Riyadh: In a recent move, the Kingdom of Saudi Arabia has amended its import rules from the Gulf Cooperation Council (GCC) countries, to prevent customs privileges on goods produced in free zones or that use Israeli components, local media reported on Monday.
In an attempt to challenge the position of the United Arab Emirates(UAE) as a center of trade and business in the region, the amendment came in accordance with a decision of the Saudi council of ministers.
Despite being close allies, Saudi Arabia is trying to challenge the UAE’s position in attracting investors and companies. Saudi Arabia is also trying to diversify its economy and reduce its dependence on oil, while creating more job opportunities for its citizens, a point also covered by the rule changes announced at the end of the week.
The decision excludes goods produced in free zones or that use Israeli components from preferential customs privileges provided by the Kingdom to the other Gulf Cooperation Council countries, namely: the UAE, Bahrain, Kuwait, the Sultanate of Oman, and Qatar.
Under the decision, the Kingdom excluded goods produced by companies with a workforce of less than 25 per cent of the local workforce from the customs exemption agreement between the GCC countries.
The decision also excludes industrial products for which the proportion of local inputs in their manufacture (the added value of the commodity) is less than 40 per cent.
The Saudi decision stipulated that “all goods produced in the free zones in the region will not be considered locally produced.”
The decision also includes “goods that include a component of Israeli production, or manufactured by companies partly owned by Israeli investors, or companies included in the Arab boycott agreement on Israel will be excluded.”
Free zones are one of the main components of the UAE’s economy, and Bahrain are the only two members of the Gulf Cooperation Council (GCC) that have normalization agreements and economic and trade contracts with Israel.
In February, the Saudi government said it would stop giving state contracts to companies with Middle Eastern outposts in any other country in the region.
Saudi Arabia announced the recent changes to the rules despite the fact that the UAE is its second largest trading partner after China in terms of the value of imports, based on recent Saudi trade data.
As per the media reports, ministerial decision stated that companies that employ between 10 and 25 per cent of the total workforce can make up for the difference by increasing the industrial added value in their products and vice versa.
The added value should not be less than 15 per cent, in any case, to benefit from the preferential tariff agreement, it added.