Customs and Trade updates

February 2010

Singapore commences FTA negotiations with the EU

Following the suspension of FTA negotiations with ASEAN last March, the EU has now changed its approach to securing a FTA with ASEAN. Instead of a multilateral ASEAN-EU FTA, the EU is now planning to secure bilateral FTAs with individual ASEAN member states instead, starting with Singapore.

The FTA negotiations between the two parties are slated to commence in early 2010. According to the EU, this change in approach would be more palatable to them, given the vast differences in economic development and approaches to negotiations of the ASEAN member states.

The final objective of the EU nevertheless remains to secure the multilateral ASEAN-EU FTA albeit via a longer process.

This signals a positive move from the EU and indicates a milestone in terms of commercial ties between the EU and Singapore. The EU is currently the largest trading partner of Singapore whereas Singapore was ranked 15th on the list of the EU’s largest trading partners.

Companies that have significant trading or manufacturing facilities in both the EU and Singapore would do well to follow negotiation developments or even engage in lobbying for potential operational advantages in terms of customs duty savings, easing of non-tariff barriers (i.e. application of licenses / permits etc.) and ultimately reduction in costs of doing business.

Implementation of the AANZFTA and the ASEAN-India FTA (AIFTA) by Singapore Customs

Singapore Customs released the relevant circulars indicating that both the AANZFTA and the AIFTA would be implemented on 1 January 2010. Exporters from Singapore seeking to utilise these agreements are advised to do a self-assessment to determine if their products enjoy any substantial preferential tariff treatment vis-à-vis the additional administrative work to comply with the respective FTA requirements. If the FTAs are worthwhile for the exporters to utilise, they will have to ensure that the rules of origin are satisfied for the respective FTA:

Rules of origin for AANZFTA

  1. Product wholly obtained or produced in Singapore; or
  2. Product satisfying the Product Specific Rules (where applicable) such as undergoing specific chemical reactions etc.; or
  3. Product satisfying one of the following:
    a) A change in the tariff classification heading at four digit level, or
    b) Meeting the local or cumulative value content of 40% originating content.

The rule of origin in point 3 is applicable only for products which are not listed in the Product Specific Rules (point 2).

Rules of origin for AIFTA

  1. Product wholly produced or obtained in Singapore; or
  2. Product satisfying the Product Specific Rules (where applicable) such as undergoing specific chemical reactions etc.; or
  3. Product meeting a local value or cumulative value content of 35% and a change in tariff classification sub-heading at six digit level between the end product and the non-originating materials that are used in production, provided that the final process of the manufacture is performed within the territory of the exporting party.

Once exporters are confident that they meet the rules of origin for the respective FTAs, they can apply for certificates of origin from Singapore Customs provided the following requirements are met in chronological order:

  • Their factories are registered with the Tariffs and Trade Services Branch of Singapore Customs.
  • If the value-added criterion is used to claim origin, their respective manufacturing cost statements for each product model exported are submitted and approved. Once approved, they are valid for one year and have to be amended accordingly annually if there are any changes to the manufacturing cost figures.
  • Their electronic applications of Certificate of Origin for the FTA in question and export permits via TradeNet are submitted and approved. The TradeNet system is the nation-wide Electronic Data Interchange (EDI) system which allows the various parties from the public and the private sectors to exchange structured trade message and information electronically. Documents relating to the production and shipment of exports accompanied by the Certificate of Origin should be kept for at least two years (for AIFTA) and at least three years (for ANNZFTA) after the date on which the CO was issued for post-verification checks by the relevant authorities.

For further details, please call your usual PricewaterhouseCoopers contact.