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July, 11th 2020

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MAY 29
10:35

Saudi to apply maximum-permitted customs duties on steel

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Saudi Arabia plans to increase customs duties on a variety of steel products to the maximum “bound rates” permitted by the World Trade Organisation, Kallanish learns.

Effective 10 June, the customs duty on billet will rise from 5% to 10%, the tariff on hot rolled flat products will increase from 5% to 10-15%, depending on the product, and on coated flats from 5% to 12-15%, depending on the product. The tariff on wire rod will hike from 10% to 20%, and on rebar will grow from 10% to 15%. The full list of products affected is available from Saudi Customs.

Bound rates are the ceiling rates listed in WTO members’ lists of commitments made when joining the WTO. These are different from applied rates which are those rates currently charged by members.

Saudi market participants cite a variety of reasons for the move, ranging from domestic industry protection to revenue generation or local content support. The tariff increase comes at a time when Saudi government spending plans have been drastically curbed by the reduction in oil prices and economic impact of the Covid-19 pandemic. The government earlier announced its intention to treble VAT to 15% from 1 July as a way of raising additional revenue.

Various observers have forecast the Covid-19 crisis will intensify the already well-established wave of global protectionism, with steel demand hit in many regions and local industry struggling to stay afloat. The decision to raise customs duties to the maximum level permitted by the WTO can therefore be considered a relatively simple measure designed to mitigate extraordinary circumstances. Saudi Arabia has been a member of the WTO since 2005.

It has received a mix response, however. “It’s the right thing to do – localise vital industry and help boost made in Saudi Arabia,” says a major Saudi trader. A mill source, however, counters: “Inflation will skyrocket – first the new VAT and now this.”

The Gulf Cooperation Council continues to carry out its safeguard investigation launched last October against a wide range of flat, long and tubular steel products.