Saudi Arabia enacts reforms to improve speed and ease of goods transport

A raft of reforms and digital transformation initiatives in Saudi Arabia have earned the country a place among the top-10 most improved global business climates in 2019, according to the World Bank’s “Doing Business 2020” report. The country’s new rank of 62nd out of 190 countries on the report’s ease of doing business rankings marked an improvement of 30 spots on the previous year. This was attributed to reforms in eight areas of business life, including trade across borders, which took into account upgrades at Jeddah Islamic Port (JIP), the introduction of an electronic single window that enables risk-based inspections, and the launch of a new online certification platform for imports.

Saleem-Saber

A key change has involved the registration, certification and shipment of products to Saudi Arabia. The Saudi Standards, Metrology and Quality Organisation (SASO), which is responsible for maintaining standards for imported consumer goods, used to require businesses to obtain a certificate of conformity (CoC) for each shipment, including certificates of origin and other legal documents. In January 2019 SASO launched an online certification and conformity assessment system, replacing previous CoC requirements. The Saber system can be used by importers within the country to make certification processes much quicker and reduce bottlenecks. Included in the service is the new Saudi Product Safety Programme (Saleem), which issues two types of certificates: the three-year product CoC, which is issued after tests and verification procedures to assess technical standards are completed; and a shipment CoC, which is issued for each shipment. The Saleem-Saber system has been made mandatory for certain products, but can be used on a voluntary basis by import agents.

Fasah

Another component of e-government reforms is the country’s single-window system (Fasah), an electronic data interchange platform that supports clearance by integrating more than 25 entities in the import-export process. This includes Customs, the Saudi Ports Authority, the General Authority of Civil Aviation and SASO, among others. The online system can be used by importers and exporters, shipping agents, port operators, clearing agents or brokers, and the public sector. Fasah services include manifest submission, declaration creation and submission, the single-payment portal and the Masar GPS tracking system, which allows cargo and container shipments to be tracked in real time as they pass government checkpoints.

Improved Clearance

On the import side, digitalisation means many processes can be completed before a ship arrives. Shipping agents are able to upload manifest documents 72 hours before arrival, while Customs brokers can file declarations with ships still at sea. These documents can be examined by external entities dealing with counterfeit items, specialised goods, restricted goods, exemptions and valuations in the 48 hours before the ship docks. At this stage, those shipments selected for manual inspection can be identified. At the ports, containers are x-rayed, stored and inspected for 24 hours before being collected for their onward journey by land. These processes are repeated in reverse when cargo for export arrives at ports by land and is loaded on to ships.

Under the previous system, imports required 12 documents: a broker authorisation, a Customs declaration, a commercial register, a commercial permit, a packing list, an exit gate permit, a CoC, proof of payment, the certificate of origin, a delivery order, an invoice and a bill of lading. Under the new system, the only required documents are the invoice and bill of ladling. Meanwhile, on the export side, the number of documents was reduced from eight to two: a manifest and an invoice.

To speed up clearance, ports have also increased the hours during which Customs operations take place, trained some staff to work in x-ray analytics rooms, and reduced the number of manual inspections. “The latest investments in innovation and technology have enhanced the productivity at JIP,” Mohammad Alshaikh, CEO of marine cargo handling firm DP World, told OBG. “It is key that all the entities work together to avoid duplications in the logistics sector. All the dry and maritime ports have to be aligned to achieve the common milestones and not overlap with each other.”

Early Wins

Improvements and reforms have already made an impact, according to a National Industrial Development and Logistics Programme progress report published in January 2019. Between February 2017 and March 2018 the average import dwell time was cut from two weeks to 6.4 days, while import clearance times were reduced from 4.9 to 1.9 days. Digitalisation meant that by March 2018, 47% of declarations had been made before vessels arrived, compared to 11% in February 2017, while 95% of declarations were submitted electronically, up from 25%.

Bonded Zones

Bonded and re-export zones are dedicated areas for manufacturing and logistics operators to benefit from special Customs regulatory schemes. In March 2020 there were two bonded re-export zones operating in the Kingdom at Jeddah and Dammam, owned by local logistics firm LogiPoint and the Saudi Development and Re-Export Services Company, respectively. The LogiPoint Bonded Re-Export zone occupies a 1m-sq-metre site at JIP, while the Dammam Bonded and Re-Export Zone is situated on a 350,000-sq-metre site within the King Abdulaziz Port complex.

Bonded zones handle trans-shipment containers and provide labelling, packaging and branding services. These sites allow local goods to be handled for export without a declared final destination and permit foreign investors to store goods without the need for commercial registration. Bonded corridors allow goods to be transported between air, sea and land transit hubs. In the second half of 2020 there are plans for a third facility to open at King Abdullah Economic City in Rabigh some 160 km north of Jeddah.

Saudi Arabia is also in the process of adopting of an authorised economic operator (AEO) programme, which was one of the components of the World Trade Organisation’s Kyoto Convention for trade facilitation. The AEO programme is a compliance and approval system that is designed to help businesses in the supply chain – including couriers, shipping and clearing agents, exporters and importers – to receive preferential treatment at ports with a reduced risk of inspections and the use of virtual Customs warehouses.

Business Response

The government’s reforms have been welcomed in the wider business community, and will help to make the Kingdom a more attractive prospect for international investors. “There have been big advancements in Customs clearance services,” Mohkam Bahakim, CEO of local logistics services provider Bahakim Group, told OBG. “Companies used to spend between 10 to 15 days on services that can now be delivered in few hours. The new regulations and legal framework are attracting foreign manufacturing companies to Saudi Arabia.” In an increasingly competitive global market, Saudi Arabia’s new digital services would give the logistics sector in the country an advantage.