Rising Shipping and Insurance Costs: What Saudi Importers Can Do

When shipping and insurance costs rise, Saudi importers have more control than it seems. Start by calculating the full landed cost of each product line, so you know what a shipment really costs once freight, surcharges, insurance, port charges, customs duty and import VAT are added. Then choose delivery terms deliberately, compare freight forwarders on a like-for-like basis, consolidate and plan orders to avoid expensive emergency shipments, check that your cargo insurance actually covers war risks, and pass lasting cost increases into prices in a planned, explained way. Review the contract clauses that decide who pays with a lawyer. This guide covers each step and ends with a checklist.

In 2026, freight rates and war-risk premiums on routes serving the region went up, and routes and ports changed for many Saudi importers. Our article on the regional crisis impact on Saudi businesses covers what changed. This guide focuses on what you can do about the cost.

Know your landed cost

Landed cost is the total cost of getting a product into your warehouse, ready to sell. Many importers price from the supplier’s invoice plus a rough allowance for freight. When freight and insurance move quickly, that old allowance can turn a profitable product line into a loss without anyone noticing until the year-end accounts.

What goes into landed cost

• Product price on the supplier’s invoice, in the invoice currency.
• Origin charges and main freight by sea, air or land, depending on your delivery terms.
• Surcharges added by shipping lines and forwarders, such as fuel, congestion, peak-season or war-risk surcharges.
• Cargo insurance, including any war-risk premium.
• Destination charges: terminal handling, delivery order and documentation fees.
• Port storage, demurrage and detention when goods or containers stay beyond the free time.
• Customs clearance: the customs broker’s fees and any inspection costs.
• Customs duty and import VAT.
• Conformity certificates for regulated products, issued through the SABER platform of the Saudi Standards, Metrology and Quality Organization.
• Inland transport from the port to your warehouse.
• Finance costs: letter of credit charges, transfer fees and the cost of cash tied up while goods are in transit.

Customs value and import VAT

Customs duty and import VAT are generally calculated on a value that includes freight and insurance, not on the supplier’s price alone. So when freight or insurance goes up, the duty and import VAT on the same goods can go up too. A VAT-registered business can generally recover import VAT, but the cash is still paid out until it is recovered. How all of this applies to your goods depends on their tariff classification, your documents and your delivery terms, so confirm the details with your customs broker.

Worked example. A Jeddah spare-parts importer has priced its catalog for years using the supplier’s price plus a fixed allowance for freight. When it rebuilds the landed cost of its main product lines with current quotes, it finds that bulky, low-value items now cost far more to bring in than the allowance assumed, while small, high-value parts are barely affected. It reprices the bulky items, moves some of them to a local distributor, and leaves the rest of the catalog unchanged.

Build the landed cost model once, in a spreadsheet or in your accounting system, and update it with every new quote. Management reporting that shows margin by product line after landed cost tells you where shipping costs are hurting long before the annual accounts do.

Choose delivery terms (Incoterms 2020) deliberately

Incoterms 2020, published by the International Chamber of Commerce, are the standard delivery terms used in international sale contracts. Each term sets where the seller delivers, when the risk of loss passes to the buyer, who pays which costs, and who handles export and import clearance. They do not decide when ownership passes, how or when you pay, or what happens if the contract is broken; those points belong in the contract itself.

The terms importers meet most often:

• EXW (Ex Works): the seller makes the goods available at its premises, and you handle everything else, including export clearance. Maximum control, maximum work.
• FCA (Free Carrier): the seller delivers the goods, cleared for export, to the carrier you nominate. Often a better fit than FOB for containerized goods.
• FOB (Free On Board): the seller delivers the goods on board the vessel you nominate at the port of shipment. Meant for sea and inland waterway transport.
• CFR (Cost and Freight): the seller pays freight to the destination port, but the risk passes to you once the goods are on board at the port of shipment.
• CIF (Cost, Insurance and Freight): like CFR, but the seller also buys insurance for you. Under Incoterms 2020 the seller only has to buy minimum cover unless you agree otherwise.
• CIP (Carriage and Insurance Paid To): the seller pays carriage and insurance to the named place, and Incoterms 2020 requires broader, all-risks-style cover unless agreed otherwise.
• DAP (Delivered at Place): the seller carries cost and risk to the named destination; you handle import clearance, duty and VAT.
• DDP (Delivered Duty Paid): the seller also handles import clearance and pays duty and taxes. A foreign seller may need a local party to do this in the Kingdom, so check with your customs broker before agreeing to it.

How to choose

Terms where the seller pays the main freight (CFR, CIF, CIP, DAP) are convenient, but you lose sight of what freight and insurance really cost, and the seller may pick the cheapest carrier and the narrowest cover. Terms where you control the main freight (FCA, FOB) let you choose your forwarder and insurer, but you take on more work and the rate risk. Ask:

• Do we have the volume and forwarder relationships to buy freight better than our supplier can?
• Who carries the risk if a route changes after the goods are loaded?
• Is the insurance bought under CIF or CIP enough for the value and risk of our goods, including war risks?
• Does the named place in the term match where we actually take over the goods?
• Do our supply contract and our letter of credit use the same term and the same named place?

Write the term with its version and named place in every contract and purchase order, for example “FCA (named place) Incoterms 2020”, so there is no room for argument later.

Compare and manage freight forwarders

A freight forwarder books space with carriers, handles documents and often coordinates customs clearance and inland delivery. Saudi Arabia has many forwarders, from global networks to small local firms, and their quotes are hard to compare because each one presents costs differently.

Compare like for like

• Ask every forwarder to quote the same shipment: same origin, destination, volume, delivery terms and service level.
• Ask for a breakdown: base freight, each surcharge, origin and destination charges, and what is excluded.
• Check how long the quote is valid and whether surcharges can change before loading.
• Compare the free time for containers at destination, since demurrage and detention can wipe out a freight saving.
• Ask about transit time and reliability on the route, not only the price.
• Check who handles customs clearance, and that the customs broker holds a valid license.

Manage the relationship

• Use at least two forwarders on your main lanes. One stays the main partner; the other keeps prices honest and gives you a fallback.
• Agree how and when the forwarder updates you on bookings, sailings and arrivals.
• Check every invoice against the quote before paying. Surcharges and storage charges are where errors and surprises appear.
• Review performance regularly: on-time delivery, invoice accuracy and how problems were handled.
• Re-tender your main lanes when costs move sharply, rather than accepting every increase.

A strategic sourcing approach treats freight like any other major purchase, with clear specifications, competitive quotes and regular reviews.

Consolidate and plan orders

The cheapest shipment is usually the one you planned. Emergency air freight, part-loads booked at short notice and goods stuck at the port because a document was missing are where shipping budgets leak.

• Consolidate orders. Combine orders from the same supplier or region into fuller loads. A full container often costs less per unit than several part-loads, but weigh that against the extra stock and cash it brings.
• Consolidate at origin. If you buy from several suppliers in one region, a forwarder can collect and combine their goods before shipping.
• Order on a rhythm. Regular, predictable orders let you book space in advance and avoid last-minute rates.
• Plan for your own peaks. If your sales rise for Ramadan or the start of the school year, order earlier for those periods instead of paying for speed later.
• Pack and load better. Ask suppliers to review packaging and palletizing for bulky items, so more goods fit into the same space.
• Prepare documents before arrival. Have the commercial invoice, packing list, bill of lading, certificate of origin and any conformity certificates ready and correct before the goods land, so they do not sit at the port building up storage and demurrage.
• Reserve air freight for real emergencies, with a clear approval rule.

Worked example. A Riyadh household goods retailer buys from several factories in one Asian country and ships each order as soon as it is ready, often as part-loads. It agrees with its forwarder to consolidate at origin every few weeks and asks two suppliers to redesign their cartons. Freight per unit falls, in exchange for slightly higher average stock that its finance team has planned for.

Marine cargo insurance and war-risk cover

Marine cargo insurance pays for loss of or damage to goods in transit. Without it, a carrier’s liability is usually limited and hard to claim, so most of an uninsured loss falls on you. Under CIF and CIP the seller must buy insurance for you; under the other terms nobody is obliged to, so whoever carries the risk on each leg should arrange cover.

What to check in your policy

• Scope of cover. Cargo cover ranges from broad all-risks cover to cover for named events only. Know which one you have.
• War and strikes. War and strikes risks are usually excluded from standard cargo cover and added through separate clauses, often for a separate premium. Do not assume your policy includes them.
• Stages covered. Check when cover starts and ends, whether it includes inland legs and storage, and whether war cover is limited to certain stages of the journey.
• Insured value. Make sure it reflects the full cost of replacing the goods, not only the supplier’s price.
• Annual or per shipment. Regular importers often find an annual or open policy, covering all shipments on agreed terms, simpler than insuring each shipment separately.
• Cancellation and repricing. War cover can often be cancelled or repriced at short notice when risks change.

The national war-risk insurance pool

The Kingdom has a national pool for war-risk insurance. The Saudi Reinsurance Company (Saudi Re) leads it under the supervision of the Insurance Authority, with insurance companies taking part. If war-risk cover for your cargo has become hard to find or very expensive, ask your insurer or broker whether it takes part in the pool and on what terms. Get the scope and the exclusions in writing before you rely on the cover.

When something goes wrong

• Note any visible damage or shortage on the delivery receipt before you sign it.
• Notify your insurer straight away, and keep the damaged goods and packaging until it agrees they can go.
• Collect the documents: invoice, packing list, bill of lading, photographs and any survey report.
• If the shipping line declares general average after an incident at sea, cargo owners may have to contribute to the shared cost before their goods are released. Insurers usually provide the guarantee for insured cargo, which is one more reason to insure.

Pass costs into prices carefully

Once you know your landed cost, you will see where margins have shrunk. Raising prices quietly across the board damages trust; absorbing every increase damages the business.

• Separate temporary from lasting costs. A war-risk surcharge or congestion fee may fall away; a higher base freight rate may not. Consider a clearly labeled, temporary surcharge for the first kind and a price review for the second.
• Price by product line. Bulky, low-value goods feel shipping costs far more than compact, high-value ones. Adjust where the cost actually landed.
• Check your sales contracts. Fixed-price contracts, including many with government entities, may allow price changes only under specific clauses, if at all. Read them before you ask.
• Explain and give notice. Tell key customers what changed and why, in plain terms, before the new price applies.
• Shorten quote validity while costs are moving, and state in each quote which costs it assumes.
• Use official price data. GASTAT publishes consumer and wholesale price indices that show how prices are moving in your categories. Our article on inflation in Saudi Arabia in 2026 looks at the wider price picture.

Contract clauses to review with a lawyer

Most disputes over higher shipping costs come down to what the contracts say. Review these points with a lawyer, especially before you sign new supply agreements or send any notice.

With suppliers

• The delivery term, its version and the named place, and whether they match the letter of credit.
• Who arranges and pays for insurance, the level of cover, and whether war risks are included.
• Price adjustment clauses: whether freight or surcharge increases can be passed to you, and how they must be shown.
• Force majeure and delay clauses: what counts, what notice is required and what remedies apply.
• Who pays storage, demurrage and detention when goods are delayed, and in which cases.

With freight forwarders

• Rate validity and the conditions under which surcharges can be added.
• Limits on the forwarder’s liability for loss, damage or delay.
• Whether the forwarder can hold your goods against unpaid invoices.

With customers

• Price review or surcharge clauses in long contracts, and delivery commitments that leave room for transit times you do not control.

These are general points, not legal advice. A lawyer should review your specific contracts before you rely on a clause, refuse a charge or change terms.

A cost-control checklist for importers

1. Rebuild the landed cost of your main product lines with current quotes.
2. Confirm with your customs broker how freight and insurance affect duty and import VAT on your main goods.
3. Check the delivery term and named place in each main supply contract.
4. Get like-for-like quotes from at least two forwarders on your main lanes.
5. Plan the coming orders and consolidate where the stock and cash impact is acceptable.
6. Read your cargo policy for war and strikes cover, stages and insured value, and ask about the national pool if cover is hard to get.
7. Split cost increases into temporary and lasting, and plan prices for each.
8. Review supply, forwarding and sales contracts with a lawyer, and track margin by product line monthly.

Our guide to building a resilient supply chain in Saudi Arabia covers the wider steps, such as second sources and fallback routes. If you want an outside view, Innovant can review your landed cost, forwarders and supply terms through its supply chain advisory service.

Common mistakes

• Pricing from the supplier’s invoice plus an old freight allowance, and forgetting that higher freight and insurance can also raise duty and import VAT.
• Accepting CIF terms without checking how much insurance the seller actually bought.
• Assuming the cargo policy covers war risks.
• Comparing forwarders on the headline rate, ignoring surcharges and free time, and paying their invoices unchecked.
• Leaving goods at the port because a certificate or document was not ready.
• Raising all prices at once, or absorbing every increase until the margin is gone.

Frequently asked questions

Book a free consultation with an Innovant advisor.