The Malaysian government uses tariffs as a main strategy to regulate the import of goods in Malaysia. The simple average applied normal trade relations (NTR)/most favored nation (MFN) tariff rate is approximately 8.56 per cent, but duties for tariff lines where there is significant local production are often higher.
The tariff protection usually is lower on raw materials and increases for those goods that have value added content. In addition to import duties, a sales tax of 10 per cent is levied on most goods. Neither import duties nor this sales tax is applied to raw materials or machinery used in export production.
Seventeen percent of Malaysia's tariff lines (mostly in the construction equipment, agricultural, mineral and motor vehicle sectors) are also subject to non automatic import licensing designed to protect import sensitive or strategic industries.
Import Restrictions on Motor Vehicles
Malaysia has long protected its automobile manufacturing industry from foreign competition using high tariffs and non tariff trade barriers. But the government has steadily dismantled the protections in order to meet its commitments to the WTO and ASEAN Free Trade Agreement (AFTA).
The Ministry of International trade and Industry overseas a system of approved permits (APs) that allow the holder to import cars and distribute them locally. The AP system was designed to provide domestic Malaysian companies easy entry into the automobile distribution and service sector. The AP system doubles up as a quota by restricting the total number of automobiles that can be imported in a given year in relation to the size of the domestic market.
But the government amended the automotive tax regime in 2004 and in 2005 to meet its commitments under the AFTA Agreement. The import duty rate for vehicles with at least 40 per cent ASEAN content fell to 20 per cent in 2005 and would be lowered to 5 per cent in 2008.
Last Updated on: 18-11-2009
