A Guide to setting up a Trading Company (Import/export) in Singapore

Three different Singapore trading company models can be set up in Singapore.

• Model A – In the first model, the goods are imported, re-packed, and are exported out of Singapore.
• Model B – In the second model, the goods are imported and used for local consumption, or local goods are exported out of Singapore.
• Model C – In the third model, the goods do not enter the Singapore border and are traded through outer sea routes. However, billing is done by a Singapore trading company. For example the goods may travel from China to destination country without entering into Singapore. However the Singapore entity may act as a middleman in this case.

The first and second models are almost similar, because goods cross the Singapore borders in both the cases. However model C differs as the goods are not crossing Singapore border.

This guide aims to provide you the required knowledge to understand these models and register your Singapore trading company.

Networked Trade Platform (NTP) was officially launched in 2018 and was created by Singapore Customs and GovTech. It is an online platform that enables trade and logistics communities to connect and conduct business worldwide.

It was introduced as an upgraded replacement to TradeNet and TradeXchange.

It enables any Singapore trading company to enjoy a wide variety of trade-related VAS (Value Added Services), namely:

• Customs declaration
• Booking of cargo freight
• Trade financing
• Reconciliation of payments
• Cargo insurance

Do note that TradeNet and TradeXchange services have been migrated to the NTP’s official website already. The current URL to access TradeNet services (like applying for IN and OUT permits) is:

https://www.ntp.gov.sg/public/government-services

If you are operating model C, where goods do not enter into Singapore then its not an issue at all, as there are no specific activities to be carried out in Singapore. However in case of other two models there are few activities those needs to be carried out. The brief list can be ;

• Receiving and storing goods
• Repackaging goods if required
• Switching BL and processing shipment document

Foreign promoters often have a problem, they are often located in overseas locations, and they don’t have any employee or person to do all these tasks. The number of shipments tend to be low on a monthly basis, which does not justify appointment of a full time employee.

In this case they can engage a logistic service provider to carry and manage all above activities on their behalf. For this you can refer to the Singapore Logistics Association members directory and look for a suitable service provider.

A member company will provide you all the services for storing of goods, clearance of goods and also for necessary paperwork.

Both importers and exporters must follow specific Singapore Customs guidelines and other CAs to conduct their trading activities. These guidelines are specific to both importers and exporters.

Let’s take a look at them.

Guidelines for importers

A Singapore trading company must declare to Singapore Customs before importing goods. Import in Singapore refers to:

• Goods that are being brought into Singapore Customs territory from an FTZ (Free Trade Zone) or any other entry point
• Goods that are being brought into an FTZ for storage and re-export

There are dutiable and non-dutiable goods.

For non-dutiable goods, you do not pay any duty. However, you must pay 7% GST (Goods & Service Tax) on non-dutiable goods.

For instance,

The above example illustrates how you will pay a 7% GST on imported non-dutiable goods.

In the case of dutiable goods, you will have to pay both import duty and GST. Hence, GST is mandatory for all imports.

In case of controlled goods or goods restricted by CAs (Controlled Authorities), you will require an additional permit from the respective CAs.

Some examples of controlled goods are:

• Tobacco
• Liquor
• Cigarette
• Animals & birds
• Arms & explosives
• Toy guns, pistols, and revolvers
• Films, video, and video games
• Weapons, spears, and swords
• Publications and audio records

Guidelines for exporters

Goods that you are going to export also require a declaration to Singapore Customs before export. The following acts regulate the goods exported from Singapore:

• Customs Act
• Regulation of Imports and Exports Act
• Legislation of respective CAs for controlled goods, for instance- Strategic Goods Act on Import, export, or transshipment of strategic goods

To apply for an export permit, a Singapore trading company must also declare the FOB (Free on Board) value of the goods.

You need an export permit in the following scenarios:

• When you export goods from an FTZ
• When local GST-paid or locally manufactured goods are exported
• When you re-export goods that were imported under the Temporary Import Scheme
• When goods are temporary exported (re-import in the near future)
• When goods are exported under the Major Exporter Scheme
• When you export dutiable goods from a licensed warehouse
• When non-dutiable goods are exported from a zero-GST warehouse
• Goods that are controlled under the Strategic Goods (Control) Act require an additional permit, called a strategic goods export permit

Officers from the ICA (Immigration and Checkpoint Authority) examine people, vehicles, and cargo entering or leaving the country. The clearance procedure for import/export depends on cargo and the mode of transport.

Import Clearance Procedure

There are two cargo types:

• Conventional
• Containerized

The clearance procedures for both cargo types are different.

Conventional Cargo Import Clearance

A Singapore trading company must produce an IN Permit from the Customs with the relevant documents, like loading bill, invoice, packing list, etc.). At an entry checkpoint, these documents must be presented before ICA officers for the clearance of goods.

Containerized Cargo Import Clearance

There is no requirement to produce the printed copy of Singapore Customs permit and other relevant documents to ICA officers at entry checkpoints if the containerized cargo is imported by sea. However, a Singapore trading company is required to produce the Customs Permit and documents like invoice, packing list, and bill when you import the containerized cargo by land or air.

For a permit application, shipper seal number and container number are required.

First, you must understand that a Singapore trading company can import two types of containerized cargo.

• FCL – FCL is short for Full Container Load. An FCL either contains goods from one consignor or contains goods for only one consignee.
• LCL – LCL is short for Less than Full Container Load. It is a container with goods for more than one consignee or from many consignors.

Procedure for FCL Clearance

FCL containers are sealed at FTZ Out-gates for Customs examination and are not unstuffed in the FTZ. Consignees or their transport agents can make arrangements with Customs for supervision when the containers are unstuffed. Customs seal is generally placed during import and should not be broken. Customs seal can only be broken under Customs supervision or with written permission.

Some containers do not require Customs examination, and ICA officers release them without a seal. They give SNR facilitation to such containers. SNR is short for Sealing Not Required. These containers do not require Singapore Customs supervision when they are unstuffed.

Procedure for LCL Clearance

LCL containers do not require Customs supervision when they are unstuffed. Generally, these containers are unstuffed in the FTZ and are cleared as conventional cargo through the Out-gates of FTZ.

Trading, like any other business, involves financial risks. Therefore, a Singapore trading company often resorts to insurance, loans, or a letter of credit as a safety measure to cover the financial risks.

Letter of Credit

An LC (Letter of Credit) is the preferred payment method between buyers and sellers. The buyer’s bank issues an LC to the seller. It guarantees the payment to the exporter from the buyer’s bank.

An LC eliminates two risks:

• When a buyer does not pay after the goods are delivered
• When exporter does not deliver the goods after the payment

Loans

Most banks in Singapore provide trade finance services. They provide loans and bank guarantees to assist traders.

The following trade financing options are offered by them:

• Overdraft – overdrawing current account up to an agreed maximum amount
• Revolving line of credit – funds available to you at a fee
• Term loans – loan against a collateral subject
• Transaction loan – finance an order placed by a new company
• Inventory financing – against unsold inventories
• Factoring loans – instant payments against outstanding invoices

Insurance

IE (International Enterprise) Singapore launched a Global Company Partnership Programme. TCIS (Trade Credit Insurance Scheme) is a financial assistance Programme under the GCP.

IE provides insurance against non-payment or default on payments by buyers under TCIS. IE also offers premium support, up to 50% of the minimum premium, to the qualifying companies.

Criteria for qualification for financing

While most of the Singapore banks will offer financing for trading purposes for companies promoted by local entrepreneurs. However, financing will not be available for those companies where shareholding is with foreign promoters. The typical rule is, to avail unsecured credit, your company must have mnimium 30% shareholding with the local person. Please note, a back to back LC is considered as unsecured credit for banking purpose.