Oct 2010 Importers of cell phones and goods of fashion have reason to rejoice. But what if you're importing portable data transmitters (PDA)?
Duty-free imports for over 300 tariff lines!
Effective 15 Oct 2010 4:00pm import duty rates for over 300 tariff lines have dropped from between 5% and 30% to 0%. The tariff lines include (broadly):
- talcum powder and shampoo;
- suit-cases, handbags and leather belts;
- suits, jackets and blazers;
- trousers, skirts and shorts;
- blouses and shirts;
- undergarments and pyjamas;
- jerseys and cardigans;
- a variety of garments;
- blankets, linens, curtains and bedspreads;
- non-leather footwear;
- headgear and hats;
- jewellery; and
- golf balls.
For the complete list with tariff codes, please read more of the Appendices at the
Ministry of Finance Malaysia website.
Do I still need "item 174 exemption" or preferential certificate of origin?
Good question. With this development, some begin to wonder whether importers still need to rely on the "luxury / branded" goods exemption (available under item 174 of the Customs Duties (Exemption) Order 1988) since this provisions only provides exemption to licensed traders and to goods with FOB value of RM200 or more per unit. Other importers who are paying import duties at preferential rates under Free Trade Agreement may also start reconsidering the need for obtaining preferential certificate of origin (e.g. Form D under ASEAN Trade in Goods Agreement or Form E under ASEAN-China Free Trade Agreement, amongst others) to save duty costs.
We had a closer look at these. Our observations are:
- Import duty for almost all goods covered under "item 174" exemption are now at 0%, except garments falling under HS 6113.00 000 made up of knitted or crocheted fabrics of heading 59.03, 59,06 or 59.07 as well as garments falling under HS 62.10 made up of fabrics of heading 56.02; 56.03, 59.06 or 59.07
- Therefore it appears that specifically for the above two categories of garments "item 174" exemption is still relevant in particular for licensed traders and where FOB value per unit is RM200 or more
- If "item 174" conditions cannot be met, than claiming FTA duty concessions is still useful to reduce duty costs on these garments
What do I need to watch out for?
While we welcome this good news for importers in the trade, one can expect Customs Authorities to scrutinise more closely how importers accurately classify the products. Classification is not a matter of picking and choosing what appears to be right, it is about having solid analyses backed up by precedents, governed by the six (6) General Rules of Interpretation (GRI) with references to Heading Notes, Sections Notes and where relevant, Interpretative Aids issued World Customs Organization. If this sounds complicated - it can be, and if you have not heard about these then you are probably not well prepared enough.
Speaking of product classification, this leads us to the abolishment of sales tax on cell phones (good news again), as well as the cessation of sales tax exemption for goods classifiable under HS8517.62 590 (bad news for some!).
Good news for cell phones, bad news for portable data transmitter
Effective 15 Oct 2010 4:00pm the following now forms a part of column (3) (description of goods), Schedule A, Chapter 85 of the Sales Tax (Exemption) Order 2008.
"- Telephone sets, including telephones for cellular networks or for other wireless networks:
- Telephone for cellular network or for other wireless networks"
The corresponding column (2) (Heading/Subheading) states:- "8517.12 000". This means cell phone (or mobile phone as some call them) are exempted from sales tax (10%).
However, at the same time "subheading 8517.62 590 and the particulars relating to the subheading" is also deleted!
So we had a look into the laws. Before 15 Oct 2010 4:00pm the law looked like this:
| (2) Heading / Subheading |
(3) Description of goods |
| 85.17 |
|
Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28.
|
| 8517.62 |
|
Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus:
|
| |
300 |
Apparatus for carrier-current line systems or for digital line systems
|
| |
|
Other transmission apparatus incorporating reception apparatus:
|
| |
520 |
transceivers (amateur radio) capable of operating in amateur frequency bands
|
| |
590 |
other (wireless PDA (personal digital assistant) with GSM (global system mobile) |
So what does the removal of the last item mean? First we look at how the sales tax exemption order works:
Section 4(1) of the Sales Tax (Exemption) Order 2008 provides that the classification of goods specified in the Order must comply with the Rules of Interpretation in the Customs Duties Order 2007.
Section 4(2) then provides that for the purpose of Schedule A:
| |
(a) |
only goods described in column (3) shown against the tariff heading in column (2) shall be exempted. Other goods, though might be classified under the same tariff headings but which are not specified, shall not be exempted. |
| |
(b) |
where the description of goods in column (3) are shown in general against the tariff headings in column (2), the exemption shall apply to all such goods as classified within that tariff heading.
|
So it means previously not ALL goods classifiable under HS 8517.62 590 were actually exempted from sales tax. If you find this confusing, don't worry - it no longer matters what variations of HS 8517.62 590 that were entitled to sales tax exemption because with this removal, ALL goods classifiable under this tariff line will be subjected to 10% with immediate effect.
Still not clear what types of goods are affected? (customs and trade issue can be complicated - see what we meant?) The easiest way is to find some examples of these goods. A quick browse through Customs Authority's classification rulings database, we found at least three (3) such products:
- Handheld / portable data collector / barcode reader (laser scanner) with wireless communication capabilities;
- A maritime GPS enabled survivor locating device that automatically transmit distress calls and tracking data;
- A handheld device described as electricity / water meter reader / barcode scanner equipped with Bluetooth and WIFI transmission and reception function.
So if you have a shipment of goods coming to Malaysia soon that you believe are similar to the above examples - take steps to classify the products correctly, and pay the right amount of tax.
The information contained in this article is intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment.
