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Trade Regulations and Standards

 

 

Saudi Arabia Country Profile, OverviewSaudi Trade Regulations and StandardsSaudi Arabia Country Profile, Overview

Also See
The Saudi Business Center

Author - U.S. Department of Commerce

Source:
STAT-USA on the Internet
US Department of Commerce
(202) 482-1986

Trade Barriers
Saudi Arabia is currently in the process of accession to the
World Trade Organization (WTO).  As a result, once Saudi Arabia
is admitted, the country's trade regime should become more
accommodating to non-Saudi business and transparent.  Saudi laws
often favor Saudi citizens, and the Kingdom still has a different
set of trade barriers, mainly regulatory and bureaucratic
practices, which restrict the level of trade.        
For example, only Saudi nationals are permitted to engage in
trading activities.          
All industrial enterprises are open to non-Saudis, 
and they can also trade in the products they manufacture.
Non-Saudis are not permitted to register as commercial agents.        

Trade Barriers

Commercial Disputes Settlements:  Saudi Arabia has signed the New
York Convention on foreign arbitral awards.  While this is an
encouraging step, the enforcement of foreign arbitral awards has
yet to be tested in practice.  Government agencies are not
allowed to agree to international arbitration without agreement
from the Council of Ministers, which, we understand, is rarely
granted.        
Business Visas:  All visitors to Saudi Arabia must have a Saudi
sponsor in order to obtain a business visa to enter Saudi Arabia.
The Saudi who agrees to act as a sponsor accepts certain legal
obligations including personal liability for the actions of the
visitor.  Therefore, a Saudi rarely assumes sponsorship unless he
has a personal interest in the proposed visit.        
In practice, this makes it very difficult for an American
business person to visit Saudi Arabia to investigate the market
or to select a local representative without incurring some
obligation to his sponsor, e.g., the right of first refusal on
any business opportunity developed.  Although the process of
obtaining a visa has been streamlined, naturalized American
citizens of Arab descent and women continue to experience
difficulties in procuring business visas, even when they have a
sponsor.  The Saudi Arabian Government has indicated that U.S.
citizens of the Jewish faith as well as U.S. citizens with an
Israeli exit and entry stamp should  face no difficulty in
getting a visa to visit Saudi Arabia.        
The Embassy is hopeful that the Saudi Government will very soon
permit American businessmen to have two-year, multi-entry visas
at reasonable prices.        
Delayed Payments:  This can be an important concern for affected
U.S. companies.  Although some Saudi Government agencies still
have outstanding dues in 1996 and 1997, the Saudi Government has
taken several measures to reduce its arrearages.  The most
notable move has been a $4.3 billion loan package to cover
payments to Boeing for aircraft purchased by the national
airline, Saudi Arabian.  The Embassy estimates that remaining
arrearages still total $2 to 3 billion.  Nonetheless, the problem
persists, and U.S. companies should check with the U.S. Embassy
or Consulates for information on the current arrearage situation.        
In 1998, due to budgetary shortfalls arising from lower than
anticipated oil prices, some Government contracts are being paid
in bonds.  Companies may either hold the bonds to maturity or
sell them to local banks, usually at a discount of 1 to 2
percentage points.        
Due to accounting procedures used by the Saudi Government, the
Department of Zakat and Income Tax will impose taxes even on
payments which have not been received, arguing that the fact of
non-payment is essentially immaterial in the tax liability
determination process.        
Intellectual Property Protection:  The Saudi legal system
protects and facilitates acquisition and disposition of all
property rights, including intellectual property.  The Saudi
Government has acceded to the Universal Copyright Convention;
implementation began on July 13, 1994.        
Saudi Arabia's Copyright Law does not extend protection to works
that were first displayed outside of Saudi Arabia, unless the
author is a Saudi citizen.  However, the Saudi Government
maintains that this is sufficient to extend protection to foreign
works.        
The Saudi Government has taken actions to enforce copyrights of
U.S. firms, and pirated material has been seized or forced off
the shelves of a number of stores.  The latest religious edict
(Fatwa) by the highest religious authority in Saudi Arabia
condemns software piracy.  Overall, however, piracy remains a
problem.   Saudi Arabia has had a Patent Law since 1989 and the
Patent Office accepts applications, but the number of patents
issued remains limited.  Protection is available for product and
product-by-process.  Product-by-process protection is extended to
pharmaceuticals.  There are provisions in the Patent Law for
compulsory licenses for non-working and dependent patents.  The
term of protection is 15 years.  The patent holder may apply for
a five-year extension.        
Trademarks are protected under the Trademark Law.  Trade secrets
are not specifically protected under any area of Saudi law;
however, they are often protected by contract.  There is no
specific protection for semiconductor chip layout design.
Several of these issues are being taken up in connection with
Saudi Arabia's application to become a member of the WTO.        
Counterfeiting: Consumer products and automobile spare parts
manufacturers are particularly concerned about the widespread
availability of counterfeit products in the Kingdom.  
While anti-counterfeiting laws exist, the U.S. Government has urged the
Saudi authorities to step up enforcement actions against
perpetrators.        
Arab League Boycott:  The Gulf Cooperation Council, i.e., Saudi
Arabia, Kuwait, Bahrain, Oman, Qatar, and the United Arab
Emirates, announced in the fall of 1994 that its members would no
longer enforce the secondary and tertiary aspects of the Arab
League Boycott.  The primary boycott against Israeli companies
and products still applies.        
Advice on boycott and antiboycott related matters is available
from the U.S. Embassy or from the Office of Antiboycott
Compliance in Washington, D.C., at (202) 482-2381.        
Protective Tariffs and Non-Tariff Trade Barriers:  Saudi tariff
protection is generally moderate, but has increased over the
years.  A number of Saudi "infant industries" now enjoy 20
percent tariff protection as opposed to the general rate of 12
percent.  Saudi non-tariff barriers also are increasing.        
Such barriers include preferences for national and GCC products
in Government procurement; a 30 percent of contract value 
"set-aside" for local contractors on major Government projects; a
requirement that foreign contractors obtain their imported goods
and services exclusively through Saudi agents; reservation of
some services for Government-owned companies, namely, insurance
and air transport; and the economic offset requirement mandating
reinvestment of a portion of contract value in indigenous
industries for certain high value Government contracts,
particularly in defense.        
Customs Valuation
All merchandise moving through Saudi customs ports is appraised
by the Department of Customs of the Ministry of Finance.        
Import valuation is primarily used for collection of import
duties and often does not reflect the actual transaction value.
Saudi customs valuation procedures are not WTO-consistent; nor
are they based on invoice value.        
Minimum prices are used, which is contrary to WTO.  Customs
agents rely on their own experience and local prices, as well as
some contact with manufacturers, to assess import tariffs.        
For statistical purposes, the valuation of imported merchandise
is the Cost-Insurance-Freight (CIF) value.  The value of exported
merchandise is based on Free On Board valuation (FOB).  The Saudi
tariff nomenclature is consistent with the Harmonized System.
There does not seem to be a significant body of rule-making or
documentation available.  Appeals are frequently done orally, and
an appeals committee, under the Deputy Director General of
Customs, meets frequently.        
Although Saudi Arabia is a member of the Customs Coordination
Council, Saudi Customs officers do not have the authority to do
investigative work on business premises; nor do they have
enforcement powers.  These powers are vested in the Ministry of
Interior.        
The U.S. Government, through a reimbursable arrangement with the
Saudi Government, is working with Saudi authorities to upgrade
customs valuation procedures.  This is particularly important in
connection with Saudi Arabia's bid to accede to the WTO.        
Import Licenses
The importation of certain articles is either prohibited or
requires special approval from competent authorities.  In
addition, import of the following products requires special
approval by Saudi authorities:  agricultural seeds; live animals
and fresh and frozen meat; books, periodicals, movies, and tapes;
religious books and tapes; chemicals and harmful materials;
pharmaceutical products; wireless equipment; horses; products
containing alcohol, e.g., perfume; natural asphalt;
archaeological artifacts.        
Export Controls
Saudi exporters need to submit a copy of their commercial
registration which indicates they are allowed to export.  They
are also required to submit a certificate of origin of Saudi
products (issued by the Ministry of Commerce).  Certain items
such as antiques, Arabian horses, livestock, or subsidized items
need special approval to export.  Exports of oil, petroleum
products, natural gas and wheat all require export licenses.        
Import/Export Documentation
The following documents are required for exporting goods into
Saudi Arabia: a notarized certificate of origin authenticated at
a Saudi diplomatic mission and local chamber of commerce 
or U.S.-Arab Chamber; a similarly authenticated invoice (in triplicate)
which must state the country of origin, name of the carrier,
brand and number of goods, and description of the goods including
weight and value; a clean bill of lading; documents indicating
compliance with health regulations, if applicable; insurance
documents if shipments are sent CIF.
The original documents must be accompanied by an Arabic
translation; Saudi Arabian Standards Organization (SASO)
certificate of conformity issued by Intertech Testing
Laboratories, if applicable; and a radiation certificate, if
applicable.        
In late 1997, the Saudi Embassy in Washington advised U.S.
traders to obtain authentication of certificates of origin and
other necessary documents through the U.S.-Saudi Business
Council, which has offices in Washington.        
Temporary Entry
For temporary entry of goods for promotional purposes, imports
need an invoice with the value of the goods endorsed by the local
chamber of commerce, and a certificate of origin.  The invoice
should state that the goods are being imported for exhibition
purposes only and will be re-exported.        
Saudi Customs requires a deposit for these goods (either 12
percent or 20 percent of the total value).  This deposit is
refundable when the exhibition is over and upon showing a
document that owner of the equipment officially participated in a
trade show.  Additionally, handling charges will be collected by
the customs authorities.  Reimbursement takes between two to four
weeks.        
Labeling and Marking Requirements
Labeling and marking requirements are compulsory for any products
to be exported to Saudi Arabia.  The Saudi Arabian Standards
Organization (SASO) is the legislative authority responsible for
establishing labeling and other guidelines in the Kingdom.  The
Ministry of Commerce, on the other hand, is the executive body
vested in implementing SASO's guidelines through its inspection
and test laboratories spread at ports of entry Kingdomwide.        
Labeling is particularly important for companies marketing food
products, personal care products, health care products, and
pharmaceuticals.  SASO has specific requirements for identifying
marks and labels for various imported items.  Companies can
request a copy of the labeling requirements by contacting SASO at
Tel: 966-1-456-9900 or Fax: 966-1-452-0086.  Recently, SASO
started enforcing a previous regulation requesting an Arabic
manual with household electrical appliances.        
Quality control laboratories at ports of entry may reject the
entry of products that are in violation of existing laws.
Products arriving at port having less than one-half of the time
remaining between production and expiration date will be rejected
and cannot be sold on the market.  U.S. manufacturers are urged
to discuss labeling requirements with their selected
representative or distributor.        
Prohibited Imports
Importation of the following products are also prohibited by law:
weapons, alcohol, narcotics, pork, pornographic materials,
distillery equipment, and certain sculptures.        
Special approval is required for the import of seeds, food,
livestock, books, periodicals, religious books, movies,
chemicals, pharmaceuticals, wireless equipment, horses, perfumes,
natural asphalt, and archaeological pieces.  There are health and
sanitation regulations on all imported foods.  The Ministry of
Commerce has issued a number of directives aimed at preventing
outdated goods from entering the Kingdom and requiring Arabic and
point of origin labeling.        
Standards (incl. ISO 9000 Usage)
The Saudi Arabian Standards Organization (SASO) has over 1420
SASO and 976 Gulf promulgated standards, and is actively pursuing
the promulgation of hundreds of new standards currently in
various drafting stages of development.        
Labeling and expiration date requirements are stringent and an
export impediment for U.S. fresh eggs and canned baby food
products.        
Saudi Arabia's residential electric power system of 127 volts, 60
Hertz, is unique and has caused export problems for many American
firms.  However, SASO will accept electrical products as low as
115 volts, 60 Hertz.        
A standards representative has been assigned to SASO from the
U.S. Department of Commerce's National Institute of Standards and
Technology (NIST) to advise the Saudi Government in developing
standards and work to insure that new standards are not
inconsistent with those in the United States.  New draft
standards are forwarded to U.S. industry associations for
comments and recommendations, before finalization by SASO.  Other
developed nations have similar programs.  The U.S. NIST
representative can be reached by fax at 966-1-488-3237.        
SASO has decided to adopt ISO 9000 as the approved standards for
Saudi Arabia and to act as an accreditation body through the
Quality Assurance Department.  Compliance will be on a voluntary
basis.  However, it would be prudent for U.S. industry and
services to consider this matter seriously in their planning.        
There may be many cases where procurement agencies will insist on
purchasing and placing orders only with those companies that are
in compliance with ISO 9000, or the U.S. equivalent series.        
In Saudi Arabia, SASO will set up its own certification
organization for locally manufactured products, as several SASO
employees have been certified to work as professional auditors in
conformance to ISO 9000 series standards.        
Ever since it was incepted in November 1995 by the Ministry of
Commerce the  certification program, known as the International
Conformity Certification Program (ICCP), is still applicable to
76 regulated products.        
The purpose of the program is one of consumer protection,
ensuring that products and goods entering the Kingdom are in
conformance with SASO standards.  ICCP is administered by the
Intertech Testing Services on a global basis, on behalf of SASO.
Products may require laboratory testing before certificates of
conformity are issued by Intertech.        
The program consists of two related but separate processes:
LISTING - Regulated products exported to the Kingdom of Saudi
Arabia must be registered by the manufacturer; SHIPMENT
CERTIFICATION - Regulated products exported to the Kingdom need
to be inspected for compliance prior to shipment.        
With the exception of certain food products, all other regulated
products will require Certificates of Conformity (COC's) issued
by Intertech; otherwise, the shipment will be rejected by customs
authorities at the port of entry.  In addition, shipments valued
at less than $5000 do not require the ICCP.        
Used motor vehicles were added to the regulated product list and
will be strictly enforced by customs at point of entry.        
SASO's Listing Center should be contacted for detailed
information at the following address:        
Mr. Dan Cochran, SASO Listing Manager
c/o Intertech Testing Services
3933 US Route 11
Cortland, NY 13045
Phone: (800) 441-SASO
Fax: (800) 813-9442        
For clarification on regulated product guidelines and procedures,
contact SASO's Program Manager Regional Office (PMRO) at the
following address:        
Mr. David Cooper or Ms. Laurel Gibson
3741 Red Bluff Road
Pasadena
Houston, TX 77503
Phone: (713) 475-2082, Fax: (713) 475-2083        
Free Trade Zones/Warehouses
There are no free trade zones in Saudi Arabia, although they are
being considered by the Government.        
Special Import Provisions
Other than those mentioned above, there are no special import
provisions.  Unusual cases should be worked out on a case-by-case
basis with Saudi Customs.        
Membership in Free Trade Arrangements
Saudi Arabia is a member of the Gulf Cooperation Council (GCC)
which consists of Kuwait, Qatar, Bahrain, the UAE, Oman, and
Saudi Arabia.  Membership confers special trade and investment
privileges within those countries.  The GCC is not yet, however,
a full-fledged customs union.  Saudi Arabia is also a member of
the Arab League.  Recently, Arab League states have agreed to
negotiate an Arab Free Trade Zone.  Under the arrangement,
countries should negotiate tariff reductions of 10 percent per
annum.  Provision may be made for more expeditious tariff
reductions on a reciprocal basis between Arab States.        

 

 

 

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