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Singapore FTA: Integrated Sourcing Initiative

ISI BENEFITS


The Integrated Sourcing
Initiative (ISI) adapts traditional trade rules to help U.S. and Singaporean companies improve the efficiency and flexibility of
their global sourcing networks.


In particular, the ISI reduces
importers’ paperwork burden and cuts processing costs – not tariffs – for certain information technology (IT) products and
medical devices in the United States and Singapore. These IT products are already eligible for
duty-free entry in most of the world under the 1996 Information Technology Agreement
(ITA).


By further enhancing trade in IT
products and facilitating manufacturers’ purchase of components, the ISI supports IT firms’ interests in global
sourcing efficiency, reduces red tape, and encourages trade among high-tech
facilities.


This innovative sourcing
flexibility helps manufacturers even without providing any tariff preferences under the U.S.-Singapore FTA.


The ISI can also help in
promoting good working conditions in the developing world. Facilities used to produce IT products and medical devices require
high standards regarding safety, cleanliness, and working conditions, and workers
in these plants need greater skills and training for such manufacturing jobs. The ISI,
therefore, can encourage good jobs and improved conditions of manufacturing facilities in
developing countries.


HOW THE ISI WORKS


For a limited number of IT
products and medical devices – listed in Annex 3B of the U.S.- Singapore FTA – that already face zero tariffs in the United
States and Singapore, the ISI eliminates the requirement that these products meet specific
"rules of origin" when shipped between the United States and Singapore.


o Free trade agreements include
such "rules of origin" to enable customs authorities to determine whether or not products "originated" in the countries
that are parties to the FTAs.


o For ISI products, this customs
procedure is streamlined and the burden on the importer is reduced.


o If an ISI product is shipped
between the United States and Singapore, an importer does not need to: prove that the ISI products meet detailed "rules
of origin" tests; complete certification paperwork; or pay the merchandise
processing fee.


A product on the ISI list is an
"originating" good under the U.S.-Singapore FTA only if it is shipped from one FTA country to the other.


o If an ISI product is shipped from
a non-FTA party – such as Indonesia – to Singapore and then to the United States, it meets the criteria for
treatment as an "originating" good under the FTA.


o If, however, an ISI product is
shipped from a non-FTA party – such as Indonesia – to Singapore, but is not shipped to the United States, it does not
meet the criteria for treatment as an "originating" good under the
FTA.


An ISI material, component, or
other input does not achieve "originating" status under the U.S.-Singapore FTA simply by being imported into Singapore or the
United States – shipment from one FTA country to the other is still required to
obtain "originating" status.


o If an ISI product is shipped from
a non-FTA party – such as Indonesia – to Singapore and is used as an input for the manufacture of a final
product in Singapore, such input does not meet the criteria for treatment as
"originating" for purposes of a regional value content (RVC).


o The only way that an ISI
material, component, product, or other input could affect an RVC calculation is if an ISI product is shipped from a non-FTA
party – such as Indonesia – to Singapore and then to the United States (and is
held there without undergoing any processing that would affects its treatment under
the rules of origin) and then is shipped back to Singapore, where the ISI
product is used as input for the manufacture of a non-ISI good.


ADDING PRODUCTS TO THE ISI LIST


The U.S.-Singapore FTA
implementing legislation permits products to be added to the ISI list only by express approval of
the Congress.