Saudi Arabia engages cross-border trade boosters
22nd October 2019By Adel Baraja, General Manager, Marketing and Customer Experience, Saudi Customs
The Saudi economic and social reform plan, called Saudi Vision 2030, aims at inducing long-term economic growth that is not reliant only upon oil exports. Saudi Arabia is the largest market in the MENA region and a gateway to a region of over 424 million consumers. Leveraging its unique geographic position, the Kingdom wishes to become a global logistics hub and has made trade facilitation one of the three pillars of its Customs strategy, with the improvement of infrastructure and digitalization as key enablers.
Saudi Customs is the official body mandated to realize this ambitious goal by managing the movement of trade and travellers crossing Saudi Arabia’s land, sea, and air ports. Its mission is to contribute towards stimulating the Saudi economy while protecting society by ensuring efficient management of trade operations, enhanced revenue collection, and good customer care.
Among recent measures taken to facilitate the exchange of goods across the country’s borders is its participation in TradeLens, a blockchain powered platform, the establishment of new bonded zones, and the launch of the Improved Clearance Programme.
Integrating the Single Window into TradeLens
Since 2017, Saudi Customs had been actively engaging in the digitalization of its clearance procedures and its handling of shipments. An electronic national system for the management of cross-border trade operations, called FASAH, has been developed. It acts as a Single Window environment, connecting all organizations involved in the regulation of trade such as environment, commerce, agriculture, Customs, and the Ports Authority.
Lately, FASAH was integrated into TradeLens, a blockchain-enabled solution that was jointly developed by Maersk and IBM, enabling all organizations involved in an international maritime shipment to simply and securely exchange shipment events and documents in real time.
Information from TradeLens is pulled into FASAH automatically, removing the need for the submission of an import or export declaration. Moreover, TradeLens allows Customs and other government agencies to piggyback their supervision processes on top of existing commercial information exchanges.
As soon as a maritime container is stuffed in one of the Saudi Customs Port or in the exporting country, Saudi Customs is able to pull the purchase order and packing list from TradeLens and use them to risk assess a shipment. Access to earlier, more complete, immutable data improves the effectiveness of targeting processes, facilitating legitimate trade, increasing compliance, and improving Customs’ efficiency.
On 13 May 2019, Saudi Customs oversaw the departure of the first shipment managed through the new mechanism. The shipment departed from Saudi Arabia’s King Abdulaziz Port in Dammam en route to Rotterdam, while its data and documents were received and handled by all FASAH-connected agencies through TradeLens.
Saudi Customs believes that the solution will transform the shipping industry in the region, making it faster, transparent, and more efficient. In addition, Customs plans to expand its participation in TradeLens to include other ports, and apply it to importing as well as exporting.
Bonded zones to boost trade
Another pillar the ambitious reform plan capitalizes on is the expansion of bonded zones and bonded warehouses, which allow companies to store merchandise for three years during which the goods may either be imported, exported, or re-exported. Some semi-manufacturing operations are also accepted. After the three-year period, the contract can be renewed. The zones offer companies various features and traditional benefits such as:
- the suspension of Customs duty and tax payments;
- the possibility to carry out light manufacturing processes on goods;
- the submission of export declarations without an export manifest;
- the (re-)export of goods through a port other than the actual port of entry;
- the possibility to sell the goods to clients registered in a bonded zone;
- the removal of the need for foreign investors to register locally in order to store goods.
The measure has been accompanied by a robust regulatory framework, which has been aligned to the Gulf Cooperation Council’s (GCC) laws as well as international standards, opening a whole new array of opportunities for trade in the region.
The regulation allows goods to be transferred between GCC bonded zones without the need to settle duties in the country of departure. Additionally, these bonded zones may be used for light manufacturing processes, including disassembling, assembling, embossing, testing, mixing and any other minor manufacturing activities, as long as the Harmonized System (HS) codes of the goods on which the processes were performed do not change from the initial codes upon which the goods entered the bonded zone. Furthermore, goods may be sold and purchased inside bonded zones or transferred from one bonded warehouse to another without any tariff being charged.
The establishment of these new bonded zones carries tremendous benefits that would shift the Kingdom’s positioning on the world’s logistics map by supporting exports, attracting foreign and local investment, and opening new markets. Two bonded zones are currently operating: one in Riyadh and the other at King Abdulaziz Port in Dammam. Another in Rabegh is set to begin operations in 2020. In addition, in January 2019, Customs signed several Memoranda of Understanding with local authorities to develop more bonded zones.
Improved Clearance Programme
Another trade facilitation initiative is the Improved Clearance Programme (ICP), which aims to streamline Customs clearances through pre-arrival electronic submission and the completion of inspections in 24 hours.
The programme reduces the number of required supporting documents to just two (invoice and bill of lading), which must be submitted through FASAH. Traders can track their shipments through the MASAR application. In 2019, thanks to the programme, 80% of Customs declarations were cleared in less than 48 hours, compared to an average of eight days in previous years.
Saudi Arabia hopes to further streamline its Customs clearance procedures and reduce clearance time to two hours over the next two years. The objective is to attain a higher ranking in the global Logistics Performance Index: from 49 to 25, in addition to securing its status as a key player in international trade.