Saudi Arabia: Increase in customs duty rates announced by Saudi Customs

In detail

Proposed changes to the KSA Integrated Customs Tariff

The Government of KSA has decided to increase the customs duty rates for an extensive range of goods. A total of 57 Chapters and more than 2,000 Tariff Lines of the KSA Integrated Customs Tariff are expected to be affected. The full list of products affected was recently published on the Saudi Customs website and can be accessed through this link (only the Arabic version is currently available): HS codes subject to increased duty rates

For ease of reference, we have listed the main categories of goods that will be subject to higher customs duties, starting June 10, 2020, below:

• Foodstuff
• Mineral products
• Chemical products
• Plastic products
• Rubber products
• Leather products
• Textile
• Footwear
• Base metals, e.g. steel, iron, aluminium, etc. 
• Cement
• Ceramic
• Machinery, equipment, electrical equipment
• Toys
• Furniture
• Vehicles
• Other various types of manufactured goods

What can I do to minimise the impact on my business?

The changing trade landscape has become a constant source of uncertainty for companies. More importantly, tariffs impact all aspects of an organization and have a direct impact on profitability. In managing these uncertain times, businesses are expected to understand the tariffs impact on profitability today and the impact that tariffs may have on profitability in the future.

As the customs duty rates have been increased to levels reaching 10%, 15% and 20% in many of the above listed cases, it is critical for businesses importing goods in KSA to consider the possibility of reviewing their customs and international trade policies to ensure efficient duty management.

Some of the options that importers can consider, in accordance with the applicable customs rules and regulations in KSA, may include: 

• Exploring alternative sourcing, focusing on the KSA local market and Free Trade Agreement (‘FTA’) partners, such as the GCC and other Arab countries, Singapore, Switzerland, Norway, etc.
• Considering applying for, or extending the customs duty exemption for industrial activities
• Exploring the use of the growing number of bonded warehouses and bonded zones across the KSA to store goods under duty suspension, i.e. deferring the payment of goods intended for the local market, and avoiding the payment of duties for goods to be re-exported from KSA
• Evaluating the use of the temporary admission relief for goods imported for a limited period of time
• Considering the review of the customs valuation policy, unbundling non-dutiable costs
• Considering the review of the tariff classification policy, focusing on streamlining the use of tariff lines
• Reviewing the contractual terms with suppliers and logistics service providers to minimise the supply chain costs associated to the imports in KSA
• Discussing the changes with customs brokers and third party logistics service providers to ensure compliance and avoid potential fines
• Evaluating the potential impact that the increased duty rates have on the VAT, Transfer Pricing and Corporate Tax/Zakat positions of businesses operating in KSA

It is also important to consider the use of digital automated trade solutions (many of which may exist in native ERP environments or can be added with additional software packages).These solutions can automate and standardize import and export processes across business units, manage customs data in a central location as well as enabling local, regional and global reporting dashboards. This helps reduce risk and provides an extra layer of control surrounding interactions with government agencies. These type of solutions also help organizations manage trade uncertainties by providing real time visibility to customs data that can be used to accurately set prices and provide support in managing profitability and ensuring compliance. 

Next steps to consider

The announced increase in customs duty rates as of June 10, 2020 requires that importers in KSA start to consider the necessary changes required to manage the impact on their operations, and comply with the legal requirements in terms of declaring and paying the right amount of customs duty to Saudi Customs. It is also recommended that importers consider the appropriateness of reviewing their customs and international trade policies to address the impact of the new customs duty rates in KSA in an efficient manner.