Saudi Trade Regulations and Standards
Author - U.S. Department of Commerce
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.
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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