Global Trade Advisory

Selecting the correct tariff classification for products moving cross-border is critical, not only from the perspective of determining customs, excise, value add or anti-dumping duties and taxes payable upon import or export, but also in determining whether goods are subject to import licensing, quotas, other requirements, and even qualification for preferential tariff under Free Trade Agreements (FTAs). 

Our team of professionals regularly assist companies in interpreting tariff classification rules, determine duty liabilities and other requirements via the following:

• WCO HS Explanatory Notes and Advisory Opinion review and analysis;
• Application for classification rulings from Customs Authorities in respect of tariff classification codes; 
• Deployment of classification tools to ensure longer term application and consistency with national requirements.

The transaction value method is used in more than 90% of world trade, based on the WTO Agreement on Customs Valuation which sets out the rules for all customs administrations across 161 WTO Members to adhere to when determining the appropriate customs value to use when imposing customs duties and other national taxes upon importation into the relevant member county.

In the context of related party transactions where customs values are more often scrutinized by customs authorities due to the ability to set prices which may fall foul of the arm’s length standard, it is imperative for companies to ensure that any transfer prices set will not only be acceptable from an income tax perspective but also from a customs perspective.  

Whilst both principles of taxation have as its main focus the arm’s length standard to be applied to all transactions between related parties, how this finally plays out in practice could be materially different as tax authorities are more focused on year-end profits, whilst customs authorities are obliged to ensure that every transaction satisfies the arm’s length principle.  In the context of customs, this would typically refer to import transactions.

Finally, as more revenue authorities around the world seek to recognize their fair share of revenue from global transactions, it will be imperative for companies to ensure that in addition to maintaining transfer pricing reports from an income tax perspective, a separate customs valuation report should also be carried out to ensure that its transfer pricing methodology can be substantiated from a customs valuation perspective.

Many countries have established a variety of duty/tax relief and exemption programs designed to ensure that certain goods imported for further manufacturing or prescribed purposes (e.g. value-adding, blending, other approved activities) may enjoy duty/tax suspension benefits while the goods are within the country. 

These programmes are typically designed to provide savings in terms of cash flow improvement and trade facilitation to companies benefiting from such schemes. Licensed premises schemes (Bonded or Licensed Warehouses) are administered by Singapore Customs and are available for companies located outside the Free Trade Zones to benefit from import duty/tax suspension whilst goods are located within such warehouses for carrying out approved activities.   
At Deloitte, we regularly assist companies with the following range of services:

• Provide guidance on availability and benefits of being located within a Free Trade Zone (FTZ) or a Licensed Premise (LP)
• Ability to use other trade facilitation programs which can minimise or defer duty/tax payment upon importation of goods into Singapore without the need to be physically located within an FTZ or LP
• Advise on requirements to qualify for the facilitation schemes such as controls that need to be put in place to track receipt, processing and subsequent export of goods out of Singapore
• Assist with designing and subsequently establishing internal controls and processes required to meet the requirements above
• Assistance with applications to Singapore Customs for the status
• Carry out periodic reviews and health checks of the compliance status of by companies of their trade facilitation schemes.

The increasing number of Free Trade Agreements (FTAs) covering goods traded with and within the Asia Pacific region present significant opportunities for businesses to reduce the landed cost of goods and increase their competitiveness in the global marketplace. 

To support businesses maximise duty savings potential and navigate the complex rules of origin and certification procedures oftentimes found in the differing FTAs, our team at Deloitte provides the following support:

• Identify available FTAs based on existing or proposed supply chain (e.g. manufacturing locations and destination countries);
• Determine qualifying Rules of Origin and Operational Certification Procedures that needs to be satisfied under the applicable FTAs;
• Review product eligibility to meet Rules of Origin and advise on alternative ways of product qualification;A
• dvise on the process and steps to obtain relevant Certificates of Origin (COO) in the country of export and to be able to secure claims for preferential duty rates in the country of import;
• Assist with filing necessary applications to authorities and support on post-import origin verification request from authorities;
• Develop procedure manuals for FTA implementation; 
• Provide awareness and training workshops on the utilisation of FTAs; and
• Promote the use of automated tools to support utilisation of FTAs, monitoring of origin qualification and tracking of duties paid and saved.

In addition to tariff barriers in the form of import duty and other taxes, non-tariff barriers (NTB) may also be imposed on trade in goods.  Examples of NTBs include licensing, quotas, localization requirements, standards, foreign exchange controls, and other procedures and administrative requirements required to be fulfilled to be able to import, export and sell goods domestically within a certain country.

As noted by the WTO in their publication titled “World Tariff Profiles” (published together with the ITC and UNCTAD), an annual publication that pulls together information on all tariff and non-tariff measures imposed by over 170 countries and customs territories, NTBs are becoming more and more relevant in their influence on global trade patterns as the reductions in tariff rates over several multilateral round negotiations have diminished the impact of tariffs.

In 2019 alone, WTO member countries around the world initiated 1,224 sanitary and phytosanitary (SPS) measures, 1,986 technical barriers to trade (TBT) measures and 271 trade remedy measures.  In Q2 of 2020 alone, countries around the world initiated 713 SPS measures, 977 TBT measures, and more than 10 trade remedy measures.  

There is empirical data to show an increasing trend in terms of the number of NTBs imposed by countries around the world.  In this regard, for new entrants into any domestic market, it is imperative to determine what the applicable NTBs are in order to be able to bring products to market within the country.  

At Deloitte, we are able to identify the NTBs applicable to your goods so that plans can be made ahead of time to obtain the requisite licensing, certification or other approvals as determined to be required. For existing entities subject to new NTBs, we can also see what opportunities are available to meet such NTBs.

The growth of global trade worldwide has resulted in increased security threats to countries around the world and customs authorities who need to inspect cargos entering the country.  Recognising this and to encourage companies dealing with cross border movement of goods, many customs authorities around the world have introduced programmes such as the Authorised Economic Operator (AEO) status, based on the WCO’s SAFE Framework of Standards.

In Singapore, Customs has launched the Secure Trade Partnership (STP) and STP-Plus programmes which encourage companies with operations in Singapore to increase the safety and security of their supply chains in exchange for various benefits under the programmes which include having expedited customs clearance, in Singapore and other partner countries that Singapore has entered into Mutual Recognition Arrangements (MRAs) with. Singapore currently has MRAs with the following countries:

• Australia
• Canada
• China
• Hong Kong
• Japan
• Korea
• New Zealand
• Taiwan
• Thailand
• United States 

The STP and STP-Plus programmes are applicable to importers, exporters, manufacturers, freight forwarders, warehouse operators, transporters and terminal operators.  Only STP-Plus holders currently benefit from the MRAs mentioned above, whereby Singapore Customs offers benefits of reduced cargo inspection, recognition as a lower risk company, a dedicated account manager appointed by Singapore Customs for the company, and recognition as a known consignor under the Regulated Air Cargo Agent Regime. 

At Deloitte, we assist companies attain the benefits associated with supply chain security programmes, where we provide the following assistance:

• Assess readiness to participate in the supply chain security programme based on current activities and operations;
• Developing and formulating processes surrounding the supply chain security framework where the existing processes and procedures are inadequate;
• Assist with applications to Singapore Customs;
• Periodic review to monitor compliance with the conditions tied to the relevant status obtained by the company; and
• Workshop and training programmes.

The increasing complexity of customs and trade regulations and the variations in local interpretation have contributed to the rise in disputes with customs and trade authorities in the region.  Such disputes can take the form of disagreements with or issues concerning:

• HS Codes, affecting duty rate(s), other national taxes applicable, triggering import or other licensing requirement, application of anti-dumping, anti-subsidy or safeguard duties and quota
• Customs valuation, affecting duty rate(s) and/or other national taxes applicable
• FTA qualification, in terms of having met the applicable rule of origin and qualification with other requirements to benefit from preferential duty rate 
• Compliance with requirements to benefit from duty/tax suspension schemes, ability to operate within special zones (FTZ, BW, etc.) 
• Compliance with permit requirements applicable upon import/export of goods 
• Trade remedy investigations 
• Investor-state disputes concerning obligations by Governments to do or not to do certain acts such as under Bilateral Investment Treaties, Investment Guarantee Agreements, FTAs, and others. 

At Deloitte, we take a holistic approach to managing disputes in terms of strategy and implementation.  Where formal voluntary disclosures programmes (VDP) or schemes are available, we will also consider the ability of the company to avail itself under such scheme based on the facts of the matter at hand.  

Where a company is no longer able to avail itself of the VDP or other disclosure schemes, whether due to the fact that an audit has already commenced or a query has already been triggered, we start by determining the maximum exposure at hand and working together with the company to mitigate the risk and determine the best defences available.  

Upon conclusion of the matter, we can also assist with designing an improvement plan to address gaps within the existing processes to prevent similar recurrent non-compliance in the future.

Trade remedies are tools used by WTO member countries to counteract unfair practices to trade caused by certain actions such as (i) dumping by a foreign entity causing injury to a domestic market, (ii) where a foreign entity receives subsidies which are non-WTO consistent that causes unfair trade to domestic companies who do not benefit from similar treatment, or (iii) to deal with a sudden influx of foreign goods into the market causing injury to the domestic market. 

Dumping occurs when a foreign entity sells goods in a domestic market that is below the price that it sells in its home market, and this practice causes injury to businesses in the domestic market. In such scenario, domestic companies can petition the Government to launch an anti-dumping investigation to determine whether ‘dumping’ has occurred, to confirm that ‘injury’ has been suffered by the domestic industry selling like goods, and this was ‘caused’ by the act of dumping by the foreign entity. 

Injury can be said to have been suffered if based on the investigation, there are facts to show that there is actual decline in a company’s output, sales, market share, profits, productivity and others. Investigation teams are also required to consider additional data in terms of the effects of the alleged dumping on the business said to have suffered injury in terms of cash flow, inventories, employment, wages, growth, etc.  WTO member states are required to adhere to strict rules and procedures when investigating complaints, in accordance with disciplines set out under the WTO Anti-Dumping Agreement (or more formally known as the Agreement on the implementation of Article VI of the GATT).  If upon investigation, it is finally determined that dumping has occurred and injury has been suffered, then Governments are able to levy anti-dumping duties to the amount required to counteract the dumping (i.e. usually a duty similar to the margin enjoyed by the foreign entity via dumping).

Conversely, unfair subsidies are dealt with by WTO member countries via countervailing duties as allowed under the Subsidies and Countervailing Measures Agreement (more commonly known as the SCM Agreement), and safeguard action allowed under the WTO Agreement on Safeguards (Article XIX of GATT).  Similar principles apply in that these agreements allow WTO member countries to impose measures to counteract unfair trade practices caused by a trading enterprise in a foreign state, or by the Government of the foreign state itself.  

At Deloitte, we provide the following assistance to companies who have suffered from an alleged unfair trade practice, or who have been alleged as participating in unfair trade practice and wishes to defend against such investigation:  

• Counselling companies on WTO and domestic rules surrounding dumping and injury; 
• Data collation and analysis to determine whether dumping has occurred and injury has been sustained; 
• National statistics review to determine other available factors required to be determined and considered by investigating authorities; 
• Additional support and guidance required throughout the entire investigative process;
• Working together with company representatives and legal counsel towards effective representation.

With heightened concerns over global safety and security, governments worldwide have increasingly introduced export controls on both tangible goods and intangible technologies that could have military applications. Principally affected are companies in the aerospace and defence, biotechnology/chemicals and information security/encryption sectors, but controls also impact all other products defined as “dual-use” and therefore will have wide ranging impact to companies operating in other sectors who move such goods around the world as part of global supply chains.

Singapore has introduced export controls on controlled goods since 2002 via the Strategic Goods (Control) Act (Cap 300), and other subsidiary legislation made thereunder. The Act seeks to place controls on any act of transferring or brokering any strategic goods, strategic goods technology, and any other goods capable of being used to develop, produce, operate, stockpile or acquire weapons capable of causing mass destruction. 

At Deloitte, we assist companies in managing their compliance efforts with export control requirements via a step-by-step approach by first determining whether export controls apply to the product and the activity in question, followed by hands on assistance to design, implement and effect internal processes, controls and systems to ensure that requisite licences are applied for prior to any transfer or brokering of strategic goods out of Singapore.   

To assist businesses in understanding whether the Strategic Goods (Control) Act, and also other export control-oriented multilateral agreements and international conventions for which Singapore is a party to, could be applicable to their products and therefore require the appropriate licence to be obtained prior to the transfer or brokering of such goods, the following steps are generally involved: 

• ECCN Classification to determine whether such goods are regarded as strategic goods
• Whether there are exceptions available against the need to obtain licensing (e.g. mass market exemptions, other exemptions available based on the specific goods)
• Whether goods brought in transit in Singapore not exceeding a certain timeframe may benefit from no licence required 
• If goods are controlled and a licence is required, whether a single use or bulk permit would be ideal 
• Requirements to be able to apply for licensing from Singapore Customs and timeframe 
• Other compliance requirements in terms of record keeping, dealings, submission of reports to Singapore Customs, etc. 

Compliance with export control requirements is taken seriously by Singapore Customs and there are significant penalties imposed on companies for non-compliance.  

In the unfortunate event that strategic goods or technology may have been shipped out or transmitted outside Singapore, we also assist with reviewing the case on hand to determine whether it would be appropriate to submit a voluntary disclosure application to Singapore Customs ahead of any audit and/or investigations.  

Our network of export controls specialists comprises lawyers, ex-government officials, industry experts and consultants experienced in export controls and trade compliance. 

• Export controls advisory
• Permit and schemes applications
  • TradeFIRST applications
  • Secure Trade Partnership (STP) status applications