This is a separate registration requirement under the Agency Act. In the event that a commercial agency agreement contains a license to use a trademark, the agreement (or a short-form agreement) should be registered with the Ministry and the Saudi Trademark Office. Traditionally, only GCC citizens and businesses (from Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the United Arab Emirates) are allowed to conduct commercial and retail activities in the kingdom, including real estate, without a local Saudi partner. However, in June 2016, the SAG Council of Ministers formally approved the full foreign ownership of retailers and wholesalers, removing the 25% local ownership requirement to date. To date, more than half a dozen companies have used the new regulation, including several U.S. companies. U.S. exporters are not required to appoint a local Saudi agent or distributor to sell to Saudi companies. Nevertheless, we recommend that all newly marketed companies find a qualified local partner through one of our matchmaking services. Relationships between agents and distributors are governed by the regulations of the trade agency of the Ministry of Trade and Investment (MOCI).
Although it is no longer required by law, we recommend that U.S. companies that want to do business with the Saudi authorities appoint a Saudi duty agent. The sales commission paid to the Saudi duty agent is justified by the relatively quick and easy access to the competent government decision. The U.S. Commercial Service in Saudi Arabia can help U.S. companies find a reputable Saudi account executive (service agent). Sales commissions are fully tradable between the Saudi agent or distributor, but generally range from 3 to 10 percent depending on the product or service and the tasks required by the duty agent. Whether sales commissions should be paid or not should be clearly stated in each agency or a distribution contract.
The termination of an agent/distribution agreement can be difficult, although Saudi policy has been amended to allow for the registration of a new agreement on the objections of an existing distributor. While most potential Saudi agents and/or distributors generally prefer exclusive agency contracts, these are not necessary. Given the close ties between the business community in Saudi Arabia, the exchange of an agent or distributor could damage the reputation of a U.S. company if it is not treated sensitively. An American company should avoid being seen as a lack of adequate commitment to its Saudi trade relations. Saudi agents can claim “separation pay” if the foreign exporter decides to dissolve a business relationship. As this is a common practice in this market, U.S. companies should address this eventuality before a contract is executed. 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 put face-to-face. To dispel reluctance on the Saudi side, an introduction by a “go-between” is generally used to ensure the reliability of both parties.