Saudi Arabia Exporting

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Exporting to Saudi Arabia

Author - U.S. Department of Commerce

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

The Commercial Agency Regulations (CARs) regulate all commercial relationships (including both agency and distribution arrangements) in Saudi Arabia. Under the CARs, foreign companies may not operate directly on the Saudi market, but only through Saudi intermediaries, i.e., Saudi nationals or companies owned and managed exclusively by Saudi nationals. Thus, although a U.S. exporter may sell its products to a Saudi purchaser without entering into a formal relationship with a Saudi intermediary, e.g., through an offshore sales transaction, Saudi representation is a prerequisite for those exporters which seek to establish a long-term presence on the Saudi market. The most important features of the CARs include:

* Registration: Saudi agents and distributors must register with, and obtain approval from the Ministry of Commerce (MOC) for each agreement into which they enter, although failure to register will not invalidate a contract or adversely affect the foreign supplier. (The MOC has the authority to verify that the agreement conforms to Saudi law and satisfies certain "minimum requirements".) * Exclusivity: While the CARs do not require that distributorships be granted on an exclusive basis, the MOC will nevertheless refuse to register an agreement that does not grant the intermediary an exclusive appointment with respect to either product line or geographic scope. * Contract Terms: Agency or distribution agreements must contain certain basic terms (including duration and termination procedure provisions) to be valid and enforceable. The MOC issued a "model contract" for commercial intermediaries in 1983. Parties may employ alternative language or adopt additional provisions in drafting their own agreements so long as they adhere to the MOC's policy concerns as reflected in the model contract. * Sanctions: Serve penalties may be imposed for violating the CARs, including liquidation of the business organization, deportation of foreign personnel, and prohibition against future commercial activities in the Kingdom. * Termination/Compensation: Commercial intermediaries may claim damages for breach of the agreement or "business custom", as well as for arbitrary (improper) termination. Although no legal right to compensation upon lawful termination or non-renewal exists, principals usually compensate their intermediaries for any goodwill developed during the course of the agreement. * Disputes: Parties are free to arbitrate their disputes outside the Kingdom. Enforcement of a foreign arbitral award may, however, be problematic.

Import Restrictions and Duties: Imports from Israel are banned entirely. Also banned are importations of weapons, alcohol, narcotics, pork, pornographic materials, and distillery equipment. Special approval is required for the import of seeds, food, livestock, books, periodicals, movies, chemicals, pharmaceuticals, radios, horses, and perfumes. Importers are required to be licensed by the Ministry of Commerce and should consult the appropriate Ministry about goods or materials to be imported, e.g., the Ministry of Health for medicines and drugs. In addition, importers must comply with regulations on standards and measurements set forth by the Saudi Arabian Standards Organization (SASO). Customs duties vary from zero to 30 percent.

Documentation: Saudi import procedures require a notarized and authenticated certificate of origin, a bill of lading or air waybill, and documents certifying proper insurance. Import of animal or plant products requires special documents attesting to adherence to health regulations; exporters should check with an import agent to ascertain the needed health and sanitary documents.

Notarization and authentication of the certificate of origin should be done by a Saudi Arabian Embassy or Consulate. In case there are no Saudi missions in the exporting country, it is sufficient to have these certificates attested to by the local chamber of commerce or industrial association.

Commercial Policies

Industrial cities have been established in Yanbu on the Red Sea and in Jubail on the Persian Gulf. These cities are predominantly petrochemical and oil refinery centers. Companies investing in these cities receive government assistance in obtaining financing and in tax relief.

Exchange Controls: The Saudi Arabian Monetary Agency (SAMA) acts as the central bank and controls the Saudi monetary supply. There are no exchange controls on the Saudi Riyal; capital, profits, and salaries may be repatriated freely. In addition, bank accounts in riyals and in dollars are unrestricted, and gold and foreign currencies may be freely bought and sold.