Guide to Establishing A Bonded Warehouse in Malaysia

The bonded warehouse system in Malaysia allows you to store imported goods with deferred duties. However, setting up your bonded warehouse requires a clear understanding of local regulations and compliance procedures. In this article, we’ve outlined the various types of bonded warehouses, key regulations to remember, and an overview of the setup process.

Overview of A Bonded Warehouse in Malaysia

What Are the Permitted Activities in A Bonded Warehouse?

A bonded warehouse is a designated facility for the storage of dutiable goods without the immediate payment of customs duties and taxes. The warehouse operator provides a bond or a bank guarantee to ensure that the customs revenue is protected in case goods are released from the bonded area without proper clearance.

To establish a bonded warehouse, you must get approval and meet the requirements set by the Royal Malaysian Customs (RMC). Bonded warehouses are regulated under the Customs Act 1967. Your business can perform various activities with a bonded warehouse which include:

• Repacking: Repackaging of goods into different sizes or sets
• Break Bulking: Breaking down goods into smaller quantities for gradual release
• Warehousing: Storing goods approved by customs authorities
• Relabelling: Relabel products to include importer and distributor names
• De-vending: Direct sale of goods from the bonded warehouse
• Consolidation: Consolidating goods for export, but must adhere to requirements on the types of goods that can consolidate
• Entrepot Trade: Re-exportation of imported goods allowing for efficient inventory management
• International Procurement Center (IPC): Procurement and sales of raw materials, components, and finished products
• Regional Distribution Center (RDC): Storing goods temporarily and acts as an intermediary between manufacturers and customers 

Benefits of Having A Bonded Warehouse in Malaysia

If you are setting up a trading company in Malaysia, then we recommend you consider establishing bonded warehouses. These provide investors with a number of benefits to encourage trade within Malaysia: 

• Deferred Payment of Customs Duties: Allows for better cash-flow management. Can use funds for operational needs or reinvestment instead.
• Storage of Restricted Goods: Allows storage for regulated products like tobacco, firearms, alcohol, and certain chemicals but with proper licensing and approvals.
• Tax Savings: Goods stored in warehouses that are re-exported will be exempt from customs duties. Businesses can avoid double taxation.
• Long-Term Storage: Able to store goods for extended periods without incurring extra customs charges.
• Inventory Management: Allows for inventory control, and reduces risk of excess inventory.
• Quality Control: It is easier to conduct inspections and quality assurance on products before sale or export.

It is important to remember that the establishment process can be challenging as you need to ensure compliance with several regulations, ranging from appropriate licensing to efficient management of your premises. Our local experts at Emerhub can assist you in ensuring that your bonded warehouse is properly established to avoid any problems with the local authorities.

Types of Bonded Warehouses in Malaysia

Bonded warehouses in Malaysia are divided into three categories. Choosing your warehouse category depends mainly on your business activities and operational plans. Keep in mind, that they each have their own sets of requirements and restrictions as outlined below:

1. Public Bonded Warehouse: A central storage facility for dutiable goods in both domestic and international trade. To apply for this warehouse category, applicants must maintain at least 30% Bumiputera equity throughout the licensing period.
   1. The minimum paid-up capital requirement for this warehouse is RM 1,000,000 (~USD 225,000). 
   2. A minimum storage area requirement of 50,000 square feet for the storage of critical goods is mandatory.
2. Private Bonded Warehouse: Ownership and operations restricted to individual companies or their affiliated companies for storing their products. The minimum paid-up capital is RM 150,000 (~USD 34,000) for critical goods. The value of goods stored in the warehouse must reach a certain threshold within a year as follows:
   1. Critical Goods & Mixed Goods (Critical and Non-Critical): The value of goods must be at least RM 5,000,000 (~USD 1,120,000) within a year
   2. Non-Critical Goods: The value of goods must be at least RM 2,000,000 (~USD 448,000) within a year
3. PEKEMA Licensed Warehouse: Specifically for the storage and distribution of motor vehicles and related goods.
   1. Subject to additional regulations set by the Association of Malay Importers and Traders of Motor Vehicles of Malaysia (PEKEMA) aside from the RMC. 
   2. Applicant must be a member of PEKEMA.
   3. Applicant must hold an Open Approved Permit (AP) issued by the Ministry of International Trade and Industry (MITI).

How to Set Up A Bonded Warehouse Malaysia

Key Requirements for Securing Approval for Your Bonded Warehouse 

Since bonded warehouses can be used to store high-value products, sensitive goods, or restricted items, establishing one in Malaysia can be challenging as the government aims to prevent the misuse of these bonded warehouses for illegal activities. 

To secure approval for a bonded warehouse, you must provide a comprehensive overview of your business activities, goods, and planned warehouse premises. The essential requirements are as outlined:

• Business License
• Comprehensive business plan
• Document detailing the security measures in place
• Flow chart of operations in the warehouse
• Details of intended goods in storage
• Bond or bank guarantee from operators to cover the potential customs duties on goods stored in the warehouse

Ensuring Compliance For A Bonded Warehouse

You must ensure ongoing compliance for your bonded warehouse in Malaysia to protect your business, the stored assets, and your employees from heavy penalties and legal issues. Below are the mandatory safety standards that you need to implement for your bonded warehouse:

• Security: The warehouse facilities and premises must have security systems and controls in place, as well as proper fencing 
• Building Safety Standards: Obtain a Certificate of Completion and Compliance (CCC) to certify that the warehouse complies with construction and safety requirements
• Fire Regulations: Obtain a fire certification from the Fire and Rescue Department of Malaysia (BOMBA), ensure proper storage of flammable materials, and ensure the availability of fire safety equipment
• Automatic Fire Monitoring System (SPKA): Facilities are required to install the SPKA. It detects fire early, alerting the nearest fire station and warehouse occupants
• Storage Requirements: All warehouses must meet the storage requirements for their categories and prepare adequate space for the expected volume of goods

Setting Up Your Bonded Warehouse in Malaysia

Emerhub’s team of local consultants can assist in setting up your bonded warehouse in Malaysia. We’ll advise you on the most suitable warehouse type for your business activities and ensure you stay compliant with the local regulatory requirements through our comprehensive company registration service:

1. Determine Bonded Warehouse Type: Based on business needs and activities, choose what category of bonded warehouse would be suitable and beneficial.
2. Send Application to RMC: We’ll submit application forms and necessary documents to the nearest customs department to your warehouse location. Customs officials will assess your application and documents.
3. Establish Record-Keeping Systems: To make it easier for audits and tracking warehouse activities, we can help establish a record-keeping system that includes entry and exit logs, as well as product details.
4. Prepare for  Inspections: Customs supervision and audits for compliance will be done before approval is given out, but random inspections will be carried out during your operation so remember to stay compliant. 

Looking to establish a bonded warehouse in Malaysia? Get in touch with Emerhub’s local experts by filling out the form below. We look forward to assisting you.