Logistics, Trade Administration and Supply Chain

All goods imported into or exported out of this country must be correctly classified at the time of import or export based on the Malaysian Customs Tariff Heading Numbers. All inquiries on the classification of goods imported or exported should be directed to the Customs station through which the goods are to be imported or exported together with the sample whenever possible and the relevant documentation related to it. The following particulars that are required are: Name of the Product Brand Trade Name (if possible/any) Country of Origin Composition (if any) Packaging Type at the Time of Import (if any) Usage If dispute arises between the Customs and the importer or exporter as to the accurate classification of the goods imported/exported, the dispute will be referred by the Customs station to: Ketua Pengarah Kastam Cawangan Tarif dan Penjenisan Tingkat 3A Blok 11, Kompleks Pejabat-pejabat Kerajaan Jalan Duta 50596 Kuala Lumpur, for the final decision and ruling on the classification

The Customs Duties (Exemption) [No. 2] Order 1988 provides for various persons or organization to be exempted from payment of customs duties on specified goods imported by them and subject to the conditions contained therein as specified. Powers to Exempt Customs Duties and Goods' Value Assessment Section 14 of the Customs Act 1967 provides for the Finance minister to exempt specific persons or organization or classes of goods from Customs duties. For the purpose of determining the import or export duties payable on ad valorem basis, goods will be valued in accordance with the definition of value in Section 2 of the Customs Act 1967. Briefly, the price envisaged by the definition of value is the price at which the goods are sold freely in the open market by the seller to any buyer not associated in business with him. Thus, if the seller sell or offers to sell his goods to any independent buyer, then the price which the seller charges for the said goods will be accepted as the open

Import/export licences are issued by the Ministry of International Trade and Industry (MITI) on behalf of the Director-General of Customs. For the convenience of importers/exporters, MITI has set up various branch offices and the areas covered by them: Pegawai Ekonomi Pulau Pinang who covers all Northern States and Teluk Intan Pengarah Cawangan Perdagangan, Kuching for Sarawak state Pengarah Cawangan Perdagangan, Kota Kinabalu for Sabah state Penolong Pengarah Cawangan Perdagangan Johor Bahru who covers Malacca and all Southern States Penolong Pengarah Cawangan Perdagangan Kelantan covering states of Kelantan and Terengganu Importers/exporters from area mentioned above should submit their applications to the respective branch office. Importers/exporters from areas other than those mentioned above should submit their applications to the following: The Secretary-General of the Ministry Domestic Trade Division MITI Block 10, Government Offices Complex Jalan Duta 50622 Kuala Lumpur Applica

Where duties are applicable on imported goods all relevant duties must be paid before such goods can be released for consumption. Where export duties are liable such duties must be paid before the goods are allowed to be exported. The following types of duties are liable on goods imported into this country: Import Duties Sales Tax Import Duty The rate of import duty varies according to the type of goods imported. The rate applicable to each category of goods is indicated in columns no. 4 of the First Schedule of the Customs Duties Order 1988. Sales Tax The rate of Sales Tax liable as stated in the Sales Tax (Order) 1977. Sales Tax have three rates of duty at 5%, 10% and 15% on gross value on all goods imported except those which are exempted. Goods exempted from Sales Tax have listed in the Sales Tax (Exemption) Order 1988. The following goods liable to a Sales Tax of 15% are as follows: Beer, Ale, Stout and Porter, Intoxicating beverages falling under tariff code headings from 2205.10

Goods may be imported or exported by land, air or sea only at prescribed place as shown in the First Schedule of the Customs Regulation 1977 Declaration All goods to be imported or exported whether or not subject to import/export duties must be declared in writing on prescribed customs forms. Customs 1 is for duties must be declared in writing on prescribed forms. Customs 1 is for goods to be imported and Customs 2 is for goods to be exported. All declarations should indicate a full and true account of the number and description of packages, of the description, value, weight, measure or quantity of all such goods. In the case of goods being imported, the country of origin should be clearly stated and in the case of goods to be exported, the final destination. Declarations must be submitted to the Customs station at the place where the goods are to be imported or exported. Customs Agents The Customs Act provides for the importers and exporters to appoint agents to act on their behalf. O

Under Article 48 of the Uniform Customs and Practice (UCP) No. 500, describes a transferable credit as "A transferable credit is a credit under which the beneficiary (first beneficiary) may request the authorized bank to pay, incur a deferred payment undertaking, accept or negotiate (the "transferring bank"), or in the case of a freely negotiable credit, the bank specifically authorized in the credit as a transferring bank, to make the credit available in the whole or in part to one or more other beneficiary/ies (second beneficiary/ies)". A credit can only be transferred if it is expressly designated as "transferable" by the issuing bank. A nominal credit may not be transferred. If a credit bears the terms = divisible, assignable or transmissible, such terms do not render the credit as transferable. Even if a credit designates as transferable, the transferring bank is under no obligation to such transfer, but if it does consent to the transfer it shall

A documentary credit is a flexible payment instrument. I has became increasingly popular as an universally accepted method of payment. In fact, over the years, it has developed and earned the respect, trusts and confidence of the international trade community and bankers as well. There are other variations of a documentary credit, depending on the wordings, terms and conditions incorporated into the said credit. Standby Credit Standby credit was not specifically mentioned until the 1983 revision of the UCP No. 400. In the united States, the bankers are not permitted to issue guarantees under the Federal Law. Standby credit was introduced in the 1920s to overcome the problem of the prohibition. A standby credit may be utilized for various transactions, for example to guarantee the repayment of a loan, for payment of services rendered, for goods sold, etc. Revolving Documentary Credit A buyer or importer may need to import X tons of Y products every month. Instead of requesti

Article 10 of the UCP No. 500 states that a documentary credit must clearly indicate whether it is available by sight payment (sight documentary credit), by deferred payment (deferred payment documentary credit), by acceptance (acceptance or term documentary credit) or by negotiation (negotiation documentary credit). Thus a documentary credit may state that payment is to be effected upon presentation of the stipulated documentations and compliance with the terms and conditions of the credit or after a certain period e.g. 60 days from the date of presentation of documents, from date of bill of lading or from the date of invoice. Sight Documentary Credit A documentary credit may provide for sight payment (sight documentary credit). This means that the beneficiary may present a sight bill of exchange (called for in the credit) together with the other supporting documentations and payment would accordingly be effected. Deferred Payment Documentary Credit A deferred payment docume

An irrevocable documentary credit constitutes a definite legal undertaking of the issuing bank. It cannot be amended or cancelled without the agreement of the issuing bank, the confirming bank (if applicable) and the beneficiary . Thus, the beneficiary can expect payment from the issuing bank (or nominated bank) provided the stipulated documents are presented and the terms and conditions of the credit are duly complied with. An irrevocable credit only carries the legal undertaking of issuing bank to remit. The bank which advises the credit does not undertake to pay. This kind of credit is known as an (unconfirmed) irrevocable credit. If the beneficiary wishes the advising bank to additionally guarantee payment, he should arrange for the irrevocable credit to be confirmed by the advising bank (or another suitable bank). This credit is then known as a confirmed and irrevocable documentary credit. Confirmed and Irrevocable Documentary Credit If an irrevocable credit is confirmed by the ad

A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. However, Article 8 UCP No. 500 states "the issuing bank must: reimburse another bank with which a revocable credit has been available for sight payment, acceptance or negotiation for any payment, acceptance or negotiation made by such bank prior to receipt by it of notice of amendment or cancellation against documents appear on their face to be in compliance with the terms and conditions of the credit; reimburse another bank with which a revocable credit has been made available for deferred payment, and if such a bank has, prior to receipt by it of notice of amendment or cancellation taken up documents which appear on their face to be in compliance with the terms and conditions of the credit". Since a revocable credit is fraught with danger, the seller/beneficiary should avoid accepting such a credit. Nevertheless, revocable credits are seldom being us

In order to prevent misinterpretations, misunderstanding and other associated problems connected with the interpretation of trade terms, phrases and divergences in customs and practice in the international trade, the International Chamber of Commerce (ICC) has come out with a standard set of rules and interpretations known as the Uniform Customs and Practice for Documentary Credits, Publications No. 500 (in short UCP No. 500). Briefly, the UCP No. 500 sets out universally accepted procedures, liabilities, responsibilities and various terms and conditions and their respective interpretations connected with international trade. The UCP has been adopted practically by every nation in the world. Although the UCP generally does not have the force of law, their provisions are binding on the relevant parties who had adopted them. Thus, as a requirement, every application and documentary credit and amendment have to bear the words, "Subject to Uniform Customs and Practice for Documentary

Article 2 of the Uniform Custom and Practice for Documentary Credit defines a documentary credit as: "For the purpose of these articles, the expression documentary credits and standby letters of credit (hereinafter referred to as credits ) means any arrangements, however named or described, whereby a bank (the issuing bank) acting on request and on the instructions of a customer (the applicant) or on its own behalf: is to make a payment to or to the order of a third party (the beneficiary) or is to accept and pay bills of exchange (drafts) drawn by the beneficiary, or, authorizes another the bank to effect such payment or to accept and pay such bills of exchange (drafts) or, authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions of the credit are adhered with". In a layman language, a documentary credit may be describe as a legal undertaking in writing. It is issued by the customer's bank (also known as the issuing ba

As indicated below, the seller may receive payment in advance or ship the goods on the mare promise of the buyer to pay either at the time of delivery or at a certain future date after delivery of the goods. To ensure a better arrangement of payment, the seller may request the buyer to make payment through a documentary credit. A documentary credit also known as a letter of credit or L/C, is an undertaking in writing given by the buyer's bank in which the buyer's bank guarantees payment to the beneficiary seller on condition that the beneficiary seller presents the stipulated documents and strictly complies with the terms and conditions mentioned in the documentary credit. We will discuss in greater details on the advantages and disadvantages of a documentary credit, how its works and the various types of documentary credit in the next chapter.

Perry's Dictionary of Banking defines a "collection as the receipt, transmission and presentation of a bill, draft, cheque or other instruments by a collecting banker for a customer and the subsequent direction of the resulting funds into the customer's account. Under this arrangement, the seller ships the goods to the buyer, engages the services of his bank to collect the proceeds from the said buyer. There are two methods of collection viz the clean collection and the documentary collection. In a clean collection, the seller ships the goods directly to the buyer. At the same time, the shipping documents are also dispatched directly to the buyer, to enable him to take delivery of the goods. The seller then draws a bill of exchange on the buyer requesting his bank to present the bill of exchange to the buyer for payment. In documentary collection, the seller ships the goods to the buyer and at the same time, he draws a bill of exchange on the buyer. The seller then hands t

Under this arrangement, the seller gives a certain credit period to the buyer to pay the purchase price of the goods for example 60 days after the shipment of the goods or 30 days from the invoice date and so on. The goods are forwarded directly to the buyer. The invoice, insurance policy and shipping documents like bill of lading, delivery order or airwaybill are also dispatched directly to the buyer to enable him to take delivery of the goods and dispose of them. On agreed due date, the buyer makes payment accordingly. The open account payment method is commonly practiced in trading within the country i.e. local trade. Factors to be considered are: The Buyer Compliance of the contract requirements such as prompt delivery of the goods to third party buyers; prompt payment on the respective due dates to continue good track records, Foreign exchange risk. The Seller Payment made only after shipment or delivery; Buyer's credit risk and integrity; Buyer's country risk - exchange c

As its name implies, the buyer pays in advance for the purchase of the goods. This payment method is generally practiced in the mail order trade. A typical scenario is in response to an advertisement or a circular brochure, the buyer remits payment together with the purchase order to the seller who subsequently forwards the goods. If the seller has no confidence in the credit or financial standing of the buyer ir the economic or political conditions of the buyer's country, he may not want to extend any credit and insist that the buyer pays in advance for the purchase of the goods. Certain goods may be required to be specially manufactured or assembled to specifications; thus the seller may need the buyer to make a partial payment in advance to meet the heavy tooling and other costs. Factors to be considered are: The Buyer Payment to be made prior to shipment or delivery; Exchange Control or liquidity and cash flow requirements; Seller's integrity and financial standing; Possibi

In a typical trade transaction, one of the critical decisions facing both the buyer (importer) and the seller (exporter) relates to how and when payment for the goods sold will be made. In practice, there are various methods of trade settlement (or payment) being adopted ranging from payment in advance to payment upon delivery or even payment after a certain period from the date of delivery or shipment. The method adopted in a certain trade transaction will depend on the relationship between the buyer and the seller, and is generally adopted after due negotiation between the said two parties. When determining the appropriate method of payment, both the buyer and the seller would consider the following factors: the nature and extent of relationship between the buyer and the seller; the track record, financial and credit standing and financial needs of the buyer; the financial standing, financial needs and profit margin of the seller; the nature and extent of competition in the particula

A freight forwarder must ave intimate knowledge of the Customs Act and its Regulations and be able to advise his client accordingly. He also must have good general knowledge of many other areas of commerce or at the very best be in the position to know how to ascertain the information required in any particular situation. There is no doubt that a broader spectrum of knowledge a freight forwarder has will enhance the value of his service to his customers. There is one most important function of a freight forwarder which must not be overlooked and this can be seen by his office rather than outside. Bear in mind that the freight forwarder is entrusted with confidential information about his customer's goods and transactions. He is in possession of negotiable documents. He is handling a large sum of money on behalf of his customers and he is a businessman who offers the expertise to the business community for a price consideration to the value of his service. Clearly, the objective of

An agent is probably best described as a person who is entrusted with the business of another (principal) and act on the others' (principal's) behalf. The term "Freight Forwarders" further qualifies this definition limiting the activities of those areas of commerce that deal primarily with importing, exporting and clearance of vessel and aircraft cargoes. The freight forwarder does not normally import or export on his own account but he handles the movement of goods from or to the port and attends to all the necessary documentation required for the inward or outward clearance of goods and carries through "Forwarding". The freight forwarder is in a unique intermediary position acting as a "go-in-between" for his client in dealings with shipping companies, insurance companies and government agencies of all kinds but predominantly of course the Customs Department. It is from this unique standpoint that he can most efficiently act in the best interest

The responsibilities of Multimodal Transport Operators (MTOs) are many and here are some illustrations: MTOs Liability The MTO: contracts with shipper to move the cargo from one point to another, on a single transport documentation, accepts responsibility for goods in transit, may subcontract some or all transport tasks, takes over risks for the entire transport chain. MTO Liability in Loss or Damage. In event of loss and damage: cargo owner is entitled to claim against MTO, according to the agreed terms and conditions in the MT documentations, in practice, the owner will demand compensation from the insurer, insurer claims against MTO or its liability insurers. MTO Liability - Options: uniform liability - single liability; regardless of where damages occurred; network liability - varying limits; depending on applicable limits; for underlying modes of transport. Network Liability System This liability system incorporates: precise rules to each transport mode if loss or damages can be l

Rules for any modes of transportation are as follows: EXW - Ex-Works FCA - Free Carrier CTP - Carriage Paid To CIP - Carriage and Insurance Paid to DAT - Delivered At Terminal DAP - Delivered At Place DDP - Delivered Duty Paid Rules for Sea and Inland waterway transportation: FAS - Free Alongside Ship FOB - Free On Board CFR - Cost and Freight CIF - Cost Insurance and Freight The definitions of each Incoterm rules are based on the following: Ex-Works (......name place of delivery) - EXW Carriage of goods to be arrange by the buyer. Risk is transfer from the seller to the buyer when the good are at the disposal of the buyer. The Cost is transfer from the seller to the buyer when the goods are at the disposal of the buyer. Free Carrier (......name place of delivery) - FCA Carriage of goods to be arranged by the buyer or by the seller on the buyer's behalf. Risk transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place. The Cost is tran

There are two types of MTOs which are as follows: Vessel Operating MTOs (VO-MTOs) Mainly because of containerization many shipowners have now extended their to services to also include carriage over land and even carriage by air. They used not to own or operate the transport of goods by road, rail or air but arrange for these types of transport by sub-contracting. They would usually sub-contract inland stevedoring and warehouse services. Non-Vessel Operating MTOs (NVO-MTOs) Other transport operators (than ocean carriers) may sub-contract the ocean voyage. They are known as "Non-Vessel Operating MTOs" or "Non-Vessel Operating Common Carriers" (NVOCCs). These types of MTO often own only one type of transport means e.g. trucks or in rarer case, airplanes and railways. Those who do not own any means of transport may include: Freight Forwarders Customs Brokers Warehouse Operator Stevedoring Companies These types of MTOs will have to sub-contract for all modes of transpor

Multimodal transport contract means a contract whereby an MTO undertakes, against payment of freight, to perform or to procure the performance of international MTO. Multimodal transport document (MTD) means a document which evidences an MT contract, taking in charge of the goods by the MTO and an undertaking by him to deliver the goods in accordance with the terms of the contract. MTO Criteria: a) Recognized Operator b) Contractual c) Freedom of Action d) Independent Status e) National Licence f) International Recognition g) Resources Scope of Services Some MTOs may own one or more means of transport, handling equipment, containers, etc particularly when there are ship operators, truck operators of railway or airlines. They may also own container depots and warehouses. But some may not own any of these and may therefore engage transport undertakings under contract to them. Some MTOs may also charter ships. The range of services which MTOs provide directly or through their sub-contracto

A global scenario is developing whereby: a) production, manufacturing, distribution and consumption is becoming increasingly sophisticated in order to ensure products are available in the global market place at the correct time, for the correct price and in good condition. b) transport services are changing in nature to meet the demands of buyers and sellers involved in the global production and consumption cycle. c) transportation services demanded by buyers and sellers increasingly involve collection of goods at a place in one country for delivery to a place in another country within specified time frames and with contractual agreement clearly setting out areas of responsibilities and liability. d) results of containerization. e) new technologies in transport (including communication systems). The name commonly applied to this all embracing transport service is Multimodal Transport. What is Multimodal Transport? The United Nations Convention on International Multimodal Transport of G