Over the last decades, Singapore has been an important hub for those traders which are dealing between the western and the eastern areas. With more than 3000 local and international supply chain and logistics businesses in the country, it is undoubtedly one of the largest merchandisers in the world.
In addition, the country has built a lot of infrastructures like harbors, airports, shipping lines, or roads, to improve the efficiency of the whole system. This guide will show you essential steps and information on how to start an import-export business in Singapore.
How to Start a Import Export Business
Is starting an import export business profitable? When managed properly, the import-export business can bring in a hefty revenue as Singapore becomes more and more globalised. However, it is pertinent to conduct market research on the goods, the target market, and the regulations of Singapore customs before starting your company.
Incorporate Your Import Export Business
Just like other areas, you first need to register your import-export management company with the Accounting and Corporate Regulatory Authority (ACRA). After that, it is compulsory to activate your business account with the Customs of Singapore before your company would export or import goods out or into Singapore.
In general, it often takes from 1 to 2 working days to process the account activation after your application is submitted. Once your business has been successfully incorporated, you will acquire an approval letter which can be valid until your business exists.
Apply for Necessary Permits and Licenses
The next step is to apply for all the necessary licenses that come with managing an import and export business, as well as being a freight forwarder. The licenses required to operate in Singapore may differ from those required by other countries, so make sure to do your due diligence when applying for an export license, import license, and more.
- Import or export all goods: If your business plans to import all goods, including non-controlled and controlled items, it is compulsory to acquire an IN Permit. Similarly, an OUT Permit is required to export all goods out of the country. Some special cases such as exporting or importing trade samples of several uncontrolled goods with the total value no more than S$400 might be exported or imported without permits.
- Import or export controlled goods: Some common controlled goods that are often imported or exported in Singapore include food and animal products, petrochemicals, drugs, tobacco products and cigarettes. These activities are subject to the regulations of the Controlling Agencies. In most cases, you have to acquire an OUT or IN Permit before proceeding.
- Import high-technology items: A few high-technology devices are basically subject to exporting regulation by the exporting area and the Singaporean importer might be required to provide a Delivery Verification and Certificate of Import by the exporter. You could apply for these permits from the Singapore Customs. Devices covered by these regulations should be directly imported into the country rather than being diverted to others.
- Export local goods: If you export local goods, some purchasers might ask for a Certificate of Origin which proves that the goods are manufactured in Singapore. There are two types of Certificates of Origin: 1) Ordinary: to satisfy the purchasers that the exported goods are entirely manufactured, produced, or obtained in Singapore and 2) Preferential: to allow purchasers to get special claims on taxes or tariff.
Excise Duty and Customs
Several goods imported or manufactured in Singapore are subject to excise duties and customs. These include tobacco products, intoxicating liquors, petroleum products, and motor vehicles. Duties will be levied on a specific rate or an ad valorem basis, which is the percentage of the customs value. Duties might be suspended temporarily under different Customs schemes such as the Free Trade Zone.
Services and Goods Tax
Important goods in Singapore will be charged a goods tax at 7 percent if they are going to the local market. This tax is administered by the Singapore Inland Revenue Authority and collected by Customs. It is on all non-dutiable and dutiable goods which are paid on the ad valorem basis.
The tax is basically calculated from the freight, insurance, and costs, along with all other duties and chargeable costs. This amount could be suspended temporarily under different customs schemes.
Import and Export Loans
If you have a tight budget, do not worry because most banks in the country take cognizance of the significant import and export industry and provide competitive financing services. Some financing options that you can benefit are:
- Factoring loans: Many factoring agents such as financial institutions and banks offer instant payments against outstanding invoices. A fee of no more than 15% will be charged for gathering the payments from the clients.
- Overdraft: You could overdraw the current account to an agreed maximum amount with the bank. The interest is only paid on what you overdraw.
- Transaction loans: This type of loan is provided to finance confirmed orders that are subject to the creditworthiness of the business placing the orders.
- Term loans: These loans are provided when companies provide collateral subjects to approval by the issuing bank.
While not required, acquiring insurance for your import export business will help with the management of the company, particularly in cases where goods are lost at sea, damaged, or non-payment from buyers. Insurance mitigates the risk of losses that often come with the import-export business.
- Trade Credit Insurance: Credit insurance protects the business from the risk of non-payment for both commercial and non-commercial transactions. If the buyer fails to pay for the purchase, or if the buyer pays at a later date from the stipulated payment due date (including the grace period), then the insurer will have to compensate the company for its losses provided that the company is insured for trade credit.
- International Trade Insurance: Also called International Product Liability Insurance, this type of insurance scheme protects import-export businesses and protects exports that are rejected from the importing country. For instance, if a country suddenly changes
policies on importing goods, then this insurance will cover the losses from the rejected exports.
- Political Risk Insurance: Countries with emerging economies may have room for opportunities for import-export companies, but they often have volatile political environments. This type of insurance protects the export trading company from political risks such as confiscated goods, non-payment, riots, and others.
- Marine Insurance: Marine insurance covers the entire journey of the goods from the seller's location to the buyer's. This is a basic form of insurance that you should acquire for your business when you start an import export company as it covers not only the goods during marine travel, but land and air travel as well.
Manage with WealthBridge
An import export company operates on a global scale, and the pressures of the ever-changing trade environment can be stressful. Our team at WealthBridge can assist you in obtaining the necessary permits and licenses you need to get your goods shipped.
Contact us today to discuss how we can be of assistance to you!