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. Singapore’s FTA Network.
3. Potential Benefits of ACFTA and CSFTA Trade-in-Goods.
4. Steps to Obtain Tariff Concessions.
5. FTA Resources.
2
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.
3
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
Singapore’s FTA Network
Singapore’s 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
6
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
8
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
ASEAN–6 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 product’s 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: [email protected] (Classification,
ROO and PCO )
[email protected] (Documentation)
Further enquires with IE:
Email: [email protected]
Phone: 1800 437 7673
48
Thank You
www.iesingapore.com