KSA - Increased Customs Duty on Specific Electrical Items

The Kingdom of Saudi Arabia (KSA) Minister of Finance has issued Ministerial Decree No. 1-88-1446, dated 01/05/1446 AH (corresponding to 11 July 2024), increasing the customs duty rates on specific electrical equipment and apparatus from 5% to 15%, effective from 16 July 2024. This adjustment aims to safeguard and promote local industries, encouraging the growth of domestic products.

The affected products, along with their Harmonized Tariff System (HTS) classification codes and tariff changes, are listed below:

The new duty rates align with KSA's commitment to the World Trade Organization regarding applicable limits for duty rate adjustments.

Deloitte’s view
 

Business impact:

The significant increase in customs duty rates will have broad business implications, including:

• Cost implications for importers and end users of imported items
• Competitive advantage for local manufacturers
• Potential adjustments in supply chains

Industries that might be affected:
 

1. Construction and Real Estate: The construction sector, which extensively uses electrical components in commercial and residential projects, will be directly impacted. The increased cost of electrical relays and circuit breakers could raise overall construction costs, affecting budgets and potentially leading to higher prices for end buyers.
2. Oil and Gas: The oil and gas sector relies heavily on sophisticated electrical systems for exploration, production, refining, and distribution. Electrical relays and circuit breakers are essential components in these systems, ensuring safety, reliability, and efficiency. The increased customs duty will elevate the cost of importing essential components, resulting in higher operational expenses.
3. Energy and Utilities: The energy sector, including power generation and distribution, will experience higher costs for essential electrical components. This could affect the cost structure of energy projects, maintenance operations, and the expansion of electrical infrastructure.
4. Manufacturing and Industrial Automation: Manufacturers using electrical relays and circuit breakers in their production processes will face increased input costs. This may impact their cost structures and profitability, potentially leading to higher prices for finished goods.

The way forward:
 

The increase in duty rates may impact business operations financially. Businesses involved in importing affected products should re-evaluate their supply chains to ensure compliance with the new customs requirements and assess the impact on their operations.

Key areas for KSA importers to consider include:

• Customs Compliance: Review the tariff classification of imported goods to ensure accurate declarations and correct payment of customs duties. This will also help evaluate the cash flow impact due to potential additional duties.
• Sourcing of Goods: Assess supply chains to explore potential duty benefits from sourcing goods locally or from regions where preferential duty treatment applies.
• Customs Duty Optimization: Examine operations to identify eligibility for customs incentives (duty exemptions or suspensions) to minimize the impact of customs duties.

Contacts
 

Our customs and global trade experts listed below would be happy to discuss the above matters in more detail or support you through a further discussion on your specific requirements