The U.S.-Singapore Free Trade Agreement (SFTA) which came into force on January 1, 2004, has many similarities to NAFTA, including the tariff shift methodology for determining if a product qualifies for preferential tariff treatment under SFTA. However, there is one striking difference—the responsibility for demonstrating that a product qualifies for SFTA treatment is on the importer rather than the exporter. SFTA textile and apparel rules are similar, but not identical, to the NAFTA rules. A comprehensive overview of SFTA, including a sample SFTA origin certification, is set forth below.
The U.S.-Singapore Free Trade Agreement (SFTA) was signed on May 6, 2003, and was the culmination of 2 years of negotiations. Singapore is the U.S.'s 12th largest trading partner, with principal exports of petroleum products, food and beverages, chemicals, textile and garments, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, radio and television receivers and parts, cars, chemicals, food and beverages, iron and steel, and textile yarns and fabrics. Electronics account for 42% of Singapore's manufacturing sector.
SFTA eliminated all tariffs of consumer and industrial goods from the U.S. to Singapore; many of these products were already duty-free. Services were a big priority for U.S. negotiators, and now there will be market access for U.S. providers of professional and financial services. The Agreement also contains investment protection for U.S. investors in Singapore, duty-free treatment of products delivered electronically, and protection of intellectual property.
As for imports of goods from Singapore into the United States, the situation is more complex. There is a staged elimination of duties on these goods depending upon the category in which they are placed, as follows:
provided for in the items in staging category A shall be eliminated entirely and such goods will be duty free on the date this Agreement enters into force;
duties on goods provided for in the items in staging category B shall be removed in four equal annual stages beginning on the date this Agreement enters into force, and such goods shall be duty free, effective January 1 of year four;
duties on goods provided for in the items in staging category C shall be removed in eight equal annual stages beginning on the date this Agreement enters into force, and such goods shall be duty free, effective January 1 of year eight;
duties on goods provided for in the items in staging category D shall be removed in ten equal annual stages beginning on the date this Agreement enters into force, and such goods shall be duty free, effective January 1 of year ten;
goods provided for in staging category E shall continue to receive duty free treatment;
duties on goods provided for in the items in staging category G shall be eliminated entirely and such goods may enter free of duty and without bond on the date this Agreement enters into force;
duties on goods provided for in items in staging category H shall be subject to the following provisions during the tariff elimination period until January 1, of year ten of the Agreement, at which time such goods shall be free of duty:
(1) For goods described in tariff category 9802.00.60, at the time of entry the duty imposed upon the value of the processing outside the United States is to be applied in accordance with the procedures specified in U.S. note 3 of subchapter II, chapter 98, of the HTSUS, and shall be the rate which would apply to the article itself under the staging obligations set forth for the appropriate provision in Chapters 1 to 97 of this schedule.
(2) For goods described in tariff category 9802.00.80, at the time of entry the duty imposed upon the assembled article is to be applied in accordance with the procedures specified in U.S. note 4 of subchapter II, chapter 98, of the HTSUS, and shall be the rate applicable to the full value of the article itself under the staging obligations set forth for the appropriate provision in Chapters 1 to 97 of this schedule.
(3) For goods described in tariff category 9817.61.01, at the time of entry the duty imposed upon the assembled article shall be the rate applicable to the full value of the article itself under the staging obligations set forth for the appropriate provision in Chapters 1 to 97 of this schedule.
(4) For goods described in tariff category 9818.00.05, at the time of entry the duty imposed upon the cost of such parts shall be the rate applicable to the full value of such parts under the staging obligations set forth for the appropriate provision in Chapters 1 to 97 of this schedule.
USITC Publication 3651 (Dec. 2003), Annex II contains a complete list of all the products in the HTSUS, together with the applicable rates under U.S.-SFTA for each year though 2013 (the last date at which some items become duty-free).
On January 1, 2004, the U.S.-Singapore Free Trade Agreement Implementation Act, P.L. 108-78, 117 Stat. 948 came into force. Sections 201 and 202 of the Act authorized the President to proclaim tariff modifications and provide the rules of origin, and Presidential Proclamation 7747 (Dec. 30, 2003) did so, incorporating by reference USITC Publication 3651, entitled “Modifications to the Harmonized Tariff Schedule of the United States to Implement the United States-Singapore Free Trade Agreement” (Dec. 2003). Annex I of that publication adds a new General Note 25 containing specific information on U.S.-SFTA (including tariff shift information) and a new subchapter X to Chapter 99 to provide temporary tariff rate quotas implemented by the Act. Annex II of that publication provides for immediate and staged tariff reductions.
Rules of Origin
Section 202 of the US-SFTA Implementation Act specifies the general rules of origin to be used in determining if a good qualifies for preferential tariff treatment under the Agreement. As noted above, the HTSUS has been amended to include General Note 25, which contains Rules of Origin, definitions and other provisions to determine whether a good originates under the US-SFTA. The methodology to determine whether a good qualifies for preferential tariff treatment is similar but not identical to that found in the NAFTA. A notable difference in the US-SFTA is that the responsibility is on the importer, rather than the exporter, to demonstrate that a good qualifies for preferential tariff treatment.
Generally, under the US-SFTA, a good shall qualify for preferential tariff treatment as a “product of Singapore” if:
(a)The good is wholly obtained or produced entirely in Singapore, the U.S. or both;
(b)Each non-originating material used in the production of the good imported from Singapore:
(1) Undergoes an applicable change in tariff classification (tariff shift) specified in General Note 25(o) as a result of production occurring entirely in Singapore, the United States or both; or
(2) The good otherwise satisfies applicable regional value content or other requirements specified in General Note 25(o); or
(c)The good, as imported, is enumerated in General Note 25(m) [see Integrated Sourcing Initiative set out below] and is imported from Singapore.
The US-SFTA contains a de minimis provision of 10%, which applies to the majority of goods, except for textile articles and other goods which are specifically enumerated. Under the de minimis rule, a good that contains materials that do not undergo a tariff shift specified in the rules of origin, may receive preferential tariff treatment if the value of all non-originating materials that do not undergo the required change in classification used to produce the good does not exceed 10% of adjusted value of the good. However, the value of such non-originating materials shall be included in the total value of non-originating materials for any applicable regional value content requirement. A list of exceptions to the de minimis rule of origin may be found in General Note 25(e)(ii). A good, which has undergone simple combining or packaging operations or mere dilution with water or other substances, shall not be considered originating.
Integrated Sourcing Initiative (ISI)
Article 3.2(1) of the US-SFTA, provides that specific goods may be considered originating goods for purposes of the Agreement when shipped between the U.S. and Singapore, regardless of whether they satisfy the applicable rule of origin. The specific list of ISI-eligible goods is limited to information technology and medical products and can be found in General Note 25(m).
In order for ISI eligible goods to receive preferential tariff treatment under US-SFTA, the good must be shipped from a non-Free Trade Agreement (FTA) country (countries other than Singapore and the United States) to the territory of Singapore, then shipped directly to the United States for importation. ISI-eligible goods that meet the criterion of being shipped from the territory of Singapore to the U.S. will not be required to satisfy the specific rules of origin; however, they will be treated upon importation as originating goods. Singapore must be the country of export for ISI eligible goods to receive benefits under US-SFTA, but the country of origin of the good may be any country. The goods must still be marked with the true country of origin, despite receiving originating status under US-SFTA. A product on the ISI list that is shipped from a non-FTA country and used as input for the manufacture of a non-ISI final product in Singapore does not count as an originating material for purposes of a regional value content (RVC) calculation. The only way that the ISI material, component, product, or other input would affect an RVC calculation would be if an ISI product from a non-FTA party were first shipped from Singapore to the United States, is held in the U.S. without undergoing any processing that would affect its treatment under the rules of origin, is shipped to Singapore, and then manufactured there into a non-ISI good and imported into the U.S. If the above shipping requirements are met, the material or component may be considered originating for purposes of satisfying an RVC requirement upon its return to the U.S.
US-SFTA Qualifying for Textiles and Apparel
Textiles and apparel products may qualify as originating goods under US-SFTA if they meet the requirements as specified in the Agreement. The duty rate for this merchandise will be identified in the special column. These rules are quite similar to the NAFTA, with some variation.
Set forth below is a summary of the type of processes required for some of the more basic products to be considered eligible for US-SFTA. However, it should be noted that there are exceptions even to these requirements, depending on the specific type of product. For more specific information, see USITC Publication 3651, entitled “Modifications to the Harmonized Tariff Schedule of the United States to Implement the United States-Singapore Free Trade Agreement” (Dec. 2003), available on the USITC website, and General Note 25(d).
Yarn – generally, fiber must originate in Singapore or U.S., in order to qualify for US-SFTA treatment.
Fabric – generally, yarn must originate in Singapore or U.S., in order to qualify for US-SFTA treatment. Cotton and man-made knit fabric are under fiber forward rules.
Apparel – generally, yarn must originate in Singapore or U.S., in order to qualify for US-SFTA treatment.
US-SFTA Qualifying Based on Tariff Preference Levels
Tariff preference levels, or TPLs, have been established for certain apparel products, of cotton and man-made fibers to allow entry under a reduced duty rate up to a specific quantity of goods that are not originating goods. These goods are both cut (or knit to shape) and sewn or otherwise assembled in Singapore from fabric or yarn produced or obtained outside the territory of one of the Parties. Once that quantity is reached, the product is dutiable at the column 1 rate and the merchandise processing fee (MPF) is due. See U.S. Note 13, Subchapter X of Chapter 99.
A valid preferential Certificate of Origin/Eligibility (Certificate) is required whenever a TPL claim is made. This Certificate must be an original and must be filed with the entry documents. This Certificate will contain a stamp by the Director General of Singaporean Customs in box 12 of the form. The certificate will also contain a number in a standard visa format (i.e. 4SG123456) that must be reflected in column 34 of the CBP Form 7501.
For TPL goods, the Special Program Indicator (SPI) “SG” must be placed in front of the chapter 9910 HTSUS number when the entry is filed. In addition to the 9910 number, the appropriate Chapter 1-97 number must be shown. The applicable rates of duty are located in Annex II (C) of USITC publication number 3651.
If a good does not qualify as originating under US-SFTA or under the established TPLs, but it is still considered a product of Singapore, then the normal column 1 rate would apply and MPF is due.
Eligible Articles / Immediate and Staged Reductions
The list of HTSUS item numbers that are eligible for immediate duty free treatment can be found in Annex II of Publication 3651 (posted to the USITC website).
Tariff rates for a variety of US-SFTA eligible goods are currently higher than the Column 1 rate. An “s” in parentheses is annotated next to the US-SFTA duty rate in the Harmonized Tariff Schedule to indicate “suspended”. In accordance with General Note 3 of the HTSUS, the normal trade relation (NTR) column 1 rate of duty will apply for those goods without regard to whether a claim for preference has been made.
The staged tariff reductions for goods not immediately duty-free can also be found in Annex II of Publication 3651.
Quotas for certain products are found in Annex 2B to U.S.-SFTA, (e.g. beef, dairy, cheese, butter, peanuts, sugar, tobacco, cotton), and is also found in USITC Publication 3651,Annex I. The application of tariff rate quotas for the U.S.-Singapore Free Trade Agreement is to be addressed in separate instructions from the Bureau of Customs and Border Protection.
Information Necessary to Make a Claim
Effective January 1, 2004, importers and brokers may file claims for preferential tariff treatment on qualifying goods that originate in Singapore. These claims shall be made at the time the entry summary is filed by placing on the CBP Form 7501 the Special Program Indicator (SPI) “SG” as a prefix to the HTSUS item number for each line on which preferential tariff treatment is claimed. In addition, at the request of CBP, the importer must submit a statement (as outlined in the attached form reproduced below), or supporting documentation containing the required data elements (described below), to demonstrate that the imported goods qualify for preferential tariff treatment. Importers are required to maintain for five years after the date of importation, all records relating to the importation of the good. These include, but are not limited to, records concerning the purchase of, cost of, value of and payment for the good, the purchase of, cost of, value of and payment for all materials used in the production of the good and the production of the good in its exported form.
Verification by Customs
Unlike the NAFTA, the US-SFTA places the burden of substantiating the validity of the claim for preferential tariff treatment on the importer. An importer may make a claim based on knowledge or information in his/her possession that the good qualifies as an originating good. CBP may verify the validity of the claim and will direct inquiries for verification via a CBP Form 28, Request for Information, to the importer. The importer will substantiate a claim by submitting a statement or supporting documentation containing the required data elements (outlined below) specifying how the good qualifies as an originating good and shall include additional requested documentation above and beyond the statement such as additional cost and manufacturing information. Such information may include information concerning the RVC calculation used in the claim for preference such as the build up or build down methods outlined in General Note 25 of the HTSUS.
In addition, the importer shall provide relevant information from the exporter or producer of the good. In many instances, the exporter may be unwilling to provide cost and/or sourcing information to the importer. CBP will still work through the importer. The importer is expected to arrange for their foreign supplier to provide information directly to CBP.
The US-SFTA provides flexibility by not mandating the statement to be in a prescribed format, however, it must contain the data elements and certification. Upon CBP’s issuance of the CBP Form 28 the importer shall provide the statement and any requested documentation to CBP no later than 30 days from the date of the request.
Examples of actions that CBP may take when verifying a claim:
Since the US-SFTA is an “importer-focused” agreement, a CBP Form 28 will be issued to the importer first. If the requested information is not in the importer’s possession, the importer may have the exporter or producer provide it directly to CBP.
If the importer is unsuccessful either in obtaining the documentation from the exporter or producer or in obtaining cooperation in providing CBP with the documentation, CBP may issue a CBP Form 28 directly to an exporter or producer in Singapore.
CBP may conduct a joint visit (CBP and Singapore Customs together), if consent is given, to the exporter or producer’s premises for textiles and apparel only.
Determination of a Claim
If the importer forwards a statement and any records and information necessary to demonstrate that the goods imported qualify for preferential tariff treatment, CBP will notify the importer of the positive determination via a CBP Form 29, Notice of Action, stating that the goods qualify as originating. The CBP Form 29 will include the HTSUS number, description of the good and the relevant rule of origin applied to the good.
If the importer fails to submit a statement or any relevant information, CBP will issue a negative determination via a proposed CBP Form 29, Notice of Action. The notice shall specify why the goods do not qualify for preferential tariff treatment and notify the importer that they have 20 days from the date of the notice to provide the statement and/or any related documentation to CBP. The proposed CBP Form 29 will cite the appropriate statutes and/or regulations and detail the rate and/or value advance where appropriate. If the importer fails to comply with the proposed CBP Form 29 within 20 days of the date of the notice, a negative determination will be sent to the importer in the form of a CBP Form 29, Notice of Action Taken.
If the importer provides a statement and/or supporting documentation, and CBP determines, based on the information submitted, that the goods do not qualify for preferential tariff treatment, a negative determination will be sent to the importer in the form of a CBP Form 29, Notice of Action Taken. The notice will specify why the goods do not originate pursuant to the US-SFTA rules of origin, cite the appropriate statutes and/or regulations and detail the rate and/or value advance where appropriate. Claims for preferential tariff treatment may be based on a statement that pertains to a single shipment or a blanket statement covering shipments for a period of up to 12 months. Where a negative determination is made with respect to a blanket statement, CBP will deny preferential tariff treatment to all importations of identical merchandise covered by that blanket statement.
Corrected US-SFTA Claims
An importer is required to promptly make a corrected declaration if the importer is aware that the claim is not valid. Penalties will not be assessed if the importer voluntarily declares that imported goods were not originating according to the rules of origin, corrects the claim and pays any duty and MPF owed. Pursuant to Article 3.14:4(b) of the Agreement, the importer will not be subject to any penalty if the claim is corrected and any duty and MPF owed is paid at least one year from submission of the invalid claim.
Petition and Protest Rights
Importers or other interested parties may avail themselves of post entry administrative and judicial procedures, such as 19 U.S.C. 1520(a) or (c), to receive a refund of duties and/or merchandise processing fees for eligible goods entered, or withdrawn from warehouse, for consumption, on or after the effective date of the US-SFTA. Importers or other interested parties may file a protest to contest a negative origin determination pursuant to 19 U.S.C. 1514 within 90 days of the date of liquidation or denial.
Merchandise Processing Fees and Harbor Maintenance Fee
In addition to the reduced and free rates of duty afforded by the US-SFTA, goods that qualify for preferential tariff treatment are not subject to merchandise processing fees. Textile merchandise entered under TPL numbers 9910 will still be subject to merchandise processing fees. There is no exemption from the harbor maintenance fee.
Currently, the program updates to the Automated Commercial System (ACS) which allow for automated processing have not been completed. Therefore, until further notice from this office, importers claiming preference under the US-SFTA must file their entries manually. Importers will have the option to file ABI entries at release and follow through with manual entry summaries. This option is allowed only for Singapore claims and will terminate once ACS programming to allow electronic filing is complete.
Data Elements for the STATEMENT MADE UNDER THE Singapore Free trade agreement
List of data elements for the importer/exporter/producer statement and certification:
1. Name and address of the importer:
The legal name, address, telephone and e-mail of the importer of record of the good.
2. Name and address of the exporter:
The legal name, address, telephone and e-mail of the exporter of the good.
(If different from the producer.)
3. Name and address of the producer:
The legal name, address, telephone and e-mail of the producer of the good.
4. Description of good:
The description of a good shall be sufficiently detailed to relate it to the invoice and the Harmonized System (HS) nomenclature.
5. HS tariff classification number:
The HS tariff classification, to six or more digits, as specified for each good in the Rules of Origin.
6. Preference criterion:
The preference criterion applicable to each good as specified in the Rules of Origin.
7. Single shipment:
Provide the commercial invoice number.
8. Multiple shipments of identical goods:
Provide the blanket period in “mm/dd/yyyy to mm/dd/yyyy” format (12-month maximum).
The signee must have access to the underlying records and the legal authority to bind the company. The signature may be in an electronic format. This field shall include signature, company, title, telephone, fax and e-mail.
I certify that:
The information on this document is true and accurate and I assume the responsibility for proving such representations. I understand that I am liable for any false statements or material omissions made on or in connection with this document;
I agree to maintain, and present upon request, documentation necessary to support this certificate, and to inform, in writing, all persons to whom the certificate was given of any changes that could affect the accuracy or validity of this certificate;
The goods originated in the territory of one or more of the parties, and comply with the origin requirements specified for those goods in the United States-Singapore Free Trade Agreement, there has been no further production or any other operation outside the territories of the parties, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the good to the United States; and
This certification consists of _______ pages, including all attachments.