Ministry of Commerce and Industry Resolution No. 69 of 1999 Issuing the Executive Regulations of Law No. 26 of 1995 on Free Zones

Minister of Commerce and Industry Resolution No. 69 of 1999
Issuing the Executive Regulations of Law No. 26 of 1995 on Free Zones

Part One
Supervision and Management of the Free Zones

Article 1

The Ministry of Commerce and Industry shall supervise the free zones and set their general policies, and shall take such decisions as it deems necessary to achieve the purpose for which the zone is established. It shall in particular have the power to:
1- Propose the establishment of new free zones and determine their location in coordination with the government entities concerned.
2- Determine how these zones shall be managed, whether by managing them itself or by assigning them to a private-sector entity.
3- Coordinate with the other government entities to implement the Free Zones Law.
4- Prepare plans and programmes for the development and growth of the free zones.
5- Propose the facilities that may be provided to the free zones by the government entities in accordance with the provisions of the Law.

Article 2

The entity competent to manage the free zones shall take all the measures and decisions required for the management of those zones, and shall in particular have the power to:
1- License the occupation of land and real estate, and the investment of real estate owned by third parties, in the free zone.
2- Obtain licences to carry on the various activities within the zone.
3- Conclude all necessary contracts with investors in the zone after the Supervising Authority has approved such contracts.
4- Work to develop international trade exchanges and transit trade, and carry out promotion and marketing operations at the local, regional and international levels.
5- Provide the facilities necessary to operate the zone in accordance with its structural plan.
6- Facilitate the provision of the labour that investors need to carry on their activity, according to need and work requirements.
7- Prepare promotion plans to attract investors to the free zones, and contract with third parties to do so on its behalf.
8- Propose the internal regulations governing work within the free zones.
9- Issue entry and exit permits for goods, in accordance with the provisions laid down in the laws and regulations applicable in this regard.
10 – Obtain residence permits and entry visas for visit and work for workers and investors within the zone, in coordination with the government entities, in accordance with the provisions laid down in the laws and regulations applicable in this regard.
11 – Carry out oversight and periodic inspection, and record any violations that occur, in accordance with the Law and the Executive Regulations.
12 – Obtain certificates of origin for goods and have them certified by the competent entity.
13 – Obtain the approvals necessary to establish manufacturing, banking and commercial projects.

Article 3

The Zone Administration shall comply with the following obligations:
1 – To carry out its work in a manner consistent with the Law and the Executive Regulations.
2 – To keep regular books and accounts.
3 – To take all security measures, arrangements and precautions within the zone.
4 – To abide by the terms of the contract with the Supervising Authority if the management of the zone is entrusted to a private-sector entity.
5 – To provide all facilities to the competent government entities to enable them to perform their work.

Part Two
Conditions and Procedures for Licensing Projects in the Free Zones

Article 4

No project may carry on any activity within the zone except after obtaining an occupancy licence from the Zone Administration in accordance with the conditions and procedures laid down in these Regulations.

Article 5

The application for an occupancy licence shall be submitted to the Zone Administration on the form prepared for that purpose, which shall include the following particulars:
1 – The applicant’s name, nationality, address and chosen domicile.
2 – Particulars of the project to be established in the zone and its duration.
3 – The area to be occupied, stating whether it is land prepared for building or a ready-built building.
4 – The equipment, machinery and apparatus necessary for the project.
5 – The capital, the sources of financing and the legal form of association with foreign companies, if any.
6 – A statement of the expected consumption of water and electricity.
7 – The number of workers, their nationalities, specialisations and wages, and the number of working days.
8 – The amount of the financial guarantee.

Article 6

The Zone Administration shall issue the licence within two months from the date of submission of the application complete with the particulars and documents provided for in the preceding Article. If the Zone Administration issues a decision of refusal, or fails to respond within the said period, the licence applicant may file a grievance against the decision within sixty days from the date on which he became aware of the decision or of the lapse of the said period, and the grievance shall be filed with the Supervising Authority. If the decision is one of approval, the licence applicant shall be notified to sign the contract within one month from the date of issue of the decision and to pay the value of the financial guarantee; if he fails to do so, he shall be deemed to have waived the application.
The contract shall set out the rights and obligations between the licence applicant and the Zone Administration.

Article 7

Licences covering the carrying on of more than one activity within the zone may be obtained.

Article 8

The Supervising Authority shall be notified of all occupancy licences issued, the contracts concluded with investors, and all information and particulars about the licensed projects. Neither the Supervising Authority nor the Zone Administration may revoke the licence unless it is contrary to the Law or the Executive Regulations, or the licensee has committed a violation of either of them or has breached his contractual obligations.

Article 9

The licence to carry on an activity within the zone shall include the particulars of the project, its legal form, nationality and capital, the boundaries of the site it occupies, the purposes it pursues, the amount of the financial guarantee paid by the licensee, and the period of validity of the licence. The licence may be assigned on the same terms after the approval of the Zone Administration and of the entity competent to issue the licence, and the assignment shall not be recognised until the prescribed fee has been paid.

Article 10

The Zone Administration shall, in agreement with the investor, determine the period required to commence the activity as from the date of issue of the licensing decision, in light of the investor’s circumstances and the nature of his activity. However, an investor who has contracted to occupy land prepared for building shall complete the construction of his facilities within the period determined by the Zone Administration as from the date of handover of the land to him and the approval of the building plans, unless the Zone Administration agrees to extend this period in light of work conditions. If the investor has not commenced his activity upon expiry of the period specified for that purpose, or the period specified for constructing the facility expires, the Zone Administration may terminate the contract with the investor; it may also terminate the contract of an investor who ceases his activity continuously for one year without an acceptable excuse.

Part Three
Entry Visa and Residence Permit System for Workers in Free Zone Projects and Those Wishing to Visit Them

Article 11

The Zone Administration shall, in coordination with the government entities, obtain entry visas for those working in the zone and those wishing to visit it, in accordance with the laws and regulations applicable in this regard.

Article 12

The visit visa for very important persons (VIP) shall be obtained in accordance with the following procedures:
1 – If the Zone Administration has prior knowledge of the visit, the Zone Administration shall send a letter to the border ports at the airport, under which the visitor shall be granted a temporary visit upon arrival.
2 – If the visitor arrives without prior knowledge on the part of the Zone Administration, the visitor shall contact the entities concerned at the border ports and fill in the particulars of an application for a temporary visit visa, and the border-port officer authorised by the Ministry of Interior shall contact the zone so that it sends a notification to the border ports confirming acceptance of the visitor’s visit to the zone; the Zone Administration shall then send a notification accepting the visit, and the authorised officer at the border ports shall grant a temporary entry visa on the responsibility of the free zone, in accordance with the provisions laid down in the laws and regulations applicable in this regard.

Article 13

The Zone Administration shall, in coordination with the competent entities, obtain visas and residence permits for the owners of the licensed projects or their representatives and the foreign workers therein, immediately upon acceptance of the applications submitted by them, and the period of the permit shall be determined in accordance with the rules and regulations in force.
The Zone Administration shall issue work cards to those working within the zone, and their period of validity shall match the period of validity of the residence in the passport.

Article 14

The Zone Administration shall issue housing permits within the zone. The use of these permits shall be restricted to those working in the zone, excluding their families, and it is a condition that the nature of their work requires them to remain in the zone outside working hours, with specific places allocated for their accommodation.

Article 15

The provisions of the Law on Labour in the Private Sector and the regulations and decisions implementing it shall apply to those working in the licensed projects in the free zone, without prejudice to any better benefits for their workers provided under the special systems of the licensed projects. The licensed projects shall provide health insurance for their workers within the zone.

Article 16

Employment contracts concluded between the owners of the licensed projects and their workers shall be drawn up in four copies, one copy for each of the two parties, one copy to be deposited with the Zone Administration and another with the Ministry of Social Affairs and Labour. The contract shall contain the particulars required by the laws and regulations in force.

Part Four
Import and Export in the Free Zone

Article 17

The Zone Administration shall have the power to monitor the movement of goods to and from the zone and to inspect the books and documents of the licensed projects, as well as the power to monitor the stock held by projects within the zone. To that end, it shall have the right to enter any place within the zone to verify the accuracy of the particulars and documents submitted to it about such goods.

Article 18

Goods shall enter the free zone through the port to which it belongs, after the person concerned submits the required documents to the Zone Administration. Goods entering the zone otherwise than through the port to which the zone belongs shall be dealt with as follows:
1 – The importer shall submit the required documents to the zone.
2 – The shipping agent shall separate on the manifest the goods coming from outside the country to the free zone and shall mark the goods.
3 – Customs shall seal the free zone goods in accordance with the provisions laid down in the applicable laws and regulations.
4 – The goods shall be transported to the site of the free zone on the responsibility of the Zone Administration.
5 – Customs shall examine the seal on the goods upon arrival at the gate of the free zone.

Article 19

Goods arriving in the free zone from inside the country shall be treated as goods exported outside the State of Kuwait, and such goods shall be accepted after submission of the documents evidencing their ownership. The same goods may be taken back into the country without the collection of customs duties or taxes on them.

Article 20

Licensed projects shall not be bound to export a specific percentage of their products abroad or to sell a specified percentage in the local market. The free zone administration shall be responsible for obtaining certificates of origin for goods exported from the zone.

Article 21

Goods shall be exported outside the country through the port to which the free zone belongs in accordance with the following procedures:
1 – An export application shall be submitted by the Zone Administration, accompanied by the required documents, to the relevant entities.
2 – The goods shall be loaded for shipment after the documents have been reviewed and approved by the free zone administration.
All of the foregoing shall be without prejudice to the procedures, rules and provisions laid down in the relevant laws and regulations.

Article 22

Goods shall be brought from the free zone into the State of Kuwait in accordance with the following procedures:
1 – The person concerned shall prepare the entry documents required by the Kuwaiti customs officials.
2 – Inspection, matching of the goods against the documents, valuation of the goods and verification of the release approvals of the government bodies shall be carried out, by Customs and the free zone administration, before entry.

Article 23

Goods shall be exported from the free zone outside the country by air, land and sea otherwise than through the port to which the zone belongs or any other port having a free zone, as follows:
1 – The free zone administration shall prepare the required export documents.
2 – The goods shall be sealed by the free zone administration.
3 – The goods shall be sealed with the customs seal upon leaving the free zone.
4 – The goods shall be transported from the free zone on the responsibility of the Zone Administration.
All of the foregoing shall be without prejudice to the procedures, rules and provisions laid down in the relevant laws and regulations.

Part Five
Procedures for the Entry, Exit and Movement of Goods in the Zone and for Building in It

Article 24

Goods and products may be moved from one project to another within the free zone after notifying the Zone Administration of the type and quantities of these products and goods. Goods and products may also be moved between one free zone and another within Kuwait, in which case the provisions set out in Article (22) of these Regulations shall apply.

Article 25

Licensed projects may not dispose of the tools, equipment, machinery and means of transport that they use within the zone except after completing all the procedures necessary for that purpose, obtaining the approval of the Zone Administration and paying the customs taxes and duties on them.

Article 26

A licence to build, or to add to a building, on sites in the free zone shall be obtained in accordance with the following procedures:
1 – The application to build or add shall be submitted to the Zone Administration, with the required documents, on the form prepared for that purpose.
2 – The application and documents shall be studied by the Zone Administration, together with the extent to which the specifications conform to the laws of the competent government entities, according to a list of specifications agreed upon with the Zone Administration and the Supervising Authority.
The Zone Administration shall obtain the licence in accordance with the provisions laid down in the laws and regulations applicable in this regard and shall notify the Supervising Authority thereof.

Article 27

Equipment, vehicles and apparatus forming part of the assets of projects shall be moved to and from the free zone in accordance with the following procedures:
1 – The transfer application shall be submitted to the Zone Administration, and the application shall state the reason for entry or exit, the times set for their exit and return, and whether the permission requested is for a single time or several times within a specified period.
2 – A description of these vehicles and equipment and copies of their ownership and registration forms shall be handed to the Zone Administration.
3 – The Zone Administration shall issue a temporary exit or entry permit.
4 – The Customs Department and the Ministry of Interior shall be notified by the Zone Administration.
5 – The applicant shall inform the Zone Administration when these vehicles or equipment return to their original places.

Part Six
Permitted Activities, Prohibitions and Exemptions in the Free Zones

Article 28

Without prejudice to the provisions laid down in the relevant laws and regulations, the following shall be permitted in the free zones:
1 – Storage and display of goods of any kind, whatever their origin or source.
2 – Sorting operations and examination of goods when they are unloaded into the warehouses.
3 – Sorting, cleaning, mixing and blending operations, even for local goods, repackaging, and similar operations that change the condition of the goods present in the free zones in accordance with the requirements of trade exchange and market demands.
4 – Carrying on any profession required by the activity, and the services needed by those working within the zone, such as banks, post, telephone, insurance, shipping, unloading, transport, exchange and others.

Article 29

The entry, storage and display of the following goods shall be prohibited in the free zones:
1 – Goods whose origin or source is prohibited from being dealt in locally or internationally.
2 – Narcotics and intoxicants, except what is necessary for the manufacture of medicines and pharmaceutical materials as determined by the Ministry of Health, and without prejudice to the provisions laid down in the relevant laws and regulations.
3 – Firearms, ammunition and explosives, except as determined by the entities competent for security and defence within the limits of the applicable laws and regulations.
4 – Damaged materials, highly flammable materials and radioactive materials, as determined by the Supervising Authority and the authorities concerned.

Article 30

Subject to the provisions of the laws and regulations on prohibiting the circulation of certain commodities or materials, all tools, equipment, machinery and means of transport that are essential and necessary for the facilities licensed in this zone shall be exempt from customs taxes and duties, in accordance with the Free Zones Law.
The Supervising Authority of the free zones may permit local goods to be brought into the zone temporarily for repair, or goods to be taken out of the free zone into the country temporarily for repair, without customs duties or taxes.

Part Seven
Service Charges

Article 31

Projects licensed in the free zones shall bear service charges for administrative services in accordance with the rules and tariffs determined by the Supervising Authority, which shall be deemed an integral part of these Regulations and shall have the same force, whereby the free zone administration shall collect charges for the following services:
1 – Porterage and handling (tabriz).
2 – Insurance.
3 – Storage.
4 – Assignment.
5 – Occupancy.
6 – Entry.
7 – Other administrative services and use of facilities and equipment.

Article 32

The service charge provided for in the preceding Article shall be calculated on the value of goods entering the free zone for storage for re-export, and shall likewise be calculated on the value of any other goods leaving for the account of the projects.

Article 33

Free zone goods permitted to be brought in temporarily for repair shall not be subject to the service charges provided for in Article (31) of these Regulations, nor shall local commodities entering the free zone temporarily for the same purpose be subject to them.

Article 34

If the documents showing the value of the goods are not submitted, or if the value shown for them does not represent the true value, the value shall be assessed on the basis of the current value of these goods.

Article 35

Service charges on the value of incoming or outgoing goods shall become due as soon as the goods enter or leave.

Article 36

The Zone Administration shall carry out porterage and handling (tabriz) operations and shall collect the charge from the owner of the goods on the basis of the packed weight or the actual weight, as the case may be, as determined by the Supervising Authority.

Article 37

The free zone administration shall insure the zone pursuant to the provisions laid down in the relevant laws and regulations, and the Zone Administration shall collect the insurance charge from the beneficiaries on the basis of the area and the type of insurance, as the case may be, as determined by the Supervising Authority.

Article 38

The Zone Administration shall collect a storage charge for goods deposited in the free zone warehouses for the entire period during which the goods remain in the warehouses, without any exemption period, and the storage charge shall be calculated on the basis of gross weight, number or volume, as determined by the Supervising Authority.
It shall also collect a charge for the occupancy of the private places specified in the contracts concluded with the persons concerned, as well as an assignment charge for each time goods, commercial occupancy contracts or means of transport are assigned, and a charge for the materials, services, certificates and copies of documents it provides, and fees for the use of tools and facilities.

Article 39

A charge shall be due for all the services provided for in Article (31) of these Regulations. If the persons concerned fail to pay this charge after its due date, the free zone administration may recover its due from the value of the financial guarantee provided for the project, and it may take the appropriate action to preserve its rights by attaching the goods or assets of the debtor projects and then selling them at public auction, in accordance with the procedures provided for in the laws in force.

Part Eight
Financial System of the Free Zone Administration and Security and Safety Procedures

Article 40

The Zone Administration shall submit to the Supervising Authority the accounting system it applies, and any amendments it decides to introduce to it, for review and approval within thirty days from the date of commencement of activity or of making the amendment. The Zone Administration shall place all records and documents at the disposal of the Supervising Authority at the times set by that authority. The Zone Administration shall provide the Supervising Authority with a copy of its balance sheet and final accounts certified by a Kuwaiti auditor within the three months following the end of its financial year, and the Supervising Authority shall have the right to examine and review the items of the balance sheet and final accounts in the presence of representatives of the Zone Administration.

Article 41

Occupants of premises and projects licensed in the free zone shall take measures to prevent fire and explosion and shall insure against them. The insurance shall cover civil liability within the limits determined by the Zone Administration, and shall be taken out with insurance companies acceptable to it. This insurance shall be compulsory and at their expense.

Article 42

Occupants of premises and owners of licensed projects shall be liable for all damage caused by them, by their representatives or employees, or by their projects, goods or the buildings they erect within the free zone, and their compliance with the prevention rules imposed on them shall not exempt them from this liability.

Article 43

The Zone Administration shall carry out periodic inspection of the projects in the free zone to verify compliance with health and residential safety procedures for buildings, facilities, electromagnetic devices and machinery, general conditions and the maintenance of buildings, in accordance with specifications agreed upon with the competent entities. The person responsible for the project in the free zone shall repair any damage, fault or violations observed within a reasonable period determined by the Zone Administration, and this obligation shall be stated in the contracts concluded with the owners of the projects.

Article 44

The Zone Administration shall, at its own expense, insure its private property situated in the free zone and all its assets in use, including machinery, buildings and electronic equipment, and shall also insure its human resources working in the free zone. Each project shall insure its assets, equipment and buildings at its own expense.

Article 45

The Zone Administration shall establish appropriate procedures to maintain the security and safety of the goods present in the free zone, in accordance with the applicable customs security standards and specifications.

Article 46

The free zone administration shall coordinate the following procedures with the various authorities:
1 – Organising general internal or external guarding in the free zones to prevent the crimes of smuggling and theft.
2 – Taking security, civil defence and fire measures.
3 – Establishing private guarding systems through licensed private guards at the expense of the facilities or the shipping agencies.

Part Nine
General Provisions and Penalties

Article 47

The Supervising Authority shall take the measures necessary to monitor the Zone Administration’s application of the Law and the Regulations, and to that end it may inspect the records, entries, entry and release orders, and invoices submitted for goods.

Article 48

Goods produced within the free zone shall bear a printed statement indicating that they were manufactured in the free zone in Kuwait.

Article 49

Government entities may enter the zone to carry out their work in coordination with the Zone Administration in that regard.

Article 50

Projects licensed in the free zones shall, when wishing to liquidate their activity, announce this in the manner determined by the Zone Administration at least three months before commencing the liquidation work. They shall submit proof that they have discharged the local obligations due from them, and shall also submit a clearance certificate from the Ministry of Interior (General Department of Correctional Institutions and Execution of Judgments) before they are permitted to liquidate their assets.

Article 51

If occupants of premises and owners of licensed projects in the free zone breach the provisions of the Free Zones Law, the provisions of these Regulations or the terms of the occupancy contracts concluded with them, the Zone Administration shall serve them with a notice to remedy the violation within a period specified in the notice. If they fail to do so within that period, the Zone Administration may, after notifying the Supervising Authority, rescind the contracts concluded with them and set a reasonable period for vacating, after which the use of the buildings and warehouses shall revert to the Zone Administration without consideration. If the owners of the projects fail to vacate within the specified period, the Zone Administration may do so at their expense, and their assets shall be placed in storage, at their cost, in warehouses.

Article 52

The provision of Article (15) of Law No. 26 of 1995 on Free Zones shall apply in particular to the following violations:
1 – Failure to submit the manifest, its absence or multiplicity, or delay in submitting it beyond the times provided for in these Regulations.
2 – Failure to submit any document provided for in these Regulations, or submission of documents containing incorrect particulars.
3 – Omission of any of the particulars required to be entered in the manifest, storage or withdrawal applications, or storage records.
4 – Loading, unloading or transferring goods from one means of transport to another, of whatever kind, without a licence from the Zone Administration and without the presence of its representatives.
5 – Storing or stacking goods in places other than those designated for that purpose.
6 – Failure to enable the employees of the Zone Administration to perform their duties and to exercise their right of inspection, review and requesting documents or records.
7 – Breach by the representatives of projects or their workers of the systems and instructions defining their duties.
8 – Failure to follow proper storage rules or failure to keep the necessary entries for that purpose.
9 – Failure to preserve the seals placed on packages or means of transport, even if this does not result in a shortage of or change in the goods.
10 – Possessing or transporting goods within the free zones contrary to the procedures provided for in these Regulations.
In all cases, the Zone Administration shall have the right to remove the causes of the violation, where possible, at the expense of the violators.

Article 53

These Regulations shall come into force from the date of their publication in the Official Gazette.