VI. Trade Regulations and Standards

The Ministry of International Trade and Industry (MITI) is
primarily responsible, within the Government of Malaysia, for the
formulation and implementation of trade regulations and policies.

The Government of Malaysia operates a system of import licensing.
Import permits are required for arms and explosives; motor
vehicles; dangerous drugs and chemicals; plants; soil; tin ore,
slag or concentrates; and certain essential foodstuffs.  Malaysia
follows the Harmonized Commodity Description and Coding System of
classification of goods.

Raw materials used directly for the manufacture of goods for export
are exempted from import duties if such materials are not produced
locally or if the local materials are not of acceptable quality and
price.  This provision, for example, applies to the very large
Malaysian imports of semi-conductor components for the fabrication
of completed semi-conductors for export.  Exemptions from duties
are also available for machinery and equipment used directly in the
manufacturing process or not available locally.

Import duties range from nil to 300 per cent, with the average duty
rate being less 10 per cent.  The higher rates apply to luxury
goods, including knocked down and assembled automobiles.  In
addition to import duties, a sales tax of 10 per cent is levied on
most imported goods.  Like import duties, however, this sales tax
is not applied to raw materials and machinery used in export
production.

All imported consumer goods are required to be labeled to identify
the importing agent.  This is typically accomplished by affixing a
label after goods have cleared customs.  Prepacked drugs must be
labeled in English or Bahasa Malaysia indicating the substance and
its components.  Food labels must indicate the use of additives and
shelf life.

Quantitative import restrictions are seldom imposed except on a
limited range of products for protection of local industries or for
reasons of security.  Recently, for example, a system of
quantitative licenses has been instituted for the import of certain
plastic resins, for the purpose of protecting a domestic
petrochemical operation.

Malaysia also has a system of export licensing.  In some cases,
such as textiles, the system of export licenses is used to ensure
compliance with bilateral export restraint agreements.  In some
other cases, such as rubber exports, special permission from
government agencies is required.   Export duties are imposed on the
principal commodities:  petroleum, rubber, pepper, palm oil, and
tin.  In the case of petroleum this is a flat rate of 25 per cent.
In the case of other commodities, it is calculated on the basis of
a threshold price, and no duty is charged if the price falls below
the given threshold.

Malaysia has ten free trade zones in which export-oriented
manufacturing facilities may be established.  These FTZs are
located in the states of Johor, Melaka, Penang, Perak, and
Selangor.  Raw material and equipment may be imported duty free
into these zones with minimum customs formalities.  Companies which
export not less than 80 per cent of their output and depend on
imported raw materials and components may be located in these FTZs.
Goods sold into the Malaysian economy by companies within the FTZs
must pay import duties.  In addition to the FTZs, Malaysia permits
the establishment of licensed manufacturing warehouses, which give
companies greater freedom of location while enjoying privileges
similar to operating in a FTZ.  Malaysia is also expanding
arrangements for temporary entry of goods in customs areas at the
principal seaport, Port Klang.

Malaysia is a member of the ASEAN Free Trade Area (AFTA), which
aims to reduce trade barriers between the member countries
(Malaysia, Indonesia, Singapore, Thailand, the Philippines and
Brunei) over a fifteen year period.  Progress to date, has been
relatively slow, and Malaysia has been working to step up the pace.