Second Reading Speech by Senior Minister of State for Finance, Mr Chee Hong Tat, on the Free Trade Zones (Amendment) Bill, at The Parliament, 4 October 2023

1 Mr. Speaker, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to move, “that the Bill be now read a second time.”

Introduction

2 Sir, this Bill seeks to amend the Free Trade Zones Act to enhance the regulation and control of goods that flow through our Free Trade Zones (FTZs). 

3 Specifically, the Bill introduces three key areas of amendments to the FTZ Act. 

a. The first is a new licensing regime on the operators of our FTZs.  

b. The second relates to new regulations on cargo handlers and other cargo agents.  

c. And the third involves enhancements to the enforcement powers of the Director-General and officers of customs under the revised Act.

Importance of Singapore’s FTZ regime

4 Before I go into the specifics of each amendment, let me explain why we are making these changes. 

5 Trade is the lifeblood of Singapore’s economy. We have thrived economically as a nation, by situating ourselves as a trading hub and crucial node in global supply chains. 

6 Today, Singapore is the second busiest container port in the world and the largest transhipment hub, handling about a fifth of the world’s container transhipment traffic. In 2022, our port handled a container throughput of over 37 million twenty-foot equivalent units (TEUs), mostly for transhipment. Our airport handled another 2 million tonnes of air cargo, a significant proportion of which is also transhipment cargo.  

7 Our geographical location and connectivity give us a natural advantage as a trading hub. But what helps to further strengthen our attractiveness as a hub is our Free Trade Zones which facilitate transhipment activities, and support more efficient and resilient global supply chains through a hub-and-spoke model.

8 There are currently ten FTZs in Singapore, located mainly at our sea and air terminals. Businesses that operate within the FTZs enjoy exemption from customs duties and taxes on re-exports, simplified Customs procedures, access to streamlined logistics and transportation services, as well as other services to facilitate their trade operations. These are pro-business elements we want to preserve when we amend the legislation.

Updating our FTZ regime

9 There has been growing concerns of FTZs around the world being misused for illicit activities such as weapons proliferation, environmental crimes and trade-based money laundering. Illegal actors will try to disguise their actions as legitimate trade – for example, by falsely declaring cargo manifest data, or by swapping out legitimate goods with contraband before re-exporting.
 
10 Singapore Customs has been taking proactive measures to combat and deter illicit activities within our FTZs. For instance, Customs regularly conducts surprise inspections on businesses operating within the FTZs. Enforcement actions are taken against those found to be engaging in illicit trade. To better target suspicious firms, Customs also works closely with our FTZ authorities, as well as local and international partners, to share actionable intelligence and operational support to strengthen our ability to detect illicit activities and enforce against illegal actors.

11 The aim of the legislative amendments is to update and strengthen our FTZ regime to keep pace with evolving threats and the increasing sophistication of illegal actors. We are proposing changes in this Bill to further enhance the regulation and control of goods that flow through our FTZs. 

Amendments to the FTZ Act

12 The first key amendment introduces a licensing regime for FTZ operators. 

13 In the past, our FTZs were operated by public bodies that were appointed by the Minister for Finance. As these entities have since been privatised, a licensing regime is more fit-for-purpose. 

14 Through the licensing regime, we will be able to specify and enforce the necessary requirements to ensure the overall security of our FTZs, and improve our regulation of the flow of goods and persons within the FTZ.

a. For example, FTZ operators will be required to put in place necessary security structures like CCTVs and fences, and provide assistance to officers of customs in their performance of their official duties. Our FTZ authorities have already put many of these measures in place today, and the proposed amendments will formalise these requirements in legislation.

b. FTZ operators will also need to screen persons who intend to operate in the FTZ, and manage the sub-leasing of premises in the FTZ. 

c. They will also need to report and disclose relevant information on suspicious or dangerous goods or persons within the FTZs to the Director-General of Customs. 

15 The second key amendment of the Bill seeks to regulate the cargo handlers and cargo agents operating within the FTZ. While cargo handlers and agents will not be subject to a licensing regime, the proposed amendments seek to clearly lay out their responsibilities in terms of securing the goods under their charge, and data provision. 

a. Specifically, cargo handlers will be responsible for monitoring and managing the movement of goods handled at their premises within the FTZs, and ensuring their premises are secure. They will need to report goods that may have contravened our laws.

b. Cargo handlers and cargo agents will also need to provide specified information contained in a Bill of Lading or airway bill in advance of their entry or transhipment of their goods through Singapore. Currently, only information relating to goods that are imported, exported or controlled goods that are transhipped, is required to be submitted as part of the permit application process. With this amendment, information on all transhipment goods will need to be submitted.  

16 These amendments will give us better visibility of goods that are being transhipped through Singapore before arriving at their final destination. Customs can monitor the flows of goods for signs of illicit activity, and take the necessary action, in close partnership with other international authorities.

17 The third set of amendments sets out the enforcement powers of the Director-General and officers of customs, and the regulatory actions they may undertake. 

a. The Director-General of Customs will be allowed to grant, renew, suspend or revoke licences. He or she will also be empowered to impose or modify licensing conditions, and order the removal of dangerous goods, as well as the detainment of goods for Customs’ inspection.

b. The Bill will also introduce powers for officers of customs to enter any area within the FTZ, and inspect or remove goods within the FTZ. They will also be empowered to request for information for the purposes of investigation, witness examination, arrest of any person without warrant, and search of any arrested person. 

18 These powers are necessary to allow Customs as the FTZ regulator to ensure the compliance of FTZ operators, cargo handlers, cargo agents and other entities and persons operating within the FTZs.

19 The remaining amendments to the Bill are operational and administrative in nature, such as amendments to the penalty framework to address non-compliance with the licensing framework, and to allow for compoundable offences in lieu of prosecution.

20 The proposed amendments in this Bill have been carefully calibrated, in consultation with industry and relevant stakeholders, to improve Customs’ ability to detect illicit activities, while keeping our regime efficient and pro-business for companies. They are also in line with international best practices, including those established by the World Customs Organisation. 

Conclusion

21 Sir, our status as transhipment hub puts Singapore firmly on the world map. Our connectivity brings goods and people through Singapore, strengthens global supply chains, boosts our economy and creates good jobs for Singaporeans. 

22 As the busiest transhipment hub in the world, a significant amount of cargo comes through us daily. The vast majority is legitimate, but there will be a small minority who seek to flout the rules. We will facilitate trade, but we do not want to be misused by bad actors for their illegal means. The amendments in this Bill are targeted at these players, while keeping a business-friendly operating environment for genuine users. 

23 Companies that do legitimate trade through Singapore will benefit from a sound, reputable and pro-business regime.  In turn, Singapore continues to remain competitive as the top port-of-call for transhipments, and a trusted global trading hub.