The cost of customs clearance is related to specific, easy-to-predict factors, but not only to that, but also to taking advantage of certain opportunities to reduce and exempt duties. In this article, we will discuss the specific factors associated with the cost of customs licensing, and how fees can be reduced to the lowest level.
How to calculate the cost of customs clearance in Saudi Arabia
The cost of customs clearance is determined by three factors:
- The value or price of the goods + all costs up to the airport of import.
- The rate of customs duties prescribed on the type of goods.
- VAT of 15%.
In order to calculate the cost of customs clearance in detail, it is necessary to first know the customs code, which is an international six-digit code, whose function is to distinguish the goods with their own code, in order to facilitate their classification and know their customs duties accurately.
For example, if we assume that we are importing onions, by searching on the official website of the General Authority of Tax, Zakat and Customs, we will find that the customs code for green and dry onions is 070310110000, and the research shows that the percentage of customs duties for it is 15%.
This is followed by multiplying the total value of the goods by their customs duty ratio, without neglecting the addition of VAT.
What other factors affect the cost of customs clearance?
There are a range of factors that affect the cost of customs clearance by increasing or decreasing and traders and importers should take into account the following:
- Review the value of the goods: The value of the goods is not calculated based on the selling price to the final consumer, which is a common mistake made by some and leads to a high cost of customs clearance.
- Tax compliance: Certain types of goods may be subject to special excise taxes, to protect national products or anti-dumping, so these taxes should be added within the formula for calculating the cost of customs clearance.
- Source of goods: The Kingdom of Saudi Arabia has free trade agreements with some countries to facilitate trade exchange and facilitate the flow of goods, so the source of the goods should be reviewed for the possibility of applying special customs duties on the goods of this source.
- Examination of exemptions: Customs authorities grant certain types of goods customs incentives and exemptions to encourage their entry into the country, which is in the interest of the importer as it leads to a decrease in the cost of customs duties or complete exemption from them.
The latest customs duty rates in Saudi Arabia
The decisions regulating customs duty rates change periodically, according to different internal and external data and to comply with the country’s economic policies and the Kingdom’s obligations with international parties such as the World Trade Organization, and in the most recent amendment of customs duties issued in 2022, customs duties were adjusted for 99 products of food, industrial, agricultural and live animals. The following is a summary of the percentage of customs duties imposed on a group of the most prominent products:
- Sheep and goats 7%.
- Fresh and chilled tomatoes 15%.
- Onions with green or dry skin 15%.
- Eggplant 10%.
- Frozen tilapia fish 6%.
- Grape and orange juice 15%.
Tips to minimize the cost of customs clearance
Since the cost of customs clearance is linked to many data beyond your control, it will be difficult to predict the final cost accurately, but there are some tips that help the importer to reduce the cost of customs clearance and avoid unnecessary expenses, are the following:
- Make sure that the customs codes of the goods are correct and up-to-date, these codes are subject to change sometimes, so they should be reviewed immediately before shipment, to ensure that they match the quality of the goods and to avoid any errors in classification.
- Prepare all the documents required for clearance well before the goods are shipped, and provide the customs clearance company with all information related to the shipment before starting the delivery process, it is advisable to complete the various requirements required by customs to ensure the clearance process with minimal delay and additional storage costs.
- If you import from one of the regions with which the Kingdom has a free trade agreement, it will be an additional advantage that reduces the cost of customs clearance, so do not lose sight of this consideration because it may save you a lot of money.
Glimpses of trade agreements between Saudi Arabia and other parties
The cost of customs clearance will not be complete without addressing the trade agreements concluded by the Kingdom with other countries to encourage bilateral trade between the two parties, and the repercussions of these agreements on customs exemptions and incentives for goods. The following highlights the most important trade agreements and their impact on the cost of customs clearance:
Economic Agreement between the Gulf Cooperation Council (GCC).
Goods produced in any of the GCC countries shall be treated as national products, under this agreement, goods shall be transported between the GCC countries duty-free, taking into account the application of veterinary and agricultural quarantine systems and prohibited and restricted goods in each country.
Agreement on the Facilitation and Development of Trade Exchange among Arab Countries (Greater Arab Free Trade Area)
This agreement means the abolition of all customs duties on exports between Arab countries, including Arab calendar goods, and Arab goods entering trade exchange in accordance with this free zone shall be treated as national goods with regard to health protection requirements and local duties and taxes.
European Free Trade Association (EFTA) countries
EFTA countries are European countries that are not members of the European Union, namely Switzerland, Iceland, Norway and the Principality of Liechtenstein, and under this agreement most of the goods imported from them to the Kingdom will receive full customs exemption, but a limited group of goods will remain outside the scope of customs exemption to protect them, such as milk, eggs, wheat and flour.
Singapore Convention
This agreement was signed by the GCC countries as a party and the Republic of Singapore as the other, under which all Singapore exports receive duty-free upon entering the GCC markets.
Finally, choose an experienced and reputable customs clearance company such as the “Border Support Company”, which on the one hand will study all the details of the shipment and on the other hand it will correct any possible errors before they occur and thus avoid paying avoidable fees or costs.
