Trade Procedures
Malaysia's foreign trade is conducted within the framework of a free enterprise system and trade has remained a private sector enterprise with government facilitating efforts where necessary. Restrictions are mainly used to safeguard national security, health and environment, maintain quality standards and to comply with safety requirements.

Import Licensing
Import licences are required for items such as arms and explosives, motor vehicles, colour copying machines, sugar, rice and flour. The Customs (Prohibition of Imports) Order 1988 lists goods whose entry into Malaysia are subject to licensing.

Export Licensing
Most Malaysian products can be freely exported. Only a limited number of products requires export licences to ensure compliance with bilateral textiles agreements or international agreements and conventions on environments and conservation. Some products are subject to export licences to monitor the domestic supply situation of essential products.

The Customs (Prohibition of Exports) Order 1988 sets out export licensing requirements in three schedules. The First Schedule lists goods that are absolutely prohibited for export i.e. turtle eggs and rattan from Peninsula Malaysia (with some exceptions). The Second Schedule lists goods that require an export licence. Among these are live or dead domestic animals, all oil palm living tissues, milk and milk products and cement clinker.

The Third Schedule lists goods that are prohibited from export except in the manner specified in the Order. The export of live birds or animals for instance must be accompanied by a permit issued by the Wildlife Department. An export permit for arms and ammunition must be obtained from the Police Department, and for toxic and hazardous waste from the Director General of the Department of Environment.

Export Duties
Export duties are generally not levied on Malaysian products, except to comply with certain regulations and to protect domestic supply.

Import Duties
As part of Malaysia's commitment to the WTO and unilateral liberalisation measures, it has reduced or abolished import duties on almost 5000 items. To facilitate trade, 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. More than 60% of the tariff lines are subject to zero duty.

Sales Tax
Sales tax is applied to selected products for both imported and domestically produced goods. The rates leviable are as stated in the Sales Tax (Rate of Tax) Order 1972 and the Sales Tax (Rate of Tax) Order 1997.

Anti-Dumping Duties
Malaysia has put in place the Countervailing and Anti-Dumping Act 1993 in accordance with the WTO Conventions. The Trade Practices Unit under the Ministry of International Trade and Industry (MITI), administers the implementation of the Act.

Common Effective Preferential Tariffs (CEPT-AFTA)
Under AFTA's CEPT scheme, ASEAN member countries have agreed to progressively reduce import duties, ranging from zero to 5%, on all products. The six original members, namely Brunei, Malaysia, Singapore, Thailand, Indonesia and the Philippines, will fully implement CEPT by 2003. The other member countries namely Vietnam, Laos, Myanmar and Cambodia, will be fully implementing CEPT in 2008.

Malaysia already has more than 90% of the tariff lines at the 0.5% level, and more than 60% of products do not attract duties. The average tariff for Malaysia is at 2.59%, and is expected to decline to about 2.07% by 2003.

Detailed information about licensing and tariffs, and the CEPT scheme is available from the Customs Department, the Ministry of International Trade and Industries and the ASEAN Secretariat.

Electronic Commerce Trade Facilitation
Malaysia has established an electronic commerce infrastructure to replace the manual system of import and export trade documentation. The network links the Royal Customs Department with all players in the import and export community:

• port operators
• freight forwarders
• forwarding and shipping agents
• commercial banks
• free zone operators
• warehouse operators
• ports and airports

The system is also currently being used by 5 permit-issuing government agencies:

• Ministry of International Trade and Industry
• Malaysia Timber Industry Boards
• Veterinary Services Department
• National Forest and Wildlife Protection Department
• Standards and Industrial Research Institutes of Malaysia.

Bilateral Trade Agreements (BTA)
Malaysia has signed BTAs with more than 61 countries as of March 2002, to facilitate, strengthen and diversify trade. The agreements grant most favoured nation treatment in terms of customs duties and import and export formalities. They also provide for the easy transit of commercial goods and facilitate implementation of promotional programmes.

Bilateral Payment Arrangements (BPA)
BPAs have helped strengthen South-South trade co-operation with other central banks, and diversify exports to non-traditional destinations. A BPA is a settlement system that converts the commercial risk relating to trade into a sovereign risk as the central banks of any 2 countries guarantee payments in domestic currencies to their domestic exporters. BPAs with 31 countries to date have resulted in a significant increase in trade with non-traditional markets, from RM2.4 billion in 1987 to RM26.7 billion in 2000.

Double Tax Agreements (DTA)
Malaysia has signed DTAs with 56 countries. These provide for the avoidance of double taxation on income such as business profits, dividends, interest and royalties that are derived in one country and remitted to another.