Exporting to Saudi Arabia
A foreign business does not require a legal presence in Saudi Arabia where goods are being sold directly to an end user in the Kingdom. Similarly, where its goods are imported for sale or resale through distributorship, commercial agency or franchise arrangements (referred to generally as ‘commercial agencies’), it is not necessary for a foreign company to establish a legal presence in Saudi Arabia.
Commercial agencies are a common and relatively straightforward way for a foreign business to arrange for its products to enter the Saudi market. Only Saudi nationals, or Saudi companies wholly owned and managed by Saudi nationals, can be commercial agents. The commercial agent must guarantee the quality of the products, and provide necessary maintenance and spare parts in the market.
Commercial agency agreements must be in writing, and the agency must be registered with the Commercial Agencies Department of the Ministry of Commerce & Investment within six months of commencement of the agreement. Failure to register can result in fines and other penalties.
A commercial agent has no statutory right to compensation upon the lawful non-renewal or termination of its commercial agency. Despite this, claims are often made by commercial agents for compensation for their contribution to the goodwill of the principal’s business. Commercial agents may sometimes refuse or delay de-registering commercial agencies on expiry or termination, with a view to obtaining compensation from the foreign principal, although it is generally possible to register a new agent without de-registration of the existing agent.
Approval requirements for the import of goods into Saudi Arabia are extensive, and vary according to the nature of the goods. Import agents are routinely appointed to ensure that importation proceeds smoothly, and they should be able to provide specific and current details of the documentation that must accompany goods destined for Saudi Arabia.
The Saudi Standards, Metrology and Quality Organisation (SASO) formulates national standards for products, including labelling, inspection and testing. In order to obtain customs clearance, all imported goods must have a “Conformity Certificate for Goods Exported to the Kingdom of Saudi Arabia”. A conformity certificate must be issued by an approved accreditation body, authorised by the relevant official agency in the country of origin. The party submitting the conformity certificate must declare compliance of the goods with SASO’s requirements. There may also be additional authorisations and requirements applicable to the particular products (e.g. ‘type approval’ requirements for telecommunications equipment).
