Doing Business in Saudi Arabia - International Franchise Association

Since this is a common practice in this market, U.S. companies should address this eventuality
prior to executing a contract.
U.S. firms interested in the Saudi market are cautioned against trying to use lists of importers for
“cold calls” on prospective agents. Saudis prefer to do business with someone only when they
have been properly introduced and have met face-to-face. To help dispel reluctance on the
Saudi side, an introduction by a “go-between” typically serves to vouch for the reliability of both
parties. Appropriate third parties for such introductions include other Saudi firms, U.S.
companies that have successfully done business in Saudi Arabia, banks, trade associations,
chambers of commerce, and the U.S. Commercial Service in Saudi Arabia (CS Saudi Arabia).
Saudi law is based on the Islamic Shari’a and differs considerably from U.S. practice.
Nonetheless, the Saudi Government has earmarked nearly $2 billion to overhaul its judicial
system and court facilities in an effort to streamline the legal process. A Royal Decree M/78
dated October 1, 2007, approved the Charter of Judiciary system and the Grievances Board
Charter, and implemented relevant mechanisms. American firms contemplating an agency or a
distribution agreement are advised to consult with a local attorney.
The U.S. Commercial Service, through its domestic U.S. Export Assistance Centers and
overseas offices in Embassies and Consulates, offers a variety of services to assist American
firms in selecting a reputable and qualified representative. Our Gold Key Matching Service is a
personalized and targeted matchmaking service that combines an orientation briefing, a profile
of each Saudi prospect, interpreter services for meetings, a Commercial Specialist from the
Embassy to escort you to your meetings, and assistance in developing follow-up strategies. The
International Partner Search provides pertinent information on up to six pre-qualified potential
Saudi representatives. This customized search will put you in touch with firms that have
expressed an interest in representing your product or service. The International Company
Profile provides follow up background information on potential partners.
Establishing an Office Return to top
The procedures to establish an office in Saudi Arabia differ according to the type of business
undertaken. The most common and direct method is simply to appoint an agent/distributor who
can set up the office under its own commercial registry. The agent/distributor agreement should
be registered with the Ministry of Commerce & Industry. The Commercial Agency regulations
govern the agent/distributor agreement.
A second method might be to establish a technical and scientific service office, which also
requires a license from the Ministry of Commerce and Industry. This approach preserves the
independence and identity of the foreign company and provides for more leeway in managing
and marketing the company’s products or services. Technical and scientific service offices are
not allowed to engage directly or indirectly in commercial activities, but they may provide
technical and advisory support to Saudi distributors, as well as conduct market surveys and
product research.
A third method is to establish a branch office. Saudi Arabia’s Foreign Investment Law allows
international companies the possibility of 100% ownership of projects and property required for
the project itself, while enabling them to retain the same incentives given to national companies.
A branch office involves a more direct presence than a commercial agent. Branch offices are
largely restricted to an administrative role and may not engage in trading activities.
Nevertheless, a branch office can be very useful as a liaison presence for a U.S. company. A