shippingWith Brexit finally done, the UK and Singapore recently signed a free trade agreement to establish post-Brexit arrangements. Lawyers say the UKSFTA is an important development that will lay the groundwork for more to come.

 

Given that the two countries have important historical and trade ties, strengthening the UK-Singapore relationship was always going to be a priority post-Brexit. Singapore has long served as the UK’s gateway to Southeast Asia, and with both sides hoping to deepen economic relations, the UK-Singapore Free Trade Agreement (UKSFTA), signed late last year, was the first step forward.

Peter Doraisamy, managing partner of Singapore law firm PDLegal, says the post-Brexit UKSFTA agreement mirrors the terms of the European Union-Singapore Free Trade Agreement (EUSFTA), signed in October 2018, but Brexit will change relationship dynamics.

“It is anticipated that with the current post-Brexit tariffs between the EU and UK, and the harsh reality of a post-Brexit trade deal with the EU, there will be significant degree of import by the UK from sources outside of the EU, for example, through Singapore,” Doraisamy says, noting under the UKSFTA, Asian food products made in Singapore continue to be able to enter the UK tariff-free, up to a combined annual quota, and under the flexible rules of origin, “there is no need that the ingredients used are grown or produced in Singapore, merely that the products are made in Singapore.”

With non-tariff barriers reduced across major key sectors such as electronics, motor vehicles and vehicle parts, pharmaceutical products, and “given Singapore’s status as a stable country with an outward-looking and laissez-faire attitude toward trade, it is anticipated that there will be a significant uptick in trade between Singapore and the UK,” Doraisamy predicts.

“This would mean more tonnage being transited through Singapore, further cementing Singapore’s position as a regional trading hub in Southeast Asia and the West. With the currently unstable geopolitical climate between the West and China, it is possible for Singapore to further develop its role as the Asian middle-man, transacting goods sourced in China, but made in Singapore for the UK market,” Doraisamy adds.

Leon Alexander, partner, and Hannah Chua, senior associate, at Clyde & Co Clasis say the UKSFTA is a sign of progress.

“The UKSFTA rates well in terms of recognising the evolving global trading environment and facilitating documentary and cargo clearance for shipments. For example, the UK and Singapore will move towards recognising each other’s authorised economic operator (AEO) schemes within two years. These measures help to give the shipping industry assurance that there will be minimal disruptions (if any) in customs and cargo operations arising from Brexit,” Alexander and Chua note.

The lawyers observe that Singapore places significant importance on ensuring continuity in its trades, especially during the COVID-19 pandemic. And with the UK one of Singapore’s top trading partners in Europe, the UKSFTA “is particularly important in maintaining the trade relations between the two nations.”-“For example, the UKSFTA will do away with unnecessary technical barriers to trade for Singapore and UK exporters,” Alexander and Chua say, noting the flexible, liberal rules of original will provide “entry of key exports to each other’s markets.”

“In addition, the UK will also grant Singapore enhanced access to city-level and municipal-level government procurement opportunities. This means that companies in Singapore may bid for more government projects in the UK, an opportunity that will no doubt be welcomed by companies in transport and logistics industries,” Alexander and Chua add.

DO THE RESEARCH

While the agreement offers scope for strengthened relations, companies will need to do their research to understand the changing relationships.

“To benefit from the agreement, we anticipate that companies, both in the shipping and manufacturing sectors, would need to adapt and pivot, to develop its processes to account for the increased openness of the UK market,” Doraisamy says.

“In the shipping sector, increased routes to assist in the flow of goods from Asia to the West would require re-optimisation of processes, and may see more shipping companies opening offices, or basing themselves in Singapore. These companies would capitalise on the increased traffic between Singapore and the UK,” he adds.

Alexander and Chua say through the UKSFTA, UK businesses are also at an advantage as they will be able to “better utilise Singapore’s capacity as a financial and trading hub to expand to the rest of ASEAN and the wider region.”

“More than 5,000 businesses from the UK are already operating in Singapore and we could see this number go up, as more UK-based companies look to take advantage of this bilateral agreement,” Alexander and Chua say.

But as clients look to get the best out of the arrangements, lawyers will be tasked with helping them ensure they get the best out of the agreement.

“Clients in the shipping sector would similarly be concerned with ensuring that their set-ups in Singapore comply with Singapore laws, to benefit from the anticipated increase in shipping traffic between Singapore and the UK,” he notes, adding, “On both fronts, we provide advice on how companies may benefit most from the UKSFTA, as well as assisting in compliance with the relevant rules and regulations in place.”

—Peter Doraisamy, PDLegal

Doraisamy says clients in the manufacturing sector are likely to be concerned with complying with the Rules of Origin and Product Specific rules, to ensure they are able to maintain preferential rates and benefit from the UKSFTA.

“Clients in the shipping sector would similarly be concerned with ensuring that their set-ups in Singapore comply with Singapore laws to benefit from the anticipated increase in shipping traffic between Singapore and the UK,” he notes, adding, “On both fronts, we provide advice on how companies may benefit most from the UKSFTA, as well as assisting in compliance with the relevant rules and regulations in place.”

While Doraisamy suggests that Singapore will offer a gateway to greater Southeast Asia — but longer term, this strategy may evolve.

“As the UK leaves the EU for good, we can see that the UK has, to date, focused on developing relationships with Singapore for the purposes of engaging Southeast Asia,” he says.

“This may change in the future, as the UK may look to other countries in Southeast Asia, which may be able to produce cheaper goods (for example, the recent FTA that the UK has entered into with Vietnam). However, given Singapore’s presence in Southeast Asia as a major trading hub, and the ability of Singapore companies to pivot quickly to address and fill gaps in the supply chain, it is anticipated that as agreements with other Southeast Asian markets develop, Singapore will gradually be able to move into trading higher-value goods,” Doraisamy adds.

 

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