Last week a small-appliance seller called me. His Dubai free zone warehouse showed 12,000 units on the system; the physical count came to 10,500. Nobody could explain the missing 1,500. He asked: will customs even notice?
They will. Goods in a free zone are duty-suspended, not duty-free. When the ledger doesn't tie out, customs assumes the missing stock went into the local market — 5% duty, 5% VAT, plus a penalty of 10–25% of value. A shortage isn't “shrinkage” in their system. It's a domestic sale.
My experience: don't wait for December 31. Start on December 1 and count against your declarations — quantity, HS code, value, SKU by SKU. Sort the gaps into three buckets. Transit damage needs a carrier claim plus unpacking photos. Lost units need a police report or warehouse CCTV. Scrap needs a licensed recycler and a destruction certificate. Customs accepts those three things. It accepts none of your verbal explanation.
Think of it like filing tax. If you never kept books, nobody wants to hear the story in December.
One more trap: temporary imports — ATA carnets, exhibition demo units, repair items — have to be closed out and re-exported before year end. I've seen three demo units forgotten in a warehouse become “undeclared imports” the next year, with a fine larger than the goods.
Honestly, most sellers don't lose money on duty. They lose it on panic. The stock sheet looks ugly in December, so they dump inventory into the local market to clean the books — 5% duty, 5% VAT, last-mile costs. The more they dump, the more they lose. It also invites a valuation challenge, and a hold of 3–7 days while it's sorted.
What we do is pull the inbound-outbound ledger against customs filings two weeks early, flag the differences, and only then walk the floor. The count is a check, not an archaeology project.
So what happens to your dead stock this year — do you scrap it properly, or let customs decide for you?