Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Standards and Technical Regulations
Saudi Arabia continues to move toward adherence to a single standard in technical regulations, which is often based on International Organization for Standardization (ISO) or International Electrotechnical Commission (IEC) standards, to the exclusion of other international standards, such as those developed by U.S. domiciled standards development organizations (SDOs). Saudi Arabia’s exclusion of these other international standards, which are often used by U.S. manufacturers, can create significant market access restrictions for industrial and consumer products exported from the United States.
Branding and Content
The Saudi market can be very sensitive to branding and materials content. U.S. companies are encouraged to familiarize themselves with Saudi traditions, customs, and strict observances of the Islamic faith to ensure that branding does not unintentionally offend local norms and practices.
Performance and Localization Requirements
Government-controlled enterprises in Saudi Arabia are increasingly introducing local content requirements for foreign firms. Saudi Aramco’s “In-Kingdom Total Value Added” (IKTVA) program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to retain Aramco’s percentage of locally manufactured energy-related goods and services at a minimum of 70 percent. Saudi Arabia’s military is reforming its procurement processes and policies to incorporate new Saudi employment and localized production goals. The Saudi Arabian Government’s Vision 2030 program calls for 50 percent of defense materials to be produced and procured locally by 2030, and simultaneously seeks comparable increases in the number of Saudis employed in this sector.
The Saudi Arabian Government is adopting progressively stricter quotas for hiring Saudi nationals. U.S. companies report increasing difficulties obtaining visas for expatriate professional employees, while others have left the country due to the slowing of opportunities or have not had their work visas renewed because of this law. Firms also may face challenges in finding enough qualified Saudi nationals to fill jobs.
Unsolicited Contracts (Scams)
The U.S. Commercial Service in Saudi Arabia continues to hear from U.S. firms receiving unsolicited but seemingly attractive business proposals from scam artists. Businesses should be particularly wary of unverified Saudi “companies” and/or government entities promising lucrative business deals and demanding staggered payments to progress through a non-existing procurement process. Perpetrators of sophisticated internet scams use Saudi Arabia’s wealth and admiration for American products and services to lure unsuspecting U.S. companies and citizens with “419” type scams (named for a Nigerian law aimed at combating financial crimes). U.S. businesses should verify the identity of any potential “partner” and the veracity of proposals before committing any resources.
Commercial Disputes Settlements
In 2016, the Saudi Center for Commercial Arbitration (SCCA) was established with arbitration rules that conform to internationally recognized standards and principles. The SCCA offers comprehensive dispute resolution services to both domestic and foreign firms. Some firms have already started referencing the SCCA in their contracts. SCCA arbitration awards can be enforced in local courts if they comply with sharia (Islamic law). The enforcement of foreign arbitration awards for private-sector disputes has yet to be upheld in practice. Saudi Arabian Government agencies are not allowed to agree to international arbitration without express approval from the Council of Ministers, which is rarely granted.
U.S. companies may experience payment delays for contracts performed for Saudi public- and private-sector entities. In April 2021, the Ministry of Finance launched the “Etimad” platform which, in theory, enables companies to submit their financial claims online to government agencies. At this point, it is unclear if this new platform will actually assist with timely payments.
Intellectual Property Rights (IPR) Protection
Saudi Arabia was removed from the Special 301 Report’s Priority Watch List in April 2022 due to steps the Saudi Authority for Intellectual Property (SAIP) took to improve the IP ecosystem in Saudi Arabia including publishing its IP enforcement procedures; increasing enforcement against counterfeit and pirated goods and online pirated content; creating specialized IP enforcement courts with trained judges and expedited timelines; conducting strong IP awareness, outreach, training, and support; setting up a centralized committee to coordinate IP enforcement actions across multiple authorities; and training IP specialists in 76 different authorities to increase government compliance with IP laws. However, challenges remain for U.S. companies wishing to protect and enforce their IPR. Stakeholders continue to raise concerns that the Saudi Arabia Food and Drug Authority (SFDA) granted marketing approval to domestic companies for subsequent versions of registered products, without requiring the submission of data that meets the same requirements applied to the initial applicant, despite the period of protection provided to the initial applicant by Saudi regulations. The SFDA has not granted these concerning marketing approvals since October 2020, and the United States will continue to closely monitor SFDA’s actions in this area.
The government has shown improvement in combatting the proliferation of counterfeit products in recent years with increased resources devoted to marketplace enforcement and stricter penalties for copyright and trademark violators. However, marketplace enforcement remains uneven while copyright enforcement is hampered by an insufficient number of inspectors. Moreover, manufacturers of consumer products and automobile spare parts are concerned about the availability of cheap counterfeit products in the marketplace.
Regional HQ Initiative
Saudi Arabia announced that by 2024 international companies would be barred from doing business with the government unless their regional headquarters are located in Saudi Arabia. Aimed at luring investment to the capital, this mandate follows Crown Prince Mohammed bin Salman Al Saud’s recently stated aim of developing Riyadh into one of the world’s ten greatest cities by the end of the decade. Previously, Saudi Arabia’s national investment agency, Invest Saudi, launched its “Programme HQ” relocation initiative, offering generous tax breaks and additional incentives for multinational companies to base themselves locally. While the Ministry of Investment published additional details on the Regional HQ initiative in January 2022, there remains uncertainty about what is required of investors, how the regulations will be implemented and enforced, and the specific incentives that will be available to companies that relocate their regional headquarters to Saudi Arabia.
Cross-Border Data Flows & Privacy
Saudi Arabia’s regulations require that data controllers store and process personal data within Saudi Arabia’s territory which impedes cross-border data flows. This trade barrier hampers the ability of foreign firms to access the Saudi market and limits Saudi enterprises’ access to best in-class digital services. It also poses a significant obstacle to the introduction of innovative and emerging technologies, including artificial intelligence, machine learning, and advanced medical solutions by international companies in foreign markets.