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Use of Bonded Warehouse in Malaysia to Conserve Cash Flow and Defer Duties Payment

Article written by Joyce Low, founder of industrialspace2u.com

Bonded Warehouses to Conserve Cash Flow and Defer Duties Payment

What is bonded warehouse?

A bonded warehouse is a designated area, approved by the Royal Malaysian Customs (RMC) under Section 65 of the Malaysian Customs Act 1967, for storing dutiable goods on which payment of duties is deferred until the goods are removed from the warehouse.

A bonded warehouse is often referred to as:

  • Public Bonded Warehouse or “Gudang Berlesen Awam”

A Public Bonded Warehouse operates as a central storage for the distribution of bonded goods (i.e. goods on which Customs duties and taxes have not been paid) in the country and for international trade, catering for the general public.

  • Private Bonded Warehouse or “Gudang Berlesen Persendirian”

A Private Bonded Warehouse is a central storage and distribution centre for bonded goods (i.e. goods on which Customs duties and taxes have not been paid), of that company and its related companies

  • PEKEMA (Association of Malay Importers and Traders of Motor Vehicles of Malaysia) warehouse

Upon entry of goods into the bonded warehouse, the importer and bonded warehouse operator incur liability under a bond. This liability is generally cancelled when the goods are:

  • Exported; or deemed exported;

  • Withdrawn for supplies to a vessel or aircraft in international traffic;

  • Destroyed under Customs supervision; or

  • Withdrawn for consumption domestically after the payment of duty.

A bonded warehouse is a duty free zone, akin to a port.  It is usually fenced and has high security.  The warehouse operator normally gives a ‘bond’ or nowadays a bank guarantee (instead of a cash deposit in the old days) to Customs to guarantee that there will be no loss of revenue to Customs should any of the goods stored within be inadvertently released from the bonded area.

What are the benefits of using bonded warehouse?

The advantages of bonded warehouse include:

1. By storing goods in a bonded warehouse, traders can conserve cash flow through the deferment of payment of tax if the goods are not immediately required when they arrive in the destination port.

2. Duty need not be paid on imported goods which are intended for re-export.

3. Duty need not be paid on goods which are produced in a free industrial zone pending export if they are stored in a bonded warehouse.

What activities are allowed in Bonded Warehouse?

The Customs bonded warehouses in the Malaysia are administratively controlled by supplying Customs with information that allows them to do more detailed checks on the clearances as well as the activities carried out on the inventory. Physical checks are carried out at random and each logistics service provider operating bonded warehouse is checked extensively to ensure compliance.

The following value-added activities can be performed on stored goods in all bonded warehouses except PEKEMA warehouse:

1. warehousing dutiable goods;

2. break bulking – where goods are released from a warehouse in smaller quantities;

3. repacking – where homogeneous goods being packed in smaller or larger quantities, or packing of various types of goods into a set;

4. re-labelling – where goods are being re-labelled, for example with importers or distributors name before distributing them locally;

5. de-vending – where goods are allowed to be sold directly to a buyer in a warehouse either duties and/or tax on the goods have been paid or not;

6. consolidation – where goods (dutiable and locally sourced) are consolidated for export;

7. entreport trade – where imported goods are to be re- exported;

8. internal transport (e.g. forklift) and handling charges.

While foreign manufacturing companies can apply for a licence to operate their own customs bonded warehouse under Licensed Manufacturing Warehouse, many companies outsource this type of storage to a logistics service provider.

Should you require assistance to rent a warehouse and subsequently apply for Bonded warehouse, do contact me at +6017 333 8007 or email me at joyce@industrialspace2u.com . We provide One Stop Centre Services to facilitate your bonded licence application via our team of experienced consultants.

We do have listing of bonded warehouses of which you can outsource the handling of your cargo to enjoy the advantages of using bonded without going through the compliance hassle of setting up one yourself. Reach out to us today to find out more!

Joyce is a Chartered Accountant who fell in love with real estate, particularly industrial property.
Do contact her via email at joyce@industrialspace2u.com or via mobile at +6017 333 8007
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