Customs legislation and the legal framework in Malaysia has largely remained unchanged since the late sixties/early seventies, with the exception of implementation of WTO valuation rules, setting up of Customs Appeal Tribunal, introduction of Advance Customs Rulings in 2000, and the Strategic Goods Act in 2010. Customs laws are administered by the Royal Customs Department of Malaysia, an agency under the Ministry of Finance.

Malaysia Customs has a growing focus on post import audit activities and retroactive duty claims as a result of incompliance or weak classification and valuation positions. Duty revenue is reducing due to its fast expanding Free Trade Agreements network in recent years, perhaps causing Customs to take a more pro-active approach to assessing compliance.

The Ministry of International Trade and Industry (MITI) is the key regulator of trade policy including trade remedies (antidumping and countervailing, safeguard measures). MITI is responsible for regulation of the manufacturing sector, issues import / export license (amongst several other authorities), is the lead agency in negotiation of Free Trade Agreements and the authority for the endorsement of Preferential Certificates of Origin.The Strategic Trade Secretariat, the office that administers Export Controls, is also MITI.

In response to the development of more sophisticated business models, basic regulations and prescribed procedures (some introduced more than 30 years ago) are often complemented with a number of administrative procedures or “guidelines/schemes” to facilitate trade, with growing reliance on on-line processes. However, some of these procedures or modifications are not always reflected in legislation or are well documented in up-to-date, reliable materials. Therefore, in practice, consultation initiated by a company with the Authorities followed by a written “approval” is often necessary to obtain clarity.

Manoeuvring through the legal framework and these administrative procedures is often not a straightforward process and can be frustrating for companies to balance sustainability, optimise processes, and continue compliance.

Our services

We focus on providing the best solutions to your company to achieve customs efficiency and strategic customs planning opportunities. We specialise in the following areas:

  • Customs valuation — advice and planning, ruling application, dispute resolution
  • Tariff classification (including AHTN) - advice and planning, ruling application, dispute resolution
  • Duty exemption — opportunities identification, options evaluation and application support
  • FTAs / preferential tariffs — monitoring, planning, trouble shooting, certificate of origin application support
  • Duties drawback and refunds support
  • Bonded warehousing, and other duties deferment/suspension facilities — advise, evaluation and application support
  • Customs compliance reviews / "Health Checks"
  • Post importation audit management and support
  • Export controls — policy formulation, process implementation
  • Technical training
  • Import and export licensing — advise, application support

Case studies

Classification support in defending its position against a RM2.4 Million retroactive duty claim for a leading automotive parts manufacturer

A tier-one bonded automotive parts manufacturer was served with a RM2.4 Million demand note from the local Malaysia Customs office on grounds that hub bearings delivered to a vehicle assembly plant should have been classified as dutiable car parts.

How we helped

WMS conducted a comprehensive review of the claim and underlying classification rules, including detailed analysis into international and domestic precedents.

The analysis identified:

  • Basis of the claim was questionable - it was based on import entries of unprocessed components rather than finished product
  • HS classification - the product was classifiable as “bearings” which is exempted from import duty in accordance to classification rules, and not as car parts that attracts 25% duty as claimed by Customs

An appeal to the Customs Appeal Tribunal was filed, along with records that showed that the local Customs office was unable to provide satisfactory explanation within the stipulated time frame.

Under the supervision of the Customs Appeal Tribunal, a mediation “round table” discussion took place with the Customs Headquarters Classification Unit, followed by an amendment to the Classification Ruling issued in favour of the company.

Benefit for the client

RM2.4 Million retrospective claim was revoked, and certainty of hub bearing being treated as duty-free component was assured prospectively.

Production based location study

A US based manufacturing company required support in setting up an ASEAN production base in response to increasing business in Asia, with potential capacity to fulfill its European market orders.  Parts were manufactured by both related and unrelated parties in Asia and US.

How we helped

WMS conducted a location feasibility study to determine optimal location and regulatory status for the production footprint.

The study included:

  • Duty suspension facilitation and optimised import-export operations
  • Regulatory environment comparison and assessment (license and registration requirements)
  • Freight options and turnaround time
  • FTA application including Malaysia-EU FTA “wish-list” discussion with Ministry of International Trade and Industry
  • Consideration of other tax and logistical aspects

Benefit for the client

  • Reduction of overall tariff costs
  • More efficient supply chain and speed to market leading to better customer satisfaction and market penetration
  • Identification of documentation gaps that might have prevented use of Free Trade Agreements

Contact us

Chandrasegaran Perumal

Director, Malaysia, PwC Asia Pacific Customs and Trade

Tel: +60 (3) 2173 3724

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