The Flour Milling Law in the Kingdom of Saudi Arabia is a set of rules governing the establishment and operation of flour mills in the Kingdom. The law was issued on May 2, 2018.
Licenses for establishing and operating flour mills
The Flour Milling Law stipulates that flour mills must be established or operated by joint-stock companies after obtaining a license from the General Food Security Authority. This license is issued by a decision of the authority’s Board of Directors, following approval from the Council of Ministers. The authority imposes a financial fee for issuing, renewing, or amending any license, with the amount determined by the Board of Directors.
In cases where a license is not renewed, the General Food Security Authority will take necessary measures to ensure the market's flour supply needs are met. Flour milling companies are not permitted to transfer their licenses without prior approval from the authority's Board of Directors.
The law specifies that milling companies may establish silos to store their operational needs after obtaining the necessary license. Milling companies are not permitted to import any quantity of wheat without prior approval from the authority.
According to the law, and without prejudice to the competencies of the Saudi Food and Drug Authority, the General Food Security Authority monitors the quality of milling company products before they are released to the market, based on standards for flour quality and any added ingredients. The regulations define these quality standards, and the authority is responsible for inspecting milling companies, their facilities, and all affiliated establishments.
The prices of flour and products derived from milling are determined according to the pricing policy approved by the Council of Ministers, based on a proposal from the General Food Security Authority.
The authority, without affecting the jurisdiction of the Ministries of Commerce and Investment, monitors the distribution of flour to distributors, bakeries, and retailers. It also oversees the prices of flour and milling company products to ensure compliance with the approved pricing policy.
The law grants the Chairman of the Board of Directors of the General Food Security Authority, in exceptional circumstances, the authority to take necessary measures to secure the market’s flour needs through facilitated procedures. This includes setting uniform flour prices in line with the pricing policy until the end of the exceptional circumstance. The occurrence or conclusion of such circumstances is determined based on a report submitted by the governor and approved by the chairman.
According to the law, milling companies are prohibited from exporting wheat, flour, or subsidized products derived from them outside the Kingdom without approval from the authority’s Board of Directors. Approval is contingent upon collecting an amount equivalent to the value of the subsidy on the wheat, flour, or derived products to be exported and ensuring that the export does not disrupt the local market’s needs for wheat, flour, or their derivatives.
Obligations of flour milling companies
The law requires flour milling companies in the Kingdom to obtain approval from the Board of Directors of the General Food Security Authority before merging with any other licensed milling company, acquiring the majority of such companies or their assets, either within or outside the Kingdom, and to notify the authority within five business days of any preliminary agreement in this regard.
Additionally, approval from the authority's board is required before purchasing 5 percent or more of the shares of any other licensed milling company, acquiring its securities, any other form of equity rights, or purchasing a lesser percentage if it would create a dominant position in any area of milling operations.
Milling companies are required to adhere to milling technologies, production standards, and flour sales and distribution controls established by the General Food Security Authority, as specified in the regulations. The authority receives complaints against milling companies or their products related to violations of the provisions of the law or regulations, investigates them, and refers them to the committee as needed. Milling companies must provide any information requested by the authority, which is responsible for maintaining the confidentiality of this information and only disclosing it to third parties in accordance with applicable laws.
Inspectors from the authority are responsible for monitoring, inspecting, and recording violations, and they hold the status of law enforcement officers. Inspectors have the authority to enter all facilities affiliated with milling companies for inspection purposes, review documents and records, and retain copies if necessary. They may also take samples of materials and products. Inspectors are required to present their official identification, indicating their inspection authority, when performing any of these actions.
The law grants authority inspectors all necessary powers to investigate violations and complaints filed against milling companies, in accordance with the provisions of the law and its regulations. Inspectors are required to prepare the necessary reports to document any recorded violations and related complaints, and they have the authority to investigate and present cases before the committee, as specified in the regulations.
The decision imposing a penalty may include a provision for its publication at the violator's expense in three local newspapers, at least one of which is circulated in the region of the violator's residence. If no newspaper is available in that region, it should be published in a newspaper from the nearest area. In cases of repeated violations or failure to rectify the violation within the timeframe specified by the committee, the violator will be penalized with double the fine or the previously determined suspension period.
Prohibitions on milling companies
The law prohibits milling companies from agreeing to practices that would dominate a specific market, restrict or prevent competition, or reduce its effectiveness in the milling sector unless they obtain approval from the Board of Directors of the General Food Security Authority. It also prohibits agreements to increase or decrease flour production or products derived from milling activities without prior approval.
It also prohibits milling companies from engaging in any activity or action that would exploit their position after obtaining approval from the authority’s Board of Directors to dominate a specific market or a part of it.
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