Advantages of Free Trade

Agreements (FTAs) between

Singapore and China

Mike Lee
Free Trade Agreement Unit

Agenda

1. What is a Free Trade Agreement (FTA)?

2. Singapores FTA Network.

3. Potential Benefits of ACFTA and CSFTA Trade-in-Goods.
4. Steps to Obtain Tariff Concessions.

5. FTA Resources.

What is a Free Trade Agreement?

A Free Trade Agreement (FTA) is a

legally binding agreement between
2 or more countries to reduce or
eliminate barriers to trade, and
facilitate the cross border
movement of, goods and services
between the territories of the
Parties.

Potential FTAs Benefits

Trade in Goods

Tariff concessions for eligible exports

Trade in Services

Improve market access for committed sectors

Remove quantitative restrictions for committed sectors

Investment Protection

Remove discriminatory pre-investment conditions

Generally free transfer of capital & funds
Greater foreign investment opportunities for committed sectors
Safeguard against government expropriation
Provide alternative dispute settlement mechanisms

Intellectual Property Protection

Reinforce partner countries commitment to protect Intellectual Property

rights

Movement of Business Persons

Increase business travel convenience

Mutual Recognition of
Standards & Qualifications

Reduce duplicative testing

Harmonise product standards
Mutually recognise professional qualifications

Government Procurement

Opportunity to bid for government tenders above a stipulated threshold

amount
4

Singapores FTA Network

Singapores Network of FTAs:

18 FTAs in force with 24 trading partners
EFTA
ASEAN
Jan 1993

Jordan
Aug 2005

China
Jan 2009

New
Zealand
Jan 2001

Japan
Nov 2002

India
Aug 2005

S. Korea
Mar 2006

ASEAN-Japan
(TIG) Jan 2009

* EFTA: European Free Trade Association

* EFTA - Switzerland,
Liechtenstein, Norway,
Iceland, Jan 2003

Australia
Jul 2003

** TPSEP - Brunei, Chile,

New Zealand
May 2006

Peru
Aug 2009

ASEAN-India
(TIG) Jan 2010

US
Jan 2004

ASEAN-China
(TIG) Jul 2005
(TIS) Jul 2007
(Investment) Feb 2010

Panama
Jul 2006

ASEAN-Korea
(TIG) Jun 2007
(TIS) May 2009
(Investment) Aug 2009

ASEAN-Australia & New Zealand

Jan 2010

** TPSEP: Trans-Pacific Strategic Economic Partnership Agreement

Singapore and China are parties to 2 FTAs

ASEAN-China
Free Trade Area

China-Singapore
Free Trade Agreement

ASEAN 6
Brunei, Indonesia, Malaysia,
Philippines, Singapore, Thailand
CLMV
Cambodia, Laos, Myanmar,
Vietnam
7

Singapore and China are parties to 2 FTAs

ASEAN-China Free Trade Area (ACFTA)

China-Singapore Free Trade Agreement

(CSFTA)

Parties

ASEAN and China

China and Singapore

Implemented

July 2005

January 2009

Coverage

Trade in Goods
Trade in Services
Investment

Trade in Goods
Trade in Services
Investment

Rules of origin

Wholly Obtained , or

Wholly Obtained , or

Exclusive Product Specific Rule (PSR).

Exclusive Product Specific Rule (PSR).

Regional (ASEAN + China) Value

Content of no less than 40% of FOB
price, or Alternative PSR.

Regional (Singapore + China) Value

Content of no less than 40% of FOB price,
or Alternative PSR.

Preferential Certificate of
Origin (PCO)

Form E

Preferential CO

Third Party Invoicing (TPI)

Yes

Yes

Movement Certificate (MC)

Yes

No

Potential Benefits of
ACFTA and CSFTA
Trade-in-Goods

How FTAs Increase Price Competitiveness

Sales Price

CIF Value of Product

Import Duty
Paid by
importer to
importing
customs
authority

Sales Tax / Valueadded Tax

Excise Tax

FTAs reduce
import duties
Imposed on both
locally produced
and foreignproduced goods
10

Example of Tariff Savings at Importing Customs

Exports of Sweetened Cocoa Powder (HS 18061000) to
China
No FTA

ACFTA

CSFTA

$100,000

$100,000

$100,000

Import Tariff Rate (MFN) 10%

10%

10%

FTA Preferential Rate

No Preferential Rate

0%

0%

Lowest Import Tariff

Payable

$10,000

$0

$0

Export Value

Using ACFTA or CSFTA, importer will be able to enjoy

$10,000 worth of tariff savings.
11

Example of Tariff Savings at Importing Customs

To enjoy the tariff savings of $10,000:

the sweetened cocoa powder must satisfy the rules of

origin of 40% value-add under the ACFTA or CSFTA
and
be exported with a Preferential Certificate of
Origin(PCO) issued by Singapore Customs i.e. ACFTA
Form E or CSFTA PCO.
12

Steps to Obtain Tariff

Concessions

Steps to Obtain Tariff Concessions

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
14

Step 1: Understand the trade flow of your product

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
15

Direct Shipment (ACFTA and CSFTA)

Original
PCO/Form E

Manufacturer
in FTA Country
(Singapore)

Importer in
FTA Country
(China)

16

Third Party Invoicing (ACFTA)

Manufacturer
issues invoice to
company in third
country who pays
the manufacturer.

Third Party in another

Country
(Singapore)

Company in third
country issues
invoice to importer
and importer pays to
company in third
country.

Original
PCO

Manufacturer in
FTA Country
(Indonesia)

Importer in
FTA Country
(China)
17

Movement Certificate (ACFTA)

Original
From E

Manufacturer
in FTA Country
(Indonesia)

Movement
Certificate

Importer/Exporter in
FTA Country
(Singapore)

Importer in
FTA Country
(China)

Singapore companies who export products not manufactured in Singapore to

China/ASEAN countries can still benefit from ACFTA provided that:
Products are certified with an Original Form E and was directly imported from
manufacturing country.
Products to be kept in FTZ or bonded warehouse in Singapore.
Movement Certificate was obtained from Singapore Customs and submitted to
importing customs before expiry of its corresponding Form E.
18

Movement Certificate (ACFTA)

Movement Certificate
No of units: 60
Apr 2012

Original Form E
No. of units:
100
Jan 2012

Manufacturer
In FTA Country
(Indonesia)

Importer in
FTA Country
(Malaysia)

Importer/Exporter in
FTA Country
(Singapore)

Movement Certificate
No of units: 40
Dec 2012

Importer in
FTA Country
(China)

Movement Certificate (MC) Vs Third Party Invoicing (TPI)

Movement
Certificate

Original PCO

MC

MC Party

Manufacturer

Importer

TPI
TPI Party

Manufacturer

Original
PCO

Importer

Step 1: Understand the trade flow of your product

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
21

Determination of HS Code
http://www.customs.gov.sg/leftNav/trad/per/Classification+of+Goods.htm

22

Step 1: Understand the trade flow of your product

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
23

ACFTA Trade in Goods Tariff Structure

ACFTA
Trade-in-Goods

Early Harvest

Normal Track
Normal
Track 1
(NT1)
Normal
Track 2
(NT2)

Sensitive List

Sensitive
List (SL)

Highly
Sensitive
List (HSL)
24

ACFTA Trade in Goods Tariff Structure

Category

ASEAN6 and China

CLMV

Early Harvest
Programme

0% by 1 Jan 2006

0% by 1 Jan 2010

Normal Track 1 (NT1)

0% by 1 Jan 2010

0% by 1 Jan 2015

Normal Track 2 (NT2)

0% by 1 Jan 2012

0% by 1 Jan 2018

Sensitive List

Reduce Applied MFN

tariff rates to 20% by 1
Jan 2012 and 0-5% by
1 Jan 2018

Reduce Applied MFN

tariff rates to 20% by 1
Jan 2015 and 0-5% by 1
Jan 2020

Highly Sensitive
List

Applied MFN tariff rates Applied MFN tariff rates

reduction to not more
reduction to not more
than 50% by 1 Jan
than 50% by 1 Jan 2018
2015

25

ACFTA Trade in Goods Tariff Schedule

(Legal Text)
www.iesingapore.gov.sg/fta

26

ACFTA Trade in Goods Tariff Schedule

(Legal Text)
www.iesingapore.gov.sg/fta

27

ACFTA Trade in Goods Tariff Schedule

(Legal Text)
www.iesingapore.gov.sg/fta

28

ACFTA Trade in Goods Tariff Schedule

(Legal Text)
Legal Text for various categories.
Early Harvest Programme Chapters 1-8 and over 100
industrial products. Exclusion List at Attachment 1, Annex 1 of
Second Protocol to Amend the Framework Agreement (8 Dec
2006)
Normal Track 2 Annex 1, Appendix 1 of Trade in Goods
Agreement (21 Nov 2004)
Sensitive Track - Attachment 8, Appendix 2 of Protocol to Amend
the Trade in Goods Agreement (8 Dec 2006)
Highly Sensitive Track - Attachment 9, Appendix 3 of Protocol to
Amend the Trade in Goods Agreement (8 Dec 2006)

Normal Track 1 are not listed.

29

ACFTA Trade in Goods Tariff Schedule

(ASEAN Website)
www.asean.org/news/item/asean-china-free-trade-area-2

...
.

...
.

30

CSFTA Trade in Goods Tariff Schedule

Builds on commitments of China and Singapore under ASEANChina FTA (ACFTA).
Accelerate tariff elimination of ACFTA NT products by 1-3 years.
ACFTA
Trade-in-Goods
Early Harvest

Normal Track

Sensitive List

Normal Track 1
(NT1)

Sensitive
List (SL)

Highly
Sensitive
List (HSL)
By 2012, preferential tariff of ACFTA NT products are eliminated in
31
both ACFTA and CSFTA.
Normal Track 2
(NT2)

CSFTA Trade in Goods Tariff Schedule

www.iesingapore.gov.sg/fta

32

CSFTA Trade in Goods Tariff Schedule

www.iesingapore.gov.sg/fta

33

Step 1: Understand the trade flow of your product

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
34

Not all goods qualify for concessions

FTAs do not award tariff benefits to all

goods.
To qualify for preferential tariffs, goods
must be Singapore-originating.

Rules of Origin
An objective set of criteria set up to
determine a products originating status.
35

Rules of Origin
Guiding principles for determining whether a product originates from
Singapore:
1. The product must be wholly obtained from Singapore /
FTA partner country, or
2. The manufactured product must have undergone
substantial transformation in Singapore / FTA partner
country
To enjoy originating status from Singapore, Singapore must be the
country in which the last substantial transformation of the product
takes place
36

Rules of Origin: Wholly-Obtained

Wholly-obtained or Produced entirely in the Party:
(a) plant and plant products harvested, picked or gathered there;
(b) live animals born and raised there;
(c) products obtained from live animals;
(d) products obtained from hunting, trapping, fishing, aquaculture, gathering or capturing conducted there;
(e) minerals and other naturally occurring substances, extracted or taken from its soil, waters, seabed or
beneath their seabed;
(f) products taken from the waters, seabed or beneath the seabed outside the territorial waters of that
Party, provided that that Party has the rights to exploit such waters, seabed and beneath the seabed in
accordance with international law;
(g) products of sea fishing and other marine products taken from the high seas by vessels registered with a
Party or entitled to fly the flag of that Party;
(h) products processed and/or made on board factory ships registered with a Party or entitled to fly the flag
of that Party, exclusively from products referred to in sub-paragraph (g) above;
(i) articles collected in the territory of that Party that can no longer perform their original purpose nor are
capable of being restored or repaired and are fit only for disposal or recovery of parts of raw materials,
or for recycling purposes;
(j) goods obtained or produced in a Party solely from products referred to in sub-paragraphs (a) to (i)
above.
37

Rules of Origin: Regional Value Content (RVC)

Formula:

Single Country Content

Local Material Cost + Direct Labour
+ Direct Overheads + Profit + Inland Transport
-------------------------------------------------------- X 100 = > 40% FOB
Free on Board (FOB) Price
Or
Cumulative Content (Regional Value Content)
Local, and FTA Parties Material Cost + Direct Labour
+ Direct Overheads + Profit + Inland Transport
-------------------------------------------------------- X 100 = > 40% FOB
Free on Board (FOB) Price
FOB = Total Material Cost + Direct Labour + Direct Overheads + Profit +
Inland Transport.

38

Rules of Origin: Product Specific Rules (PSRs)

PSRs (Exclusive/Alternative):

ACFTA
Refer to Attachment 10, Attachment B in Protocol to
Amend the Trade in Goods Agreement (8 Dec 2006)
CSFTA
Refer to Annex 2 (effective 1 June 2009)

39

Simple/Minimal Operations
Products which have only undergone the following 'minimal
processes' would not qualify as of Singapore origin:
1. operations to ensure the preservation of products in good condition during transport and storage
(ventilation, spreading out, drying, chilling, placing in salt, sulphur dioxide or other aqueous solutions,
removal of damaged parts, and like operations);
2. simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching
(including the making up of sets of articles), washing, painting, cutting up;
3.
(i) changes of packing and breaking up and assembly of consignments;
(ii) simple placing in bottles, flasks, bags, cases, boxes, fixing on cards or boards, and all other
simple packing operations;
4. the affixing of marks, labels or other like distinguishing signs on products or their packaging;
5. simple mixing of products, whether or not of different kinds;
6. simple assembly of parts of products to constitute a complete product;
7. a combination of two or more operations specified in (1) to (6);
8. slaughter of animals.

40

Step 1: Understand the trade flow of your product

Step 1: Understand the trade flow of your
product
Step 2: Find out the HS code of your product
Step 3: Check that product is offered tariff
concessions under the FTA.
Step 4: Check that your product satisfy the
Rules of Origin
Step 5: Comply with documentary requirement
41

Application Procedure for Preferential

Certificate of Origin (CO)
Factory
Registration
Manufacturer must apply for
registration of the factory with
Singapore Customs (SC)
SC will visit the factory to
note:
Manufacturing
operations;
Machinery and
manpower &;
Updated production and
book records

Prepare
Manufacturing
Cost Statement
Manufacturer to prepare
manufacturing cost
statement for each
product in order to
prove local value
content and/or change
in tariff heading meets
the Rules of Origin as
stated in respective FTA
Usually valid for one
year

Apply for
Preferential
Certificate of
Origin
After SC approval of
cost statement
Manufacturer to apply
Preferential CO from SC
for each shipment
Preferential CO usually
valid for one year
Manufacturer to sign on
CO and send original
copy to importer for
importer to claim tariff
concession

Details available at http://www.customs.gov.sg/leftNav/trad/Certificates+of+Origin.htm

42

Application Procedure : Manufacturing Cost Statement

43

FTA Resources

FTA Tariff Calculator

www.iesingapore.gov.sg/fta

45

FTA Tariff Calculator (Step 4)

46

China FTA website

http://fta.mofcom.gov.cn

47

More Resources on the Internet

Preferential Certificate of Origin Procedures & Guide to
Rules of Origin:
http://www.customs.gov.sg/leftNav/trad/Certificates+of+Origi
n.htm
http://www.tradexchange.gov.sg
Singapore Customs
Hotline: 6355 2000
Emails: customs_roo@customs.gov.sg (Classification,
ROO and PCO )
customs_documentation@customs.gov.sg (Documentation)
Further enquires with IE:
Email: enquiry@iesingapore.gov.sg
Phone: 1800 437 7673
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Thank You
www.iesingapore.com