CONTROL OF IMPORTS AND EXPORTS (AMENDMENT) BILL

Order for Second Reading read.

4.20 p.m.

The Minister for Finance (Mr Lim Kim San): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, under the proviso to section 5 of the Control of Imports and Exports Ordinance (Chapter 214), the Controller and Registrar of Imports and Exports is unable to cancel, suspend or amend any import licence or permit until the existing irrevocable letter of credit issued in respect of it has expired. There have been instances where manufacturers have asked for the imposition of quota restrictions, and with the knowledge that such restrictions would be implemented soon, they or their friends are suspected to have taken advantage of the proviso to section 5 of the Ordinance by placing orders with overseas buyers in quantities much larger than they normally import and establish covering letters of credit just before the quota restrictions are imposed. There are also instances where merchants and banks are suspected to have connived in backdating letters of credit so as to take advantage of opportunities arising from the imposition of quotas.

Sir, in order to prevent these disruptive practices, it is considered that the recognition of an irrevocable letter of credit should be discretionary and not mandatory. In other words, where letters of credit have been opened in good faith, then such imports will be allowed. On the other hand, if there are strong grounds of suspicion that there is improper advantage being taken of foreknowledge of a quota or ban or that the banks, in connivance with the traders, have backdated their letters of credit, then the imports will not be allowed even if irrevocable letters of credit have been established.

Mr Speaker, Sir, it was originally proposed that the proviso to section 5 of the Control of Imports and Exports Ordinance (Chapter 214) be deleted so as to enable Government to cancel, suspend, amend or disallow any import licence or permit for goods covered by an irrevocable letter of credit. However, the Chambers of Commerce and banks have advised that the deletion of this proviso would give the Controller and Registrar of Imports and Exports unfettered powers to cancel even import licences for goods covered by genuine letters of credit established in good faith. This may create uncertainty among the trade and could react to the discredit of Singapore as a trading centre. I, therefore, propose to suggest an amendment to clause 2 of the Bill during the Committee stage. This amendment will give the Government powers to reject, cancel or suspend import licences covered by irrevocable letters of credit suspected to be established not in good faith.

Sir, I beg to move.

Question proposed.

Mr Lim Soo Peng (Havelock): Mr Speaker, the amendment to the Bill amending the Control of Imports and Exports Ordinance attempts to restrict the powers sought in the Bill which, as it stands, gives absolute discretion to the Controller to cancel or vary import licences whether or not an irrevocable letter of credit exists. This amendment is to be welcomed as Singapore is a trading city. Whatever might be the success of its industrialisation programme, its geographical position determines that its trading activity will go on expanding. And in a trading city traders must feel secured that bona fide arrangements and commitments in trade will be honoured. The essence in trade is that delivery and acceptance are made as scheduled. I quite appreciate that there have been and there will be circumstances in which it is justifiable for the State to step in and interfere with trade. But I submit that such circumstances must be rare and far between.

On the wording of the amendment, I should like to hear the views of the Members of this House who are in the legal profession. As a layman, I see great difficulties in implementing the law if the amendment as it stands is passed. My experience in business tells me that all letters of credit are established in good faith by the banker and his client, the importer. Without such good faith or confidence, the banker will not issue a letter of credit. I think what is in doubt is not so much the good faith between the banker and his client as the morals of the importer. Circumstances may arise where an importer, as the Minister for Finance has just mentioned, armed with foreknowledge acquired legally or more likely illegally, attempts to frustrate Government's intentions and enriches himself by extraordinary imports. For one man to enrich himself in this way at the expense of the nation and the people is obviously immoral and reprehensible. Tire State, indeed, has a duty to step in. What I am worried is whether the proposed amendment as it stands enables the State to do this. I should feel happier if Members in this House will assist with words which will enable the State to intervene and only intervene in the circumstances I have narrated.

Mr Lim Kim San: Mr Speaker, Sir, far from interfering in any trading that is being carried on in Singapore, it is the avowed policy of the Government to allow freedom of trade as much as possible. But, as I have said in moving the Second Reading of the Bill, we have come across instances where letters of credit were opened and there was an absence of good faith. In fact, there was connivance between the banks. Hence the necessity for this amendment. I can assure the Member for Havelock that the wording of the amendment as it stands will enable us to prevent or discourage such malpractices and punishment meted out if they ever arise. The amendment has been vetted by the S.A.G.'s Office and, as far as I can ascertain, the legal phraseology is as it should be. If the hon. Member has reason to believe that it is not so, then I welcome any further amendment by him.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. -[Mr Lim Kim San].

Bill considered in Committee.

[Mr Speaker in the Chair]

4.31 p.m.

Clause 1 ordered to stand part of the Bill.

Clause 2 -

Mr Lim Kim San: Mr Speaker, Sir, I beg to move,

In page 1, line 6, to leave out from "amended" to the end of line 10 and insert -

"by deleting the proviso thereto and substituting therefor the following:-

"Provided that any cancellation, suspension or variation of the conditions of any import licence or permit shall not be enforced until an existing irrevocable letter of credit issued in respect of it has expired, unless such officer or person has reason to believe that such irrevocable letter of credit was not established in good faith.".".

Mr Speaker, Sir, as stated earlier, the deletion of the proviso to section 5 of the Control of Imports and Exports Ordinance may create uncertaint3 among the trade and react to the discredit of Singapore as a trading centre if the Controller and Registrar of Imports and Exports has unfettered powers to cancel or reject import licences for goods covered even by genuine letters of credit established in good faith, it is almost impossible for a hank to dishonour the terms of a genuine irrevocable letter of credit opened in good faith once it has been issued and is still valid and correct.. Both banks and traders may therefore be afraid to open letters of credit in future in cases where there is a possibility that import licences may be withdrawn.

The amended clause drafted in consultation with the Chambers of Commerce and banks empowers the Controller and Registrar of imports and Exports to cancel, suspend, amend or disallow any import licence or permit for goods covered by any letter of credit only when he has reason to believe that such an irrevocable letter of credit was not established in good faith.

Amendment agreed to.

The Chairman: The reference to "Cap. 214." in the marginal note will be omitted.

Clause 2, as amended, ordered to stand part of the Bill.

Bill reported with an amendment; read a Third time and passed.