Tariff Protection
Consistent with its policy of an open economy, the Malaysian
Government adopts a trade liberalisation approach and continuously
reviews downward the country’s tariff structure.
However, in certain cases, tariff protection is considered for
deserving infant industries which are in a position to supply a major
portion of the domestic market - provided the product is of acceptable
quality and the price to consumers is reasonable.
In granting tariff protection, the degree of utilisation of
domestic raw materials, the level of local value-added, and the level
of technology of the industry will be taken into consideration. Tariff
protection granted will be reviewed from time to time, consistent with
the needs of the industry and the welfare of consumers.
Exemption from Import Duty on Direct Raw
Materials/Components
Effective from 1 January
1999, full exemption from import duty can
be considered on raw materials/components irrespective of whether the
finished products are sold in the domestic market or are exported.
(i) Manufacture of Goods for Export
Full exemption from import duty on direct raw materials are
normally granted, provided the raw materials/components are not
manufactured locally or, where they are manufactured locally, are not
of acceptable quality and price.
(ii) Manufacture of Goods for the Domestic Market
Full exemption from import duty on direct raw materials and
components that are not manufactured locally can be considered.
Full exemption from import duty can also be considered if the
finished product made from dutiable raw materials/components is not
subject to any import duty.
Exemption of Import Duty and Sales Tax on Machinery and
Equipment
Most machinery and equipment not produced locally are not subject
to import duty and sales tax. However, machinery and equipment with
import duty and sales tax can be considered for exemption if:
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they are used directly in the manufacturing process, and
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the equipment is used for environmental control, recycling,
maintenance and quality control.
Drawback of Excise Duty on Parts, Ingredients or Packaging
Materials
Under Section 19(1) of the Excise Act 1976, a drawback of excise
duty in respect of parts, ingredients or packaging materials of any
goods manufactured, may be claimed by the manufacturer if such parts,
ingredients or packaging materials on which excise duty has been paid,
are used in the manufacture of goods which are exported.
Movements of excisable goods from licensed premises for use in the
manufacture of goods by a factory in a Free Zone or the islands of
Langkawi or Labuan are considered as exports from Malaysia.
Drawback of Sales Tax on Materials Used in Manufacture
Under Section 29 of the Sales Tax Act 1972, all duty-paid goods
used as materials for the manufacture of other goods which are
subsequently exported, are eligible for drawback of the sales tax in
full.
Similarly, goods from the Principal Customs Area which are used in
the manufacture of other products by a factory in a Free Zone or on
the islands of Langkawi or Labuan are considered as exports of goods
from Malaysia.
Drawback of Import Duty
All duty-paid goods used as parts or ingredients or as packaging
materials in the manufacture of other goods which are subsequently
exported, are eligible for drawback of import duty in full.
The conditions for duty drawback, as stipulated under Section 99 of
the Customs Act 1967, are as follows:
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Such books and accounts are kept as the Director-General of
Customs may require for the purpose of ascertaining the quantity
of the goods used in the manufacture or for the packing of such
manufactured goods.
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Such goods are re-exported within twelve months of the date upon
which the import duty was paid or such further period as approved
by the Director-General of Customs.
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Written notice has been given on the export declaration form
that a claim for drawback will be made, and such claim is made in
the prescribed form and established to the satisfaction of a
senior officer of Customs within six months of the date of such
re-export or such further period as approved by the
Director-General of Customs.
Movement of goods from the Principal Customs Area to a Free Zone or
the islands of Labuan or Langkawi are regarded as exports. Therefore,
such goods, if manufactured in the Principal Customs Area, will be
eligible for drawback of duty.
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