Rules of origin are rules that show the country of origin of a certain product. Customs clearance uses it to determine its economic nationality. These rules have become a challenge for the national shipping company of Saudi Arabia. This is because the whole world is not using the rules harmonized. The lack of harmony is even more noticeable with more and more free trade agreements. The Minister of finance in Saudi Arabia sets new national rules of origin for GCC goods. He wants to condition those goods are national during the import into the KSA.
What are the key requirements as Saudi Arabia sets new national rules of origin?
- The goods should have a valid Certificate of Origin now that Saudi Arabia sets new national rules of origin
- The goods need to be transported directly from the manufacturing country to KSA without passing through Bahrain customs clearance for example
- For products that are not completely manufactured in the GCC countries, the manufacturing process should at least be 40% of added value
- The national workforce of the manufacturing companies should not be below 25% of the total workforce.
How to applicate the new decision
Whether the goods are fully or semi manufactured, their origin is determined when entering Saudi Arabia via air cargo Bahrain for example. When the good enter the country, the national provisions decide their treatment as national goods. The 34 articles that make these rules will encourage the growth of national industries. Also, they should support the local economy and sustainable development.
The free zones as Saudi Arabia sets new national rules of origin
KSA will treat goods manufactured in free zones and duty-free shops as foreign. Because of that, they will be subject to customs duties. Goods that correspond to the following criteria will not benefit from the treatment:
- Goods that passed through a free zone entity or establishment
- The Goods that entered into free circulation in the GCC
- Goods that include raw materials and components of GCC origin
The way forward
The new rules are effective from the 2 of July 2021. Custom clearance and freight forwarding companies should consider how the new rules for national goods impact their importing and exporting operations. Businesses should also review how this decision affects their production, supply chain, and movement of goods between the GCC countries. The problem is that certain processes, like mixing of products and packing, will not satisfy the requirements. Doing any business from a GCC-free zone will like result in not satisfying the requirements.
Saudi Arabia sets new national rules of origin – conclusion
The new rules have a goal to encourage the production of national goods, but the pandemic has affected the trade of goods. With time and joined forces, the economy will stabilize, and we will be able to see the results of decisions like the one where Saudi Arabia sets new national rules of origin.