EU – Singapore Free Trade Agreement - entry into force 21 November 2019
On the 21 November 2019, the EU-Singapore Free Trade Agreement (“EUSFTA”) enters into force. The EUSFTA ensures that the current duty-free access for EU products to Singapore remains unchanged, and that the remaining tariffs and trade barriers will be removed. Moreover, the EU will eliminate its tariffs and trade barriers for the majority of goods from Singapore.
Trade relations between the EU and Singapore
There is already significant trade between the EU and Singapore, with trade in goods reaching €53 billion and trade in services reaching €51 billion in 2017. While many EU goods can already enter Singapore duty-free, the EUSFTA ensures that the current duty-free access will remain unchanged, and the existing tariffs and trade barriers will be removed. This will particularly benefit key trade areas, such as machinery, transport equipment, pharmaceuticals and chemicals. Moreover, the EU is currently Singapore’s largest trading partner in services, with more than 10.000 EU companies already established in Singapore, using it as a regional hub and gateway to the region.
Removal of customs duties and non-tariff barriers
Once the EUSFTA enters into force, Singapore will maintain free access for EU products, and remove customs duties on the remaining products within a period of 5 years. For imports from Singapore, 80% of all imports will be able to enter the EU duty-free on the day it enters into force, including electronics, pharmaceuticals, petrochemicals and processed agricultural foods. For the remaining goods, the EU will remove tariffs in either 3 years for products such as textiles and carpets, and 5 years for products such as bikes, sports footwear, fruits and cereals.
The EUSFTA also addresses technical and non-tariff barriers to trade. Key provisions concerning liberalisation, competition and intellectual property protection are expected to further facilitate the trade in services. For electronics, the EU and Singapore have amongst other things agreed to remove mandatory third party conformity assessment for product safety schemes for certain products, and instead allow other forms of conformity assessments, such as the supplier’s declarations, which is the norm in the EU. The agreement also provides for new motor vehicles and car parts from the EU be accepted by Singapore without further testing or certification requirements, provided they are already certified in accordance with international standards accepted in the EU. The agreement further removes such barriers related to pharmaceuticals, equipment for renewable energy, and animal and plant products.
The EUSFTA also enhances customs cooperation by harmonizing and simplifying customs procedures, including working towards establishing mutual recognition of trade partnership programmes, such as the ‘Authorised Economic Operators’ programme in the EU. There are moreover provisions concerning border enforcement allowing right holders to request the Singaporean customs authorities seize counterfeit trademark goods, pirated copyright and design goods, and counterfeit goods protected by Geographical Indications (GIs).
Benefit from the preferential tariffs – Rules of Origin
In order to benefit from the preferential tariff treatment, products have to be considered as originating in the EU or Singapore. This is the case for ‘wholly obtained products’, such as natural resources, plants and vegetables, and ‘sufficiently worked or processed products’, containing materials that are not ‘wholly obtained’ in Singapore or the EU, but have been sufficiently worked or processed there. There are further product-specific requirements for determining whether products can enjoy the preferential treatment, and flexible rules allowing companies to use changes in tariff classification or regional value content to meet the requirements. Requesting the customs authorities for a so-called EU Binding Origin Information (BOI) provides for more certainty on the origin of your goods.
In recognition of the integrated supply chains in Southeast Asia, the EUSFTA also allows for “ASEAN cumulation” for specific manufactured products. Under these rules, Singapore-based manufacturers may include materials and parts originating from other ASEAN Member States as content originating in Singapore when determining the preferential origin or their products. The EUSFTA also contains co-equal rules whereby exporters have the option to meet either a RVC (regional value content) or CTC (change in tariff classification) rule. This option will offer companies greater flexibility in establishing the origin of their products.
The EUSFTA results in a further removal of customs duties and non-tariff barriers between the EU and Singapore. Benefitting from preferential import duty rates however requires a thorough review of the rules of origin.
If you would like to know if and how your company can benefit from the EUSFTA, please feel free to contact Kneppelhout’s International Trade and Customs team.