Problems relating to Trade and Investment on Malaysia
9. Restrictive export/import trade, duty, and customs clearance |
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Issue |
Issue details |
Requests |
Reference |
| (1) Raise of Import Duty | - On 15 March 2002, GOM raised tariff on hot-rolled steel, cold-rolled steel, galvanised sheet iron, and welded steel tube to protect the domestic industry. - On 1 August 2009, MITI released the review of its steel industry policy under which GOM will reduce in stages or exempt import duty on steel products: (1) Reduction of import duty on steel bar to 10% by 1 August 2009, and 5% by 1 January 2010, (2) Reduction of import duty on steel sheet to 25% by 1 August 2009 and 0-10% by 1 January 2018, (3) Exemption of import tariffs in so far as they are used as raw materials for final export products, or if they are not locally manufactured or used as raw materials for final products on which zero duty is imposed. |
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| (Improvement) - On 19 August 2009, MITI released the new steel industry policy (NSIP). NSIP due for enforcement from 1 August 2009 incorporates, among others, staged reduction in import tariffs on steel products, shift to manufacturing licence with less requirements, simplified implementing procedure for the compulsory standard, avoidance of delays at the point of import customs clearance of customs clearance procedure, and the method to avoid additional surcharge. |
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| (2) Repealed Application Sector Utility-Based Import Duty Exemption Quota | - By the steel industrial policy review of 1 August 2009, GOM repealed import quota scheme and sector utility-based import duty exemption quota. Since then GOM has been granting import duty exemption only on products not capable of domestic production. - On 19 October 2011, Ministry of International Trade and Industry (MITI) proposed reduction of import tariff on steel products (25% => 15%) and repeal of tax exemption under the MIDA scheme to Malaysian iron and steel industry federation (MISIF). MISIF expressed its opposition to the proposal. On 9 December 2011, Japanese Chamber of Trade & Industry, Malaysia (JACTIM) likewise desptached its written opposition opinion to MITI, stating that MITI's repeal of tax exemption scheme is directly inductive to the debilitated competitive edge of the Malaysian industries.On 22 January 2013, MITI announced repeal of tax exemption on hot-rolled steel plates corresponding to the 18-industrial standards, beginning 1 February 2013. |
- It is requested that GOM resumes Import Duty Exemption Scheme. - It is requested that GOM: -- irons out the procedures, -- resumes tax exemption system, and -- elucidates the basis of tax exemption. |
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| (3) Nebulous Judgement Basis of Import Duty Exemption | - The nebulous judgement basis on "domestic manufacture feasibility" of Malaysian Investment Development Authority (MIDA) serves as barrier/ blockade for stable products supply. More precisely, reduction in quantity applied, postponement for issuance of duty exemption, approval or non-approval varies by importer, etc. In addition, no consideration is paid to the local manufacturers' supply capacity, users' evaluation, comment, etc. | - It is requested that GOM makes more transparent the Duty Exemption Scheme. | |
| (Action) - In May 2014 GOM implemented "2013 Import Duty Exemption Order" and "Sales Tax Exemption Order", streamlining the tax exemption procedures on machinery, equipment, spare parts, consumable supplies, engines and motors, and container trailers. Enterprises subject to these orders are manufacturers, plus those in hotel and transport businesses. |
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| (4) Vexatiously Complex and Delayed Import Duty Exemption Procedures | - Since inaugurating the local steel mill in Malaysia in December 2006, it has taken a long time for an MFS to obtain the quota on import duty exemption for electrogalvanised (EG) steel sheet. The ambiguity of the term, "capable of domestic production", which forms the basis for determining tax exemption, serves as barriers and hindrances against the stable product supply. More precisely, GOM granted tax exemption by reduction in quantity in one case, and in another case GOM took time before determining its approval, and in third case, yes or no was determined individually by each importer. GOM's decisions reflect neither the supply capacity nor users' the evaluation/opinions. |
- It is requested that GOI: -- smoothen the procedures,. -- reopens the tax exemption scheme, and -- makes transparent the basis of tax exemption. |
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| (Action) - The customs clearance time differs by each custom. In the majority of cases, as of 2004, it averaged 1-3 days generally for customs clearance. However, a considerable reduction has been achieved at Kuala Lumpur International Airport (KLIA) and Johor Causeway & Second Link (for cargoes transported from Singapore overland), averaging 1-12 hours. - Effective 1 June 2004, GOM implements Customs Golden Clients Pilot Program (CGC) on designated enterprises, to expedite customs clearance procedure. Under the program, the Customs and the designated enterprises are connected online, and the designated enterprises are authorized to deliver and store imported goods in their own premises without submitting import declaration to the Customs and are given two weeks to complete the customs clearance formalities. - At the 2nd Subcommittee Meeting on Business Environment of Japan-Malaysia EPA, GOJ requested GOM to improve the import procedure for electrically galvanized steel sheet on which quota for tax exemption is becoming difficult to procure, as the local steel mill for electrically galvanized steel sheet began its operation at its new plant. GOM responded that it would provide for a forum to hold continued discussion with GOJ on the tax exempted quota issue. - On 1 January 2009, MITI announced implementation of "Electronic Preferential Certificate of Origin (e-PCO)". This e-PCO is addressed to the online filing of application for cost analysis (AC) and Preferential Certificate of Origin (CO). This e-PCO will be first implemented on CA and CO forms submitted to MITI Kuala Lumpur. Implementation details of e-PCO on other states will be later announced. |
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| (5) Nebulous Tax Exemption Scheme under Japan-Malaysia EPA | - Unlike MIDA's tax exemption scheme (TES), the tax exemption scheme under Note 13 of Japan-Malaysia EPA of 13 July 2006 grants tax exemption on raw materials destined to the 8-users such as car industries, home electric appliance industries, etc. based on the users' opinion (in terms of specifications, grade, and volume). However, in the absence of the detailed implementing rules for TES, member firms are unable to benefit from the TES. It is reported that TES is due for incorporation into Amended Tariff Decree by the end of 2012. However, it appears there has been a delay in preparing the Amended Tariff Decree. |
- It is requested that GOJ and GOM overhaul as soon as possible detailed implementing rules for TES under Japan-Malaysia EPA. | |
| (6) Dilly-dallied Malaysia-EU FTA Negotiation | - Customs duty burdens upon the Malaysian export industries due to exclusion of Malaysia from the beneficiary countries under EU's GSP. | - It is requested that GOM ratifies Malaysia-EU FTA as soon as possible. | |
| (7) Disappearance of Generalised System of Preferences (GSP) | - EU discontinued its GSP on audio products from Malaysia (beginning 1 January 2013). Member firm is concerned about the debilitated competitive edge of the Malaysian products destined to EU, compared to products shipped from PRC and Vietnam manufacturing depots. | - It is requested that GOM ratifies Malaysia-EU FTA as soon as possible. | |
| (8) Import Licence (I/L) Scheme | - On 25 November 1982, GOM implemented the import license (I/L) system on wire rod (common steel), and bar steel/wire rod (alloy steel). - On 15 August 1985, GOM implemented the import license (I/L) system on billet and coil for re-rolling. - On 2 April 1999, GOM implemented the import license (I/L) system on hot and cold-rolled steel. GOM requires the Local Mill's "approved permission" for steel production-hot-rolled steel to grasp the local mill operation, and cold-rolled steel, the market trend. - Since 15 June 2012, HS7225 flat-rolled products of other alloy steel wide width have become the target goods requiring I/L. - On 1 March 2013, Customs Order 2012 exempted the above-mentioned products (flat-rolled products of other alloy steel wide width (HS7225)) from the target goods requiring I/L. |
- It is requested that GOM repeals the I/L system. | |
| (Action) - On 5 July 2005, former Prime Minister Mahathir recommended strict implementation of the AP system, by pointing out the illicit declaration of the number of AP's issued and the import price, as regards issuance of I/L on automotive vehicles. NAP announced in October 2005 incorporates a provision that prohibits issuance of AP to new brands. - In March 2002, the Malaysian government introduced a measure to protect its own steel industry by increasing tariff rates, etc. in retaliation against the U.S. policy to protect its steel industry. However, auto vehicles, electric and electronic products, FZ, LMW, and CEPT rates are excluded from the scope of this measure. Antidumping proceeding against import of steel products and invocation of safeguard measures on steel products are also being considered. - In November 2008, GOM repealed I/L (AP) over 54 items of steel products and repeals tariffs on 57 items of steel products. - Since November 2008, GOM has compelled compliance inspection under the Malaysian Standards (MS Standards) on 57 items of imported steel products, requiring submission of Certificate of Approval (COA) upon customs clearance, the same as the domestic enterprises. - On 13 June 2012, MITI announced the compulsory acquisition of licence on import of 8-items of Steel Alloy (HS7225) for the purpose of curtailing the increasing import of sub-standard products and of securing the safety in quality. This requirement entered into force on 15 June 2012. (Customs Order No.2/2012 (amended) Import Embargo) - On 22 January 2013, Ministry of International Trade and Industry (MITI) announced: MITI will repeal the Duty Free Import Measures restrictively only to the imported goods destined to the domestic sales and consumption on the 18-items of Hot Rolled Steel Sheet, which have become domestically procurable. - On 25 June 2014, Ministry of Finance, Malaysia expanded the scope of the target goods subject to import restrictions: by addition of 3-items under steel and steel products (HS72 and 73), namely, angles, shapes & sections (HS 7222.40), structures and parts of structures (HS 7308), and roof/cladding/ceiling panel or ceiling strips, et al (HS 7326.90.500) -- Customs Prohibition of Imports Order (P.U.(A) 172) [in Malay and English] (http://www.federalgazette.agc.gov.my/outputp/pua_20140625_PUA%20172-Perintah%20Kastam%20(Larangan%20Mengenai%20Import)%20(Pindaan)%20(No%202)%202014-%20pinda%202.pdf) |
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| (Improvement) - In May 2000, the product list requiring import license has been amended to eliminate the requirement for import license from Electric Power Supply Bureau on certain items classified under Chapter 85 of the harmonized schedule code. - In January 2008, MITI repealed "Approved Permit" on imports of 26items of construction machinery. - In May 2008, MITI repealed "Approved Permit" and import tariff on imports of bar steel (HS7214.10.110, HS7214.20.910) and billets (HS7207.11.900, HS7207.12.900, HS7207.19.900, HS7207.20.900, and HS7207.20.990). MITI also completely repealed the maximum price on steel. - In June 2008, MITI repealed "Approved Permit" on imports of 13 items of recording and playback device, sound and other recording media such as discs and tapes. - Effective 1 August 2009, MITI: (1) no longer requires import licence for steel plate, while it continues to require steel import licence (CAP) for the purpose of monitoring and data collection, (2) has repealed the import control based on the procurement rate of local materials and import materials concerning the import of hot-rolled, cold-rolled, and electric galvanised (EG) steel plate. - On 1 March 2013, Customs Order 2012 exempted the above-mentioned products (flat-rolled products of other alloy steel wide width (HS7225)) from the target goods requiring I/L. |
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| (9) Safeguard Measures | - On 1 May 2011, upon request of Megasteel Sdn Bhd, MITI initiated investigation on safeguard measures based on the alleged causal relationship between the rapid increase of hot-rolled steel plate import and the material injury to the domestic industries. On 22 August 2011, MITI terminated the safeguard measures investigation with negative finding. MITI found such import did not threaten the domestic industry, although the import volume increased by 35% during January to September 2010. |
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| (Action) - On 16 August 2012, the Malaysian Safeguards (Amendment) Act 2012 entered into force. Under Article 40A, newly provided, the Amended Act empowers Government of Malaysia (GOM) to conduct the safeguard investigation and to impose Safeguard Measures against a specified country(ies) pursuant to the agreed terms under the trade agreement. Furthermore, by amended Article 28 of the same Act, GOM is empowered to apply the affirmative measures by imposing safeguard tax and quantitative restrictions against all imported products. (http://www.federalgazette.agc.gov.my/outputaktap/20120816_1439_BI_A1439%20BI.pdf) - In August 2014, Ministry of International Trade and Industry, in response to the Safeguard Petition from Ji Kang Dimensi Sdn Bhd, domestic steel manufacturer, initiated safeguard investigation on steel and thick plate products. |
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| (Improvement) - On 22 August 2011, MITI terminated investigation with the negative injury finding (holding that while import increased by 35% during January through September 2010, such import did not amount to the threat to the domestic industries.) - On 8 January 2016, Malaysian international trade and industry made negative preliminary decision in the safeguard investigation on hot-rolled coil. (This investigation was terminated.) |
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