, including beauty goods adulterated by microbial contamination and goods advertised with medicinal properties that are legally considered unauthorized new drugs (U.S. Food & Drug Administration, 2022). Companies that import goods into the United States that are deemed to be exclusively cosmetics are exempt from FDA registration requirements, and bringing cosmetics into the U.S. does not necessitate a registration number (U.S. Food & Drug Administration, 2022). When applying the given regulations to the UAE perfume, it becomes evident that there are no strict trade barriers that would impede imports to the U.S.
Customs and Duties in the United States and United Arab Emirates
As for customs and duties in the two countries, there are no significant tax processes either. Both incoming and outgoing transportation are often zero-rated in the United Arab Emirates (Deeks & Hayashi, 2021). Exporters in the United Arab Emirates are not required to pay taxes on their exports of products and services (Deeks & Hayashi, 2021). When importing products and services, the company is responsible for paying the relevant customs charge (Deeks & Hayashi, 2021). In other words, exporting from the UAE is not costly.
Similarly, the United States imposes import duties on perfumes. The Harmonized System Code for perfumes (3303.00) attracts an import duty of 0% ad valorem, but an import processing fee (Merchandise Processing Fee) of 0.3464% applies (U.S. Customs and Border Protection, n.d.). The bare minimum tax expense will be $31.67 and will not exceed $614.35 as of 2023 (U.S. Customs and Border Protection, n.d.).
The Multi-Product Fee (MPF) for informal entries applies to products shipped, flown, or sent internationally (U.S. Customs and Border Protection, n.d.). For imports of commercial products worth $2,500 or more, formal registrations are necessary (U.S. Customs and Border Protection, n.d.). As a result, transporting the perfumes from the UAE will not involve taxes. Importing the products into the U.S. will incur $305 in taxes, as the goods are valued at more than $2,500.
Mode of Transportation
Finally, the urgency, cost, and type of the items would all play a significant role in determining the mode of transportation for the perfume shipment. Sea freight would be the preferred method because of the heavy shipping and the delicate nature of the perfume bottles. Nevertheless, it is slower than air freight, so if speed is essential, air freight might be a better choice—albeit at a higher cost.
There are several reasons why sea freight is the most practical. First, the specified method of transportation is less expensive. One of the most economical methods of moving goods over long distances is through the shipping industry, which also offers the lowest freight rates (Spalding et al., 2021). Secondly, it is the best approach for transporting large amounts of product. Compared to the capacity of trucks or airplanes, vessels are designed to carry significant quantities of goods and merchandise (Spalding et al., 2021).
Furthermore, hazardous materials, as well as liquids and gases, can be transported by shipping (Spalding et al., 2021). To maintain the safety of the ship, crew, and cargo on board, several restrictions apply (Spalding et al., 2021). Third, the chosen method is the safest form of transportation. The proportion of losses caused by incidents during maritime transportation has reached its lowest level (Spalding et al., 2021). Lastly, agencies and organizations perceive the approach as the most environmentally friendly (Spalding et al., 2021). Thus, risks associated with the maritime business are lower than those associated with vehicle transportation.
Social and Cultural Implications
Finally, social and cultural implications are essential to understand in the given situation. For example, when communicating with overseas companies, it is essential to be culturally sensitive (Morris & Oldroyd, 2020). First, Arabic is the official language of the United Arab Emirates. Even though many residents speak English fluently, having access to interpreters or translators can help ensure successful communication, particularly during in-depth conversations or negotiations (Morris & Oldroyd, 2020). Second, building connections and gaining confidence are critical components of doing business in the nation, especially given that this is an Islamic country that values morals and integrity (Wijaya et al., 2023). Therefore, for professional contacts to be successful, rapport-building through meetings and personal relationships might be important, along with attention to language barriers.
Conclusion
In summary, with no trade constraints and $305 in import duties from the United States, the fragrance will cost AED 312,000 ($88,240) and be shipped by sea freight. The United States and the United Arab Emirates have a strong trading relationship with few trade restrictions. Additionally, there are no noteworthy customs or tariff procedures in either nation. Taxes will not be imposed on perfumes while they are being transported from the UAE. Because the articles are priced at more than $2,500, the import taxes will total $305.
Given the shipment’s weight and the fragility of the perfume bottles, sea freight would be the best option. In addition to paying particular attention to language difficulties, rapport-building through meetings and personal interactions may be crucial for the effectiveness of professional encounters. However, it is slower than air freight; thus, even if it costs more, air freight might be a preferable option if speed is crucial.
References
Anderson, R., Seibert, R., & Wagner, J. G. (2020). Politics and change in the Middle East (10th ed.). Taylor & Francis.
Deeks, A., & Hayashi, A. (2021). Tax law as foreign policy. University of Pennsylvania Law Review, 170, 275-340.
Forbes. (n.d.). AED to USD.
Lussier, R. N., & Sherman, H. (2022). Business, society and government essentials: Strategy and applied ethics (3rd ed.). Taylor & Francis.
Morris, S., & Oldroyd, J. (2020). International business. Wiley.
Spalding, M. J., Braestrup, A. E., & Refosco, A. (2021). Greening the blue economy: A transdisciplinary analysis. In Sustainability in the maritime domain: Towards ocean governance and beyond (pp. 27-59). Springer International Publishing.
Swiss Arabian. (n.d.). Shaghaf Oud Ahmar.
U.S. Customs and Border Protection. (n.d.). Merchandise processing fees.
U.S. Food & Drug Administration. (2022). Cosmetics importers.
Wijaya, I. F., Moro, A., & Belghitar, Y. (2023). Trust in Islamic business‐to‐business relationships: Evidence from Indonesia. British Journal of Management, 34(1), 111-128.