How the RCEP Can Turn Singaporean SMEs to Regional Brands

Welcome to the world’s largest trading bloc.

In 2021, Singapore joined fellow ASEAN members along with China, Australia, New Zealand, South Korea, and Japan to sign the Regional Comprehensive Economic Partnership (RCEP). 

As of this year, it is the world’s largest free trade agreement (FTA) as it covers a third of the world’s global population and GDP. 

Some of the key benefits of the RCEP include tariff elimination of about 92% of goods traded among RCEP members, as well as streamlined rules in the provision of preferential market access benefits. This is good news for SMEs in Singapore, as it lowers the barrier to entry to provide their goods or services throughout the Asia-Pacific region.

SMEs may then wonder: How can they make the most out of RCEP’s provisions to expand their business and build their client base? We break down the details of how you can fully utilise the provisions of the RCEP. 

Save on import/export costs

Each ASEAN member-state has a schedule of import rates for products and countries. The RCEP’s provisions eliminate or reduce import customs duties for 90% of goods entering a participating state. 

This means, for instance, that a manufacturer of a bottled tea drink who used to import ingredients, like milk or tea leaves, for its product can now enjoy reduced operational costs. In turn, such a manufacturer may also sell its products to a participating RCEP country with lower import duties. 

For some countries, tariff rates of certain goods that were previously at 10% could be eliminated within the first year of implementation of the RCEP. For example, in the Philippines, imported woven fabrics of cotton and paper used for printing would have zero tariffs by the first year of implementation of RCEP in the country. 

For other products, the reduction could be gradual and staggered. Importing fruits like mangoes and mangosteens to the Philippines, for instance, may only come with reduced tariffs only by year 15. This gives countries time to strengthen local production of such goods to remain competitive.

Want to know if the product you’re selling may enjoy lower or no tariff rates under RCEP? You can do so in two ways:

• Use the Tariff Finder search engine developed by Enterprise Singapore and Mendel.
• Check the instructions and country-specific links provided by Enterprise Singapore.

If you want to be eligible for such benefits when you export to an RCEP country, you need to present a “proof of origin” document to customs authorities. This certifies that the product you’re sending to that country was obtained or produced in an RCEP member state. This helps ensure that RCEP benefits are enjoyed by RCEP members. 

You can obtain a proof of origin document in two ways:

• Apply for it to the relevant issuing authorities in the country of export, 
• Or prepare a declaration of origin as an approved exporter under RCEP. You can apply for the latter at the Singapore Customs office. 

Discover expansion opportunities in participating countries

The RCEP lowers cross-country barriers for business, which opens the opportunity for SMEs to go beyond local shores and finally break into international markets. While the prospect of growing your market is compelling, it also presents a myriad of financial obstacles, especially if you’re exporting for the first time.

You may need fresh capital to hire staff to manage sales and marketing in a different country. You may also need cash to boost production of goods or products to handle the additional demand. But expansion comes with risks, and this could make it difficult for SMEs, especially those without enough credit history, to obtain loans.

But SME business financing now takes many forms. As an alternative to loans, SME financing platforms like Funding Societies provide accounts receivable financing for SMEs. This lets you pledge your invoice to the financing platform, which gives you cash equivalent to a percentage of the invoice value. When the invoice becomes due, your buyer either pays the financing platform or pays you so you can pay back the cash.

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Another expansion financing option is supply chain financing, wherein either a buyer or a supplier acts as an anchor who certifies its partner as a reliable member of its supply chain. This way, a supplier may either enjoy early payment, or a buyer may enjoy longer payment terms. 

The government also offers an Enterprise Development Grant (EDG) for SMEs looking to innovate and expand their operations abroad. The programme gives you up to 50% worth of EDG-related costs.

Learn the rules of new, streamlined customs processes

Venturing into new markets could mean more administrative work for their lean teams. For SMEs with lean teams, this complexity can prove to be a barrier to expansion.

Fortunately, the RCEP parties have anticipated this challenge and have committed to adopt information technology to support a streamlined customs procedure. Participating states will provide in advance a list of documents required for pre-arrival processing of imported goods, as well as for the acceptance of electronic submission of documents. 

The RCEP participating states have also vowed to simplify customs risk management checks and clearances. For example, customs authorities usually physically check all shipments being offloaded on their shores. With the RCEP, checks will be based on risk profiles, instead of fully physical inspections. 

On top of that, goods covered by the RCEP’s agreement may not be held longer than required, and must be released to the extent possible within 48 hours of arrival. Perishable goods must be released within six hours of arrival. 

These commitments mean lesser lead times for exporters, and can lead to improved business operations. Such speed could help you lower logistics and warehousing costs, and could ultimately facilitate an efficient supply chain within the region. But you need to be vigilant of these benefits’ enforcement.

As an SME, it’s particularly important to know these rules and benefits, as you may not have access to consultants, lawyers, and partners in different countries. Hiring such specialists can be expensive, so it’s crucial to be aware of your rights under the RCEP so you can report violations on time and settle disputes.

Cooperation needed for RCEP’s success 

For SMEs to get the most out of RCEP, they need to know and use the resources available to them.

Governments and their partner institutions can facilitate assistance to SMEs, especially by helping provide market intelligence to businesses about RCEP markets. Enterprise Singapore has created various online guides about the FTA’s provisions. Finance partners like Funding Societies can also provide the financial backing that SMEs too often find in short supply. 

Ultimately, the transition from local to international operations can be quite an adjustment for SMEs. But with the right partners, you can capture opportunities in the world’s largest trading bloc.

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Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorised third party.