Trade Restrictions: Bahrain's Barriers And Their Impact

what are trade restrictions in bahrain

Trade restrictions in Bahrain are governed by the country's Customs Affairs and the Ministry of Industry and Commerce (MoIC). Bahrain has a positive and relatively stable investment climate, with a business-friendly environment that attracts foreign investment and businesses. The country has a liberal approach to foreign investment and does not impose tariffs or non-tariff barriers on American investments.

The country applies a Common External Tariff (CET) of five per cent on imported goods, with certain exceptions, such as a 20 per cent duty rate on paper and aluminium. Bahrain also prohibits the domestic production of alcohol and tobacco and imposes high customs duties on the import of these products for health and religious reasons.

Additionally, Bahrain has specific import restrictions on certain goods, including live wild animals, food products, arms and ammunition, and items infringing on intellectual property rights. These restricted items require special documentation, such as a No Objection Certificate (NOC) or valid permits, for importation.

To promote economic development, Bahrain has established special economic zones, such as the Bahrain International Investment Park (BIIP) and the Bahrain Logistics Zone (BLZ), which offer incentives like competitive land lease rates, tax exemptions, and duty-free access to GCC and US markets.

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Prohibited imports

The Kingdom of Bahrain has a range of prohibited and restricted imports, which are outlined by the country's customs laws and other legislation. Here is a detailed overview of the prohibited imports into Bahrain:

  • All types of narcotic drugs, including marijuana, CBD oil, heroin, cocaine, hashish, and pills with drug effects, are banned from entering Bahrain.
  • Used and reconditioned tires are prohibited.
  • Any form of advertisement for cigarettes is not allowed.
  • Radio-controlled or remote-controlled model aircraft are prohibited.
  • Children's toy guns capable of firing projectiles are not permitted.
  • Printed publications, photographs, pictures, books, magazines, sculptures, and mannequins that contradict Islamic teachings, decency, or morality are banned.
  • Seditious or treasonable material is prohibited.
  • Asbestos or items that contain asbestos are not allowed.
  • Raw ivory, ivory articles, and rhinoceros horns are banned.
  • Any other items whose importation is prohibited under the Kingdom of Bahrain's customs laws or any other laws of the country are also prohibited.

In addition to these prohibitions, Bahrain has specific requirements and restrictions for certain types of imports, such as pharmaceutical products, food items, and alcohol and tobacco products.

Pharmaceutical Products

The Bahraini government mandates that pharmaceutical products must be imported directly from a manufacturer with a research department. These products must also be licensed in at least two other GCC countries, including Saudi Arabia. Drugs and medicines can only be imported by a drug store or pharmacy licensed by the Ministry of Industry and Commerce (MOIC) after receiving approval from the Ministry of Health.

Food Items

Bahrain's customs regulations require importers of food items to present a manufacturer's certificate stating that the goods do not contain cyclamates. Additionally, all Arab-origin products imported under the facilitation and trade exchange convention among Arab countries are exempt from customs duties if they can produce a recognised certificate of origin.

Alcohol and Tobacco Products

The Bahraini government prohibits the domestic production of alcohol and tobacco. For health and religious reasons, non-GCC alcoholic beverages are charged a 125% customs duty, while non-GCC tobacco products are assessed a 100% duty.

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Restricted imports

Bahrain has a business-friendly environment and a liberal approach to attracting foreign investment and business. The country maintains a positive and relatively stable investment climate.

The following items are restricted and require a No Objection Certificate (NOC), valid permit, or approval document issued by the relevant regulatory authority for import into Bahrain:

  • Live wild animals, including horses (excluding circus or performance animals)
  • Animals, birds, and their by-products
  • Animal or vegetable fertilizers
  • Insecticides and fungicides
  • Meat and meat products
  • Fish and seafood products
  • Fruit and vegetables
  • Radioactive chemicals and active isotopes
  • Food products (processed and unprocessed)
  • Unadulterated ethyl alcohol, isopropanol
  • Pedestrian-controlled four-wheel mini cars
  • Handcuffs made from iron/steel
  • Arms, ammunition, explosives, and military weapons
  • Magazines and publications
  • Optical and magnetic audio-visual media
  • Items infringing on intellectual property rights
  • Telecommunications, radio, and television receiving and broadcasting equipment

Additionally, Bahrain has specific requirements for the import of pharmaceutical products and beef and poultry products. All imported beef and poultry products must be accompanied by a health certificate and a halal slaughter certificate issued by the country of origin. Pharmaceutical products can only be imported directly from a manufacturer with a research department, and the products must be licensed in at least two other GCC countries, one of which must be Saudi Arabia.

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Customs procedures

The Kingdom of Bahrain has a relatively stable investment climate and a business-friendly environment. The country has a liberal approach to attracting foreign investment and business. Bahrain's customs procedures are outlined below.

Import Requirements and Documentation

Importers or their local agents must complete a customs bill of entry before importing goods into Bahrain. It is recommended that importers use a registered, licensed clearing agent to expedite the import process. The importer is required to submit a customs declaration form along with the following documents:

  • Import customs declaration form
  • Shipping agent delivery order
  • Three copies of the original invoices from the exporter
  • Two copies of the packing list with detailed weights, packaging, and goods classification
  • Original certificate of origin
  • Copy of the insurance policy
  • Original bill of lading
  • Import permit/approval for restricted goods
  • Bank advice/guarantee (if applicable)
  • Statistical declaration if the final destination is within GCC countries

Customs Clearance Procedures

After submitting the customs declaration form using the eCAS Customs Clearing System, the following steps must be completed:

  • Pay the duty and fees at the cashier desk in the customs point
  • Submit all relevant documentation to the customs clearing officer
  • Pay the relevant cargo handling fees and make an appointment for cargo movement
  • The port operator will move the container to the inspection point
  • Customs will risk assess the goods and may carry out an inspection
  • Goods will be cleared and allowed to leave the customs point

Customs Duties and Tariffs

Bahrain applies a Common External Tariff (CET) of 5% on almost all imported goods, with some exceptions. Goods produced in the GCC region and countries with specific trade agreements, such as the US, are exempt from the CET. Certain types of goods, such as paper and aluminium, are charged a 20% duty rate upon import.

Alcoholic beverages and tobacco products from non-GCC countries are subject to high customs duties of 125% and 100% respectively.

Prohibited and Restricted Imports

Bahrain has a list of prohibited items that cannot be imported into the country, including:

  • Narcotic drugs
  • Used and reconditioned tires
  • Advertisement material for cigarettes
  • Radio/remote-controlled model aircraft
  • Children's toy guns
  • Publications, pictures, books, etc., that contradict Islamic teachings
  • Seditious or treasonable material
  • Asbestos or asbestos-containing items
  • Raw ivory and rhinoceros horn
  • Pharmaceutical products (must be imported directly from a manufacturer with a research department and licensed in specific GCC countries)
  • Beef and poultry products (require health and halal certificates)

Special Trade Zones

Bahrain has established several special trade zones to attract foreign investment and facilitate trade:

  • Bahrain International Investment Park (BIIP): A tax-free zone located near the Khalifa bin Salman Port, offering competitive land lease rates, 100% foreign ownership, tax exemptions, and duty-free access to GCC and US markets.
  • Bahrain Logistics Zone (BLZ): A boutique logistics park offering competitive land lease rates, 100% foreign ownership, tax exemptions, and a 12-month grace period on utility payments.
  • United States Trade Zone (USTZ): Established to attract US companies, offering similar incentives to BIIP and BLZ.

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Trade agreements

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. The country has a positive and relatively stable investment climate, maintaining a business-friendly environment. The Bahraini government focuses on attracting foreign direct investment (FDI) in sectors such as manufacturing, logistics, infrastructure, information and communications technology (ICT), financial services, tourism, health, and education.

To promote investment, the government offers various incentives, including assistance in registering and opening businesses, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other Gulf Cooperation Council (GCC) markets for products manufactured in Bahrain.

United States-Bahrain Free Trade Agreement (FTA)

The United States-Bahrain FTA entered into force in 2006, eliminating or reducing tariffs on most goods and services. This agreement has created significant export opportunities for US farmers and generated jobs, while also supporting Bahrain's economic and political reforms. On the first day of the agreement, 100% of the two-way trade in industrial and consumer products flowed without tariffs. As a result, US agricultural exports to Bahrain have increased considerably.

The FTA has also opened Bahrain's services market wider than any previous agreement, benefiting US financial service providers and companies offering telecommunications, audiovisual, express delivery, distribution, healthcare, architecture, and engineering services. The agreement further enhances intellectual property rights protection and promotes economic reforms and liberalization in the Middle East.

Bilateral Investment Treaty (BIT)

The United States and Bahrain signed a Bilateral Investment Treaty in September 1999, which entered into force in May 2001. This treaty protects US investors in Bahrain by providing most-favored nation treatment, national treatment, the right to freely transfer funds without delay, international law standards for expropriation and compensation, and access to international arbitration.

Double Taxation Treaties (DTTs)

Bahrain has double taxation treaties in force with various countries, including Algeria, Austria, Bangladesh, Barbados, Belarus, Belgium, Bermuda, Brunei, Bulgaria, China, Cyprus, the Czech Republic, Egypt, Estonia, France, Georgia, Hungary, Iran, Ireland, the Isle of Man, Jordan, the Republic of Korea, Lebanon, Luxembourg, Malaysia, Malta, Mexico, Morocco, the Netherlands, Pakistan, the Philippines, Portugal, Seychelles, Singapore, Sri Lanka, Sudan, Switzerland, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, the United Kingdom, Uzbekistan, and Yemen.

United States Trade Zone (USTZ)

In February 2022, Bahrain inaugurated the United States Trade Zone (USTZ) to attract US companies to establish industrial manufacturing, logistics, and distribution facilities. The USTZ provides streamlined access to the wider GCC market and offers incentives such as land lease discounts and customs exemptions.

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Foreign investment

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. The country has a positive and relatively stable investment climate, with a business-friendly environment and a proactive approach to attracting foreign investment. The Bahraini government permits 100% foreign ownership of businesses or branch offices, without the need for a sponsor or local business partner. There are no restrictions on the repatriation of capital, profits, or dividends, except for income generated by companies in the oil and gas sector, where profits are taxable at a rate of 46%.

The Bahraini government has implemented several measures to encourage foreign investment, including:

  • Providing industrial lands at reduced rental rates
  • Offering customs duty exemptions for industrial and manufacturing projects, including imports of raw materials, plant machinery, equipment, and spare parts
  • Granting a five-year exemption from the "Bahrainization" recruitment restriction
  • Establishing the United States Trade Zone (USTZ) to incentivize US companies to build full turnkey industrial manufacturing, logistics, and distribution facilities in Bahrain to access the wider GCC market
  • Offering assistance in registering and opening business operations
  • Providing duty-free access to other GCC markets for products manufactured in Bahrain

There are, however, some restrictions on foreign investment in certain sectors. These include construction, press, publishing, and distribution, car and motorbike rental, fishing, foreign manpower supply, land transportation of goods and passengers, trading, small businesses, foreign manpower, commercial agencies, certain real estate services, gas bottling and distribution, and gas cylinder distribution. In these sectors, foreign investors may be required to have a minimum level of Bahraini investment, typically 51%.

Despite these restrictions, the Minister of Industry and Commerce can grant exemptions to allow foreign investment into restricted sectors if it is deemed to benefit the country and support economic development. Additionally, there are several sectors that allow for 100% foreign investment, such as technology and manufacturing, although these may be subject to other regulations.

The process of establishing a business in Bahrain is straightforward. The most common form of business vehicle is a commercial company established under the Commercial Companies Law (CCL). Foreign investors must register their company with the Ministry of Industry and Commerce (MOIC) and are subject to security screening by the Ministry of Interior. The MOIC also requires information on the ultimate beneficiary owner of any shareholder with more than 10% ownership in the company's share capital.

Overall, Bahrain offers a favourable environment for foreign investment, with a range of incentives and supportive government policies. The country is committed to attracting foreign investment and promoting economic growth and development.

Frequently asked questions

The Bahrain Free Trade Agreement (FTA) is a treaty between the United States and Bahrain that came into force in 2006. It eliminated or reduced tariffs on most goods and services, created a more predictable and transparent trade and investment environment, and committed to world-class intellectual property rights protection.

Prohibited imports to Bahrain include:

- Narcotic drugs

- Used and reconditioned tires

- Advertisement material for cigarettes

- Radio/remote-controlled model aircraft

- Children's toy guns capable of firing projectiles

- Publications, photographs, etc., that contradict Islamic teachings

- Seditious or treasonable material

- Asbestos or items containing asbestos

- Raw ivory, ivory articles, and rhinoceros horn

Restricted imports to Bahrain include:

- Live wild animals

- Animals, birds, and their by-products

- Animal or vegetable fertilizers

- Insecticides and fungicides

- Meat and meat products

- Fish and seafood products

- Fruits and vegetables

- Radioactive chemicals and active isotopes

- Food products (processed and unprocessed)

- Unadulterated ethyl alcohol, iso-propanol

- Handcuffs made from iron/steel

- Arms, ammunition, explosives, and military weapons

- Magazines and publications

- Optical and magnetic audiovisual media

- Items infringing on intellectual property rights

- Telecommunications, radio, and television equipment

To import goods into Bahrain, importers or their agents must complete a customs bill of entry and submit the following documents:

- Import customs declaration form

- Shipping agent delivery order

- Original invoices from the exporter

- Packing list with detailed weights and packaging information

- Certificate of origin from the relevant chamber of commerce

- Copy of the insurance policy

- Original bill of lading

- Import permit/approval for restricted goods

- Bank advice/guarantee (if applicable)

- Statistical declaration for goods destined for GCC countries

Bahrain has a positive and stable investment climate. The government maintains a business-friendly environment and a liberal approach to attracting foreign investment, particularly in sectors such as manufacturing, logistics, ICT, financial services, tourism, health, and education. Bahrain's total foreign direct investment (FDI) stock reached $32.2 billion in 2022, with annual inflows of $1.9 billion.

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