custom duties consulting services in the gcc

CUSTOM DUTIES
IN SAUDI ARABIA
& THE GCC

CUSTOMS DUTIES
IN SAUDI ARABIA

Our Customs Duties service in Saudi Arabia is part of our tax consultancy services in Saudi Arabia.

Custom Duty is a tariff or a tax paid to the government imposed on good transported, imported or exported, across international borders. In general, the purpose of the custom duty is to protect the country’s economy, support local merchandise, provide form of protection to the country’s jobs and control the transport of restricted and prohibited products by regulating the flow of goods into and outside the country.

The custom duty is either specific or on ad valorem basis, it is a rate or a percentile determined by the total value of the goods paid for in another country; its value is not based on factors such as quality, size or weight of the good.

In general, each country imposes its own type of custom duties, and these are:

Basic Customs Duty (BCD).
Countervailing Duty (CVD).
Additional Customs Duty or Special CVD.
Protective Duty.
Anti-dumping Duty.

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WHAT IS THE DIFFERENCE BETWEEN A TAX AND A CUSTOMS DUTY?

A tax is placed on all types of goods sold or services provided in the country, both imported or exported, and taxation is considered a source of income generation for governments. On the other hand, a duty is a type of tax yet imposed only on goods being imported into the country, and its main purpose is to protect economies upon different aspects. Both taxes and duties are charged to the importer on his shipments that must be paid to the relevant authorities and adds on to the overall landed cost to be paid for a good imported to the country.

WHAT IS THE DIFFERENCE BETWEEN A TAX AND A CUSTOMS DUTY?

A duty is imposed to all goods being imported (except to exempted items), and it may vary depending on the nature of the good. A tariff is however, an additional fee charged on selected goods imported to the country generally in aim to discourage the import of those goods to protect local economies and jobs. Imported goods are classified using the HS and HTS code to determine the applied duty and tariff levied on the shipment.

Follow this link that contains the unified custom duty for GCC states on all goods.

WHAT IS IMPORT DUTY RECOVERY?

Importers of goods into the country are eligible for refund when they can demonstrate and prove that the amount they paid is in excess of the required duty, this is known as import duty recovery.

WHAT IS DUTY DRAWBACK?

Duty drawback is a form of import duty recovery, where the paid duty is refunded on goods that is only transiting through a country and are being re-exported out of the country. The business will need to provide certain proof documents for exit of goods.

WHAT IS A COUNTERVAILING DUTY?

Countervailing duties are special duties and tariffs granted by the International Trade Commission on special cases, where governments may provide aid and assistance to certain countries’ domestic industries to enable them to export their products for lower prices.

WHAT ARE ANTI-DUMPING DUTIES?

Anti-dumping duties are special duties charged to protect local industries from the imported foreign goods that may be sold in the domestic market at a lower value than the fair market price. The duty is used to eliminate the cost of dumping, and is determined by calculating the difference between the cost of production or price of the good in the country of origin and the price of the good sold in the local importing country.

CUSTOM DUTIES IN SAUDI ARABIA

Zakat, Tax and Customs Authority (“ZATCA”) is the regulatory authority of Customs Duty after the Saudi Council Ministers announced approval on May 2021 to merge the General Authority of Zakat and Tax (GAZT) and the General Authority of Customs.

Saudi Arabia uses the Harmonized Commodity Description and Coding System (HS Code) for tariff classification purposes. The customs duty rate is calculated on an ad valorem basis on the value of the good plus cost, freight, and insurance (“CIF”) value. Saudi Arabia also has a signed agreement with Gulf Cooperation Council (“GCC”) which allows member of the GCC countries total exemption of the custom duties, and a 5% custom duty on most goods imported from other non-GCC countries, 100% custom duty on cigarettes, 50% on carbonated drinks and 100% on energy drinks. However, several number of goods have reflected an increase on the imposed duty rates by up to 25%.

The last announced change on levied duty was on 12 June 2022 on the following goods:

Live animals.
Foodstuffs.
Mineral products.
Chemical products.
Plastic products.
Glass products.
Base metals, namely aluminium.
Machinery, equipment, electrical equipment.
Vehicles.

Businesses are required to present a commercial invoice, a bill of lading, certificate of origin to import goods to Saudi Arabia, and complete the clearing procedure through registering at “Fasah” platform and submitting the required documents including the related declaration form at least 48 hours prior to the arrival of the imported goods at the port of entry. “Fasah” platform also provides guide to the custom clearance agents and freight brokers in the country.

Businesses also require reaching the Saudi Standards, Metrology and Quality Organization (“SASO”) to issue Product Conformity Certificate to ensure that the imported goods conform with the technical regulations and control quality standards of imported goods to the country, and afterwards obtain a consignment/shipment certificate for imported goods.

PROHIBITED AND RESTRICTED GOODS

There are some restricted products that require special approval by Saudi authorities for import including: agricultural seeds, live animals, books, periodicals, movies, and tapes; religious books and tapes; chemicals; pharmaceutical products; wireless equipment and radio-controlled model airplanes; horses; products containing alcohol; natural asphalt; and archaeological artifacts.

Saudi law prohibits importation of the following products: weapons, alcohol, all types of narcotic drugs, goods that contradict Islamic faith and public morals, used clothing, certain sculptures, as well as used, reconditioned and inlaid tires.

Follow this link for the list of restricted and banned products to export from Saudi Arabia.

CUSTOMS DUTIES IN SAUDI ARABIA FAQs

WHAT ARE CUSTOMS DUTIES?

Customs duties are tariffs or taxes imposed by the government on goods that are transported across international borders, either into or out of a country. The primary purpose of these duties is to protect local industries by making imported goods more expensive, thus encouraging consumers to buy domestic products. Additionally, customs duties serve as a source of revenue for the government and help regulate the flow of restricted or prohibited items, ensuring that they meet safety and regulatory standards.

HOW ARE CUSTOMS DUTIES CALCULATED IN SAUDI ARABIA?

In Saudi Arabia, customs duties are typically calculated on an ad valorem basis, which means the duty is a percentage of the total value of the goods. This total value is determined by the Cost, Insurance, and Freight (CIF) method, which includes the cost of the goods themselves, the cost of insurance during transit, and the freight charges. The percentage rate applied can vary based on the classification of the goods as outlined in the Harmonized System (HS) codes.

WHAT IS THE ROLE OF THE ZAKAT, TAX AND CUSTOMS AUTHORITY (ZATCA)?

The Zakat, Tax and Customs Authority (ZATCA) is the regulatory body responsible for overseeing customs duties in Saudi Arabia. Established following the merger of the General Authority of Zakat and Tax (GAZT) and the General Authority of Customs, ZATCA manages the enforcement of customs regulations, ensures compliance with tariff classifications, and collects customs duties. They play a crucial role in facilitating trade while protecting the economy from unfair trade practices.

ARE THERE EXEMPTIONS FOR CERTAIN GOODS FROM CUSTOMS DUTIES?

Yes, certain categories of goods may be exempt from customs duties. Common exemptions include personal items, goods imported for charitable purposes, and items brought in by diplomatic missions. Additionally, products that qualify under specific free trade agreements or goods imported into free zones may also be exempt. It’s essential for businesses to verify eligibility for exemptions with customs authorities to avoid unnecessary duty payments.

WHAT ARE THE IMPLICATIONS OF FAILING TO COMPLY WITH CUSTOMS REGULATIONS?

Non-compliance with customs regulations can lead to a range of consequences, including financial penalties, increased scrutiny from customs officials, seizure or confiscation of goods, and significant delays in the import process. In severe cases, repeated violations could lead to criminal charges against individuals or businesses involved. To avoid these pitfalls, it’s critical for companies to understand and adhere to customs regulations diligently.

HOW CAN BUSINESSES RECOVER OVERPAID CUSTOMS DUTIES?

Businesses that believe they have overpaid customs duties can file a claim for recovery. This process involves demonstrating through documentation that the amount paid exceeds the required duty. Claims should be submitted to the customs authority with all supporting documents, including proof of payment and any relevant correspondence. Engaging with customs experts can significantly streamline this process, ensuring that all necessary steps are followed correctly.

WHAT ARE ANTI-DUMPING DUTIES, AND HOW DO THEY AFFECT IMPORTS?

Anti-dumping duties are tariffs imposed on imported goods believed to be priced below their fair market value, typically as a result of foreign manufacturers receiving subsidies. These duties aim to protect local industries from unfair competition, ensuring that imported goods do not harm domestic producers. Businesses importing products subject to anti-dumping duties should be aware of these additional costs, as they can significantly affect the overall price and market competitiveness of their offerings.

WHAT IS THE PROCESS FOR DUTY DRAWBACK IN SAUDI ARABIA?

Duty drawback is a mechanism that allows importers to recover duties paid on goods that are subsequently exported. To initiate this process, businesses must provide comprehensive documentation to customs, including proof of exportation and the original import documentation. The application for a duty drawback must be submitted within a specific timeframe, and the customs authority will review the claim to ensure it meets all criteria. Utilizing the expertise of customs consultants can help businesses navigate this process efficiently.

HOW DO CUSTOMS DUTIES DIFFER BETWEEN GCC COUNTRIES?

While many Gulf Cooperation Council (GCC) countries share a common customs framework, specific duties and regulations may vary by country. For example, while a 5% customs duty is commonly applied across many GCC nations, particular goods might attract different rates depending on local policies. Businesses engaging in cross-border trade within the GCC should familiarize themselves with the customs regulations of each member state to ensure compliance and optimize their import costs.

WHAT TYPES OF GOODS ARE CONSIDERED PROHIBITED FROM IMPORT?

Saudi Arabia prohibits the importation of several goods, including weapons, narcotic drugs, alcoholic beverages, and any products that contradict Islamic values. Additionally, certain items that pose health risks or are environmentally harmful may also be banned. It is crucial for importers to conduct thorough research and consult customs authorities to ensure that their goods do not fall under the prohibited category.

WHAT STEPS SHOULD BUSINESSES TAKE TO ENSURE COMPLIANCE WITH CUSTOMS REGULATIONS?

To ensure compliance with customs regulations, businesses should maintain accurate and detailed records of all transactions, stay updated on changes in customs laws, and prepare documentation carefully. Engaging with customs experts for regular audits can help identify potential compliance issues before they arise. Additionally, training staff involved in the import process about relevant customs regulations can minimize risks and enhance operational efficiency.

HOW DOES THE HARMONIZED SYSTEM (HS CODE) AFFECT CUSTOMS DUTIES?

The Harmonized System (HS Code) is an internationally standardized system for classifying traded products. Each product is assigned a unique code that determines the applicable customs duties and tariffs. Understanding the HS code classification for their products is vital for businesses, as incorrect classification can lead to miscalculations of duties and potential penalties. Importers should ensure they accurately classify their goods to avoid complications at customs.

CAN I APPEAL A CUSTOMS DUTY ASSESSMENT I BELIEVE IS INCORRECT?

Yes, businesses have the right to appeal customs duty assessments if they believe an error has been made. The appeal process typically involves submitting a formal request for reconsideration, along with supporting documentation that substantiates the claim. It’s important to adhere to the deadlines for filing appeals, as they can vary by jurisdiction. Our team of customs experts can assist you throughout the appeals process to ensure your case is presented effectively.

CUSTOM DUTIES IN QATAR

The General Authority of Customs (“GAC”) is the regulatory authority in Qatar to monitor the import and export of goods in and out of the country.

Businesses are required to provide a custom declaration form to GAC upon arrival for clearance of imported goods. Business may use “Al-Naqeeb” online portal to finalise custom clearance procedures such as to check information related to tariffs, duty calculation, accessing customs data, complete a duty payment and a customs transaction.

The custom duty rate in Qatar is also set at a percentage value of goods which is 5%; however, the custom duty for urea and ammonia is 30%, steel is 20%, cigarettes and tobacco related products is 100%.

EXEMPTED GOODS FROM CUSTOM DUTY

Personal products and household items.
Imports for charity.
Imports of the diplomatic and military corporations and bodies.
Imported goods cleared for the free zones and duty-free shops.
Goods in transit at designated destinations.

Prohibited goods for import to the country include flammable goods, nuclear and radioactive materials, arms and explosives, narcotic drugs, and goods shipped from economically boycotted countries.

The Customs Department may run an inspection on the goods; usually by providing a prior notice to the shipment owner, and at his presence. Goods that are harmful or that are prohibited may be damaged or re-exported. Not that only, but also the business bears the cost of transportation to the examination place, packing and repacking, in case an examination is required.

EXEMPTED GOODS FROM CUSTOMS INSPECTION

Imported goods in the name of the ruling family.
Imported goods in the name of diplomatic and consular corporations, and the political mail.

CUSTOM DUTIES IN KUWAIT

Kuwait approved the custom duty regulation in 2003; setting the custom duty rate at 5% CIF on most goods, while tobacco products are levied at a rate of 100%. Some products such as foodstuff, medicines and medical items are exempted from the single customs tariff.

CUSTOM DUTIES IN OMAN

The Directorate General of Customs is the regulatory authority for customs control and security of imports and exports in Oman. A custom duty of 5% is generally levied on the majority of imported goods; however, the custom duty is 100% on alcohols, 50% on cement, 15% on paints and polyurethane products, to name few. While basic food commodities and goods manufactured within the GCC are exempted from the duty. The custom duty in Oman is also assessed on an ad valorem basis on the CIF value. Importing entities are required to provide a list of documents for clearance of the imported goods which include but not limited to the following: the original commercial invoice which should reflect an accurate description of the goods, bill of lading or airway bill, relevant certificate or permit for restricted imports and certificate of origin.

CUSTOM DUTIES IN BAHRAIN

In Bahrain, all goods are subject to custom duty at a rate of 5% of the value of the good including the CIF as per the unified customs tariff table unless exempted as per the GCC unified customs law or any other international agreement. While the custom duty is 225% for alcoholic beverages, 200% for cigarettes and 20% for paper and aluminium products.

Businesses looking to engage in import are required to electronically submit the customs/import declaration form to the customs department including all required documents such as bill of lading and invoice to issue an exit order and release of goods. Note, that goods are subject to inspection and examination as per the risk assessment standards criteria.

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