Advantages of Free Trade Agreements (FTAs) between Singapore and China. Mike Lee Free Trade Agreement Unit

Transcription

1 Advantages of Free Trade Agreements (FTAs) between Singapore and China Mike Lee Free Trade Agreement Unit

2 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

3 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

4 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

5 Singapore s FTA Network

6 Singapore s Network of FTAs: 18 FTAs in force with 24 trading partners ASEAN Jan 1993 New Zealand Jan 2001 Japan Nov 2002 EFTA * EFTA - Switzerland, Liechtenstein, Norway, Iceland, Jan 2003 Australia Jul 2003 US Jan 2004 ASEAN-China (TIG) Jul 2005 (TIS) Jul 2007 (Investment) Feb 2010 Jordan Aug 2005 India Aug 2005 S. Korea Mar 2006 ** TPSEP - Brunei, Chile, New Zealand May 2006 Panama Jul 2006 ASEAN-Korea (TIG) Jun 2007 (TIS) May 2009 (Investment) Aug 2009 China Jan 2009 ASEAN-Japan (TIG) Jan 2009 Peru Aug 2009 ASEAN-India (TIG) Jan 2010 * EFTA: European Free Trade Association ** TPSEP: Trans-Pacific Strategic Economic Partnership Agreement ASEAN-Australia & New Zealand Jan

7 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

8 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 Preferential Certificate of Origin (PCO) Wholly Obtained, or Exclusive Product Specific Rule (PSR). Regional (ASEAN + China) Value Content of no less than 40% of FOB price, or Alternative PSR. Form E Wholly Obtained, or Exclusive Product Specific Rule (PSR). Regional (Singapore + China) Value Content of no less than 40% of FOB price, or Alternative PSR. Preferential CO Third Party Invoicing (TPI) Yes Yes Movement Certificate (MC) Yes No 8

9 Potential Benefits of ACFTA and CSFTA Trade-in-Goods

10 How FTAs Increase Price Competitiveness Sales Price CIF Value of Product Paid by importer to importing customs authority Import Duty Sales Tax / Valueadded Tax Excise Tax FTAs reduce import duties Imposed on both locally produced and foreignproduced goods 10

11 Example of Tariff Savings at Importing Customs Exports of Sweetened Cocoa Powder (HS ) to China No FTA ACFTA CSFTA Export Value $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 Using ACFTA or CSFTA, importer will be able to enjoy $10,000 worth of tariff savings. 11

12 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

13 Steps to Obtain Tariff Concessions

14 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

15 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

16 Direct Shipment (ACFTA and CSFTA) Original PCO/Form E Manufacturer in FTA Country (Singapore) Importer in FTA Country (China) 16

17 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. Manufacturer in FTA Country (Indonesia) Original PCO Importer in FTA Country (China) 17

18 Movement Certificate (ACFTA) Original From E Movement Certificate Manufacturer in FTA Country (Indonesia) Importer/Exporter in FTA Country (Singapore) 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. Importer in FTA Country (China) Movement Certificate was obtained from Singapore Customs and submitted to importing customs before expiry of its corresponding Form E. 18

19 Movement Certificate (ACFTA) Original Form E No. of units: 100 Jan 2012 Movement Certificate No of units: 60 Apr 2012 Importer in FTA Country (Malaysia) Manufacturer In FTA Country (Indonesia) Importer/Exporter in FTA Country (Singapore) Movement Certificate No of units: 40 Dec 2012 Importer in FTA Country (China)

20 Movement Certificate (MC) Vs Third Party Invoicing (TPI) MC Original PCO Movement Certificate Manufacturer MC Party Importer TPI TPI Party Manufacturer Original PCO Importer

21 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

22 Determination of HS Code 22

23 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

24 ACFTA Trade in Goods Tariff Structure ACFTA Trade-in-Goods Early Harvest Normal Track Sensitive List Normal Track 1 (NT1) Normal Track 2 (NT2) Sensitive List (SL) Highly Sensitive List (HSL) 24

25 ACFTA Trade in Goods Tariff Structure Category ASEAN 6 and China CLMV Early Harvest Programme 0% by 1 Jan % by 1 Jan 2010 Normal Track 1 (NT1) 0% by 1 Jan % by 1 Jan 2015 Normal Track 2 (NT2) 0% by 1 Jan % 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 reduction to not more than 50% by 1 Jan 2015 Applied MFN tariff rates reduction to not more than 50% by 1 Jan

26 ACFTA Trade in Goods Tariff Schedule (Legal Text) 26

27 ACFTA Trade in Goods Tariff Schedule (Legal Text) 27

28 ACFTA Trade in Goods Tariff Schedule (Legal Text) 28

29 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

30 ACFTA Trade in Goods Tariff Schedule (ASEAN Website) 30

31 CSFTA Trade in Goods Tariff Schedule Builds on commitments of China and Singapore under ASEAN- China 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) Normal Track 2 (NT2) Highly Sensitive List (HSL) By 2012, preferential tariff of ACFTA NT products are eliminated in both ACFTA and CSFTA. 31

32 CSFTA Trade in Goods Tariff Schedule 32

33 CSFTA Trade in Goods Tariff Schedule 33

34 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

35 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

36 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

37 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

38 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

39 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

40 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

41 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

42 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 42

43 Application Procedure : Manufacturing Cost Statement 43

44 FTA Resources

45 FTA Tariff Calculator 45

46 FTA Tariff Calculator (Step 4) 46

47 China FTA website 47

48 More Resources on the Internet Preferential Certificate of Origin Procedures & Guide to Rules of Origin: n.htm Singapore Customs Hotline: s: (Classification, ROO and PCO ) customs_documentation@customs.gov.sg (Documentation) Further enquires with IE: enquiry@iesingapore.gov.sg Phone:

49 Thank You