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Singapore is very well known as an important ‘port of call’ for businessmen, especially those who are dealing between the eastern and the western time zones. As per World Trade Organization’s latest data, Singapore is the 14th largest exporter of merchandise in the world and has a trade to GDP ratio of 404.9. If you are planning company incorporation in Singapore or setting up a Singapore trading company and start an import and export business, this article will help you begin.
Almost 3000 global and local logistics and supply chain management businesses are operating in Singapore today. Singapore also offers the shippers to opt from 200 shipping lines which connect 600 ports in 120 plus countries. Managing the port services such as transfers of container load and unloading requires highly-trained and skilled staff and state-of-the-art equipment and technology. The Changi Airfreight Centre runs a round-the-clock one-stop service centre for all the airlines, cargo agents, shippers and consignees. With state-of-the-art infrastructure, cargo is managed efficiently and rapidly. As Singapore has proven its market dominance in the import and export trade, it has well-defined guidelines and procedures in place. This article provides an overview of the various things you need to know about trading in Singapore such as how to open a customs account, process to apply for licenses and permits, different types of goods which can be imported or exported, what are the taxes and fees, options of trade financing, and options for goods storage etc.
The import and export of certain goods depend on the control of the Controlling Agencies and are therefore known as controlled goods. To import or export such controlled goods, you need a special permit, in addition to the regular IN Permit and OUT Permit. The permit applications are to be submitted to the relevant Controlling Agencies through the TradeNet® system or through your freight forwarding agency or cargo agent for processing and the approval. Some examples of controlled goods are cigarettes, tobacco products, petrochemicals, drugs, animals and food products.
Some high-technology items are dependent on the export control by the country that is exporting and the Singapore importer could be requested to furnish an Import Certificate and also a Delivery Verification (ICDV) given by the exporter. Importers have to apply for an ICDV from the Singapore Customs. Items covered under an ICDV have to be imported into Singapore directly, and cannot to be sent via other countries.
In case of exporting, transhipping or bring in transit some Strategic Goods, you need to obtain a Strategic Goods Control (SGC) TradeNet Permit. Strategic goods have to be traded as per the Strategic Goods (Control) Act. This Act covers all the goods and technology that are planned or expected to be used for weapons of mass destruction.
Some buyers may request exporters for a Certificate of Origin (CO), which is a document proving that the goods are manufactured in Singapore. There are two types of Certificates of Origin:
You could apply for a CO through TradeNet® or through your freight forwarding agency or cargo agent.
Certain goods which are made in Singapore or imported into the country and are also subject to customs and/or excise duty are called as dutiable goods. Dutiable goods in Singapore include: tobacco products, liquors, vehicles, and petroleum products. Duty is levied on an ad valorem or specific rate basis. An ad valorem rate is basically a percentage of the total Customs value of the imported goods. A specific rate is a precise and specific amount per unit of weight or some other quantity like $300.00 per kg. Duty may be briefly suspended (up to the point of consumption) under the different Customs schemes.
Depending on the qualifying conditions, exemption of duty is granted for certain wine used at wine exhibitions and conferences approved under the Meetings, Incentives, Conventions & Exhibitions (MICE) Incentive Scheme “BE In Singapore – BEIS” which is administered by the Singapore Tourism Board. In addition, motorized bicycles that cannot be registered as motorcycles/scooters are also exempt from the excise duties.
Goods that are imported into Singapore are subject to the existing GST which is currently at 7% if those goods are to be used for local consumption. GST is regulated by the Inland Revenue Authority of Singapore (IRAS) and is collected by Singapore Customs. GST applicable on all dutiable and non-dutiable goods is to be paid on an ad valorem basis, that is, 7% on the total value of goods. The taxable GST is calculated depending on the CIF value plus all the duties and any other chargeable costs, which may or may not be reflected on the invoice. GST might be briefly suspended (up to the point of consumption) under the different Customs schemes. Please note that depending on some specific criteria, GST relief is given for the wine, which is used at wine exhibitions and conferences approved under the Meetings, Incentives, Conventions & Exhibitions (MICE) Incentive Scheme “BE In Singapore – BEIS”, which is administered by the Singapore Tourism Board.
GST can be charged from customers if you have registered with IRAS to collect GST. You could also get back GST through a refund on GST paid on the imports if the goods are eventually exported out of Singapore. You need to be GST-registered with IRAS to also apply for the refund.
Note: There are special schemes, for example, the ‘Major Exporter Scheme’ and ‘Import GST Deferment which decrease the burden of GST.
Singapore Customs charges some administrative fees. The best way is to make all payments for all fees, duties and also GST to Singapore Customs by GIRO, which authorizes Singapore Customs to directly make deductions from one’s bank account.
Singapore companies and businesses often depend on loans, LCs or letters of credit and insurance to take care of the financial risks that are involved in trading.
Letter of Credit (LC) is very commonly used in Singapore; in this, the buyer’s bank guarantees the payment to the exporter. This is the preferred option of payment both among exporters and buyers because the exporter’s payment is safeguarded before the goods are shipped and in the same manner, the buyer doesn’t need to make any payments till he/she receives the goods. Depending on the LC, other financing options available are Back To Back LC, Trust Receipt and Packing Credit.
Most Singapore banks work with the large import and export industry and give competitive trade finance services such as import and export products and bank guarantees. Some financing options offered by banks are overdraft, revolving line of credit, term loans, transaction loan, inventory financing, and factoring loans.
Trade Credit insurance provides businesses with protection against any risk of non-payment by the buying agencies which might arise due to commercial and non-commercial risks. If the buyers fail to pay on the pre-determined due date and even in the grace period, the insurer would pay after verifying the validity of that claim. International Enterprise Singapore, which is a Government initiative, gives trade credit insurance at appealing and competitive premium rates through its TCI Programme.
Thinking of setting up a trading company yet? Contact us at IMC and we would help you streamline the process of company incorporation Singapore or immigration services in Singapore.
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