[Big read] ‘Made in Singapore’ to bypass US tariffs? Not so easy

“With Trump, you never know which country’s tariffs will spike tomorrow. If Thai tariffs go up today, I’ll source from Vietnam; if Vietnamese tariffs rise tomorrow, I’ll shift to Indonesia.”

Haili Singapore is a local trading company that primarily imports and exports massage chairs destined for the US. Its general manager, Henry Wang, told Lianhe Zaobao that setting up the trading company in Singapore while operating factories in other Southeast Asian countries provides greater flexibility to cope with tariff uncertainties.

During the first China-US trade war under US President Donald Trump’s first term in 2018, Wang relocated his factory from China to Southeast Asia. “My orders are taken from Singapore, produced in Thailand and shipped directly to the US. The country of origin is Thailand,” he said.

Trump was reelected in 2024 and on 2 April this year, declared “Liberation Day”, imposing reciprocal tariffs of 10% to 49% on several countries, including those in Southeast Asia. The move shocked the world, but less than 13 hours after the tariffs took effect, Trump announced a 90-day suspension of the policy. The latest update is that tariffs will take effect on 1 August.

Since taking office, Trump has repeatedly shifted course on tariffs and trade policies, leaving governments and businesses worldwide scrambling to respond.

Wang said, “As a business, it’s hard to say how we should prepare for Trump’s future tariff policies. Will Vietnam negotiate? How will those talks go? What about Thailand? These are issues at the government level.”

From a practical standpoint, Wang believes that there is still some room to manoeuvre: “If Thai tariffs stay at 36% while Malaysia’s are lower, I’ll discuss with clients about sourcing from Malaysia instead,” he said.

Mark Lee, CEO of Sing Lun Holdings, which operates in manufacturing, investment and real estate, said that some clients have asked them to open additional factories in regions with lower tariffs. However, as someone who closely follows China-US trade issues, Lee noted that amid uncertainties in consumer demand, opening more factories is very risky.

He pointed out that when China faced accusations of dumping and currency manipulation over a decade ago, the company’s “local production for local markets” strategy — that is, setting up factories in China to serve the Chinese market — had helped to mitigate risks. At the same time, it also established facilities in other countries to enhance competitiveness. However, the company was still considerably affected by the uncertainties surrounding the current tariff war. 

Firstly, profits have shrunk. Singapore currently faces a 10% baseline tariff from the US, but it is unclear what will happen once the temporary suspension ends.

Secondly, there are risks associated with front-loading. Lee noted that many clients want to move shipments forward from the original plan of August or September, filling factory capacity and making it seem as if business is good. But rushing orders means working overtime, and the added labour costs eat into profits. “You’re either stuffed or starving,” he noted.

Front-loading refers to importers placing orders and shipping goods earlier than planned to avoid impending higher tariffs, leading to a temporary surge in exports. This trend began to emerge after Trump won the US presidential election last November.

While front-loading has temporarily raised recent export figures in ASEAN countries, the market generally believes that the underlying issues remain unresolved. In the long run, it could even disrupt supply chains.

A UOB report noted that the earlier front-loading may lead to a “payback”, potentially causing a more protracted downturn in trade activity in the second half of this year. Data show that Singapore’s front-loading activities have slowed, with growth in overall non-oil domestic exports (NODX) and non-electronics NODX both falling.

Lee revealed that many clients are waiting to see the outcome and broader impact of the tariffs. If tariffs are too high, they may raise their selling prices, which could in turn cause consumer demand to fall.

EP-Tec Solutions is a Singapore-based manufacturer that exports LED display screens to the US. According to the company’s manager Alex Lim, while components are sourced from China, most of the research and development and assembly is done in Singapore. So far, US clients have found the current 10% tariff “still manageable”.

However, Lim pointed out that wages and rent in Singapore are high, making overall costs relatively higher. While the current tariff rate has not caused major issues, any further increase would definitely squeeze profits.

Singapore is currently subject to a 10% baseline tariff, prompting some overseas companies to seek partnerships with local firms in order to label their products as “Made in Singapore”.

Lim revealed that there have been more such enquiries since “Liberation Day”, with electronics companies from mainland China, Taiwan, Germany and others reaching out. However, he noted that local production costs are high, and some foreign firms are unable to commit to consistent production volumes, making collaboration difficult.

Unable to reach an agreement due to high local costs, some foreign companies have considered skirting the rules.

Bernard Chan, director of logistics company Penanshin Air Express, told Lianhe Zaobao that when the US-China trade war first began, a Chinese mattress exporter came to their office, hoping to obtain a Singapore certificate of origin for goods destined for the US.

Since the products were all made in China, Chan replied, “That’s not possible.”

A report released last month by research firm Nomura noted that since Trump’s tariff hikes on China in February, imports into Asia from China have risen significantly.

These products may include excess low-cost goods sold from China to Asian markets, intermediate goods processed or assembled in other parts of Asia, or goods shipped through third countries for the purpose of “origin laundering”.

“Origin laundering” typically refers to the practice of rerouting exports through a third country without making any substantial transformation to the product, primarily to evade tariffs and obscure the true country of origin.

The report pointed out that such transhipment practices have been identified in Mexico as well as in several Asian countries, including Vietnam, India and Indonesia.

In another report released in mid-June, Nomura said that the US may eventually impose an average tariff of 15.5% on Southeast Asia to stop rerouting activities. Tariffs on Singapore and the Philippines may be set at 10%, given limited signs of rerouting there.

Nevertheless, Singapore’s Ministry of Trade and Industry (MTI) and Singapore Customs issued a circular on 9 June, noting that since 2020, Singapore Customs has investigated close to 690 cases of non-compliance related to certificates of origin and rules of origin.

The circular reminded all traders and declaring agents of the importance of accurately declaring the country or region of origin in all import, export and transhipment permit applications.

Huang Yanting, director at Drew & Napier LLC, told Lianhe Zaobao that these standards are not new. In fact, Singapore Customs had already outlined them in a handbook published in February 2016. This latest circular reiterates some key points.

For example, a product that has undergone minimal processing in Singapore does not qualify as being of Singapore origin; likewise, if goods manufactured in one country are shipped to another by a Singapore exporter, their origin cannot be declared as Singapore.

Huang believes that these rules provide clear guidance for import and export businesses amid today’s complex geopolitical climate, helping companies carry out cross-border trade in a more compliant manner.

The latest circular also reiterates the criteria for certificates of origin that grant preferential tariffs under free trade agreements. It states that the declared goods must be wholly grown or produced entirely in Singapore, or have undergone substantial transformation in Singapore, such as being manufactured in Singapore with minimum 25% of local content based on the ex-factory price of the finished goods.

Penanshin’s Chan shared an example of a company that produces electrical boxes — only the electricity meters were made in Singapore, while the rest of the components were imported. However, since the locally produced electricity meters met the 25% threshold, the company was granted a certificate of origin.

Still, he noted that meeting this standard is not easy for most businesses. “In the food industry, it’s unlikely. But for sectors like furniture assembly or semiconductors, it may be more feasible,” Chan said.

The government has long been committed to safeguarding Singapore’s international reputation as a trusted and reliable business hub. To that end, it has established a well-developed export control framework, along with an inter-agency coordination mechanism — the Inter-Ministry Committee on Export Control — to ensure rigorous oversight and enforcement.

In March this year, a case involving the breach of UN sanctions against North Korea highlighted the importance of maintaining Singapore’s international business reputation. A Singaporean private company assisted a Taiwanese man in procuring a total of 9,570 tonnes of gas oil since 2019, well aware that it is destined for North Korea and forging contracts to cover up the transactions. The head of the company was sentenced to one year and three weeks in prison.

The judge pointed out that the defendant’s actions not only damaged Singapore’s international reputation and image, it also had long-term negative impacts on the country and impacted public interest.

This was not the first time UN sanctions were violated in Singapore. In 2022, a local man who operated three trading companies was charged with exporting prohibited luxury goods worth nearly S$580,000 (US$454,575) to North Korea.

With geopolitical conflicts intensifying and the international environment becoming ever more complex, various countries are increasingly inclined to implement unilateral export controls that go beyond UN sanctions.

In response to an enquiry from Lianhe Zaobao, the Ministry of Foreign Affairs emphasised that while Singapore does not enforce other countries’ laws, companies operating in Singapore must conduct their international business activities transparently and in full compliance with applicable laws and regulations. The government does not condone businesses deliberately using their association with Singapore to circumvent or violate the export controls of other countries.

In February this year, a major case in Singapore involving Nvidia chips worth up to US$390 million was uncovered. Following an anonymous tip-off, an investigation revealed that a batch of servers sold by US server suppliers Dell and Supermicro, possibly containing Nvidia chips that were subject to US export controls, were shipped from Singapore to Malaysia, after which their whereabouts were unknown.

At the time, then Home Affairs and Law Minister K Shanmugam emphasised that the investigation was not related to any country or entity, was not done at the request of the US, nor related to US export controls on advanced Nvidia chips.

Three men were charged for violating Singaporean laws by making false representations on the final destination of the servers.

In April this year, the MTI and Singapore Customs issued a joint advisory that encouraged businesses to implement a robust internal compliance programme, and to remain informed about the issue of relevant export controls on advanced semiconductors and AI technologies. 

To address new risks brought about by constant technological advancements, Singapore’s export control framework includes a “catch-all provision” that can supervise items that are not specified on the list of controlled items, but nevertheless possess potential risks.

In theory, if Nvidia chips were judged to be used for weapons of mass destruction, this provision would apply.

Previously, Singapore Customs released best practices and risk alert guidance related to the catch-all provision, and also conducted external outreach. However, many companies that were interviewed were not aware of this provision. Joanna Lam, a partner at RSM accounting firm, said that among the companies she engaged with, few were familiar with the provision.

She pointed out that firms conduct basic compliance checks before transactions, especially when involving sensitive products. However, if it involves something as simple as a pipe, aside from basic checks, how much more do companies need to be familiar with the product’s upstream and downstream? How extensive should this understanding be? If the scope is too large, it could become a burden for businesses.

Toh Tiau Lai, president of the Singapore-China Business Association, stated that for small and medium-sized enterprises (SMEs), if they have to hike up labour costs for this, it would not be very practical.

For SMEs without the resources to establish legal teams, Huang suggested that firms can consider setting up internal compliance mechanisms, such as conducting internal assessments of exports, establishing a “Know Your Customer” system and conducting reviews of known end-users of products.

Toh believes that in the face of tariff wars, SMEs have limited resources and the government could provide more support with public resources, allowing businesses to find a foothold in uncertain environments and avoid inadvertently falling into traps.

This article was first published in Lianhe Zaobao as “关税地缘政治双夹击 我国企业顺势掌浮沉”.

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