A bonded warehouse in Malaysia is a key part of the logistics network, providing a secure place for storing imported goods without immediate import duties.
This helps importers and exporters improve cash flow by delaying tax payments until goods are sold or exported.
Using bonded warehouses can lead to significant savings, especially when goods are imported for processing and then re-exported.
As a trade hub in Southeast Asia, Malaysia offers incentives for using bonded warehouses, but understanding local rules and compliance is crucial.
What is a bonded warehouse?
A bonded warehouse is a secure storage facility authorised by the Royal Malaysian Customs that allows goods to be stored without the need to pay duties immediately.
It's meant for holding dutiable goods until they're ready to move out, acting as a duty-free zone with secure and controlled access.
Types of Bonded Warehouses
| Classification | Description |
| Public Bonded Warehouse (Gudang Berlesen Awam) | Serves as a central storage and distribution facility for bonded goods, usable by multiple importers. Ideal for businesses seeking the financial benefits of bonded storage without the high operational costs of a private facility. |
| Private Bonded Warehouse (Gudang Berlesen Persendirian) | Operated exclusively by a company and its affiliates for their own bonded goods. This provides total control over the supply chain and integrates seamlessly with production schedules. |
| PEKEMA (Association of Malay Importers and Traders of Malaysian Motor Vehicles) | A specialised warehouse where both the importer and the operator are liable for the stored goods. This responsibility ends when goods are exported, used as supplies for international travel, destroyed under Customs supervision, or withdrawn for domestic use after duties are paid. |
The Types of Activities That Allowed in a Bonded Warehouse
Many people think bonded warehouses are just for storage, but that's not the whole story.
While they are administratively regulated by Malaysian Customs, you can perform several value-added activities inside the bonded zone without paying duties first.
With approval from the Royal Malaysian Customs Department (RMCD), these activities (also known as break-bulk or entrepot operations) can help with regional distribution.
They include:
- Break-bulking: Distributing commodities from a large shipment into smaller amounts.
- Repacking and Relabelling: Repackaging goods for consumers and adding local labels, such as the importer's or distributor's name, before domestic distribution.
- Consolidation: Combining dutiable and locally supplied goods for export.
- Other activities: The RMCD also allows for storing goods, de-vending (selling directly from the warehouse), handling import-export commerce, and internal transportation.
While foreign manufacturing enterprises can apply for a Licensed Manufacturing Warehouse (LMW) licence to operate their own customs-bonded warehouse.
However, many companies choose to outsource this type of storage to a logistics service provider.
The Restrictions on Using a Bonded Warehouse
Despite the clear advantages of using a bonded warehouse in Malaysia, certain restrictions and considerations must be kept in mind as follows:
- Alcohol: To store or move intoxicating liquor, a licensee needs written approval from the provincial agency that authorises liquor sales.
- Domestic Goods: The following domestic items cannot be stored in a bonded warehouse:
- Cigars
- Unstamped or raw leaf tobacco in a packet
- Packaged or bulk spirits and wine on which duty has not been paid
- Specially denatured alcohol not subject to duty
- Cigars
- Imported Goods: A licensee cannot store the following imported items in a bonded warehouse:
- Bulk spirits
- Bulk wine
- Specially denatured alcohol
- Bulk spirits
Timeframes for Managing Storage Durations
Bonded warehouses are fantastic for cash flow because you can delay tax payments, but this benefit doesn't last forever.
In Malaysia, you generally have a 24-month (2-year) limit to store goods in a bonded facility before you have to pay customs duties.
If you don't export the goods, clear them for local sale by paying the duties, or move them to another bonded warehouse within that two-year window, the goods may be at risk.
In such cases, the RMCD can auction them off to cover the unpaid taxes.
However, if your supply chain is facing delays, you can apply for an extension. Just make sure to submit a strong justification to the Director General of Customs before your time is up.
What are its advantages and benefits?
- Restricted Items and Storage: Sensitive and restricted goods can be safely stored in bonded warehouses. Basically, anything from little goods to big items and freight with unusual shapes can be stored here.
- Tax Savings: Businesses can save money on taxes by holding their products in a bonded warehouse, since duties are only paid when the items are shipped out for delivery. This implies that unsold items can be re-exported without incurring any tariffs.
- Multiple Forms of Storage: Bonded warehouses provide a variety of specialised storage services for a wide range of items. Perishable goods are stored in deep-freeze containers, while electronics and automotive components are kept in temperature-controlled chambers.
- Modifications Made On-Site: A bonded warehouse can do on-site alterations to your stored shipment. This implies you may do whatever you want with your items in terms of maintenance, testing, labelling, packing, inspection, and grading.
- Secure Warehousing: Because they pay security professionals and have security cameras for 24/7 supervision, bonded warehousing is far more secure than storage services from normal warehouses.
Determining Factors for Bonded Warehouse
- Strategic Location: The location of a bonded warehouse is key to streamlining your supply chain. Choose one near major ports, airports, or transport hubs to reduce transit times and improve logistics. Proximity to suppliers or customers further cuts lead times and costs.
- Regulatory Compliance and Certifications: Compliance with customs regulations is critical. Select a warehouse with proper certifications and a reliable compliance history to avoid delays, penalties, or disruptions.
- Storage Capacity and Scalability: Pick a warehouse that meets your current needs and offers scalable options for growth. This ensures your supply chain can adapt to market demands and seasonal changes.
- Value-Added Services: Modern warehouses offer more than storage. Look for extra services like packaging, labelling, inventory management, and distribution to simplify logistics and cut costs.
- Technology Integration: Technology plays a big role in warehouse efficiency. Choose facilities with tools like warehouse management systems, real-time tracking, and automation to boost operations and visibility.
Establishing A Bonded Warehouse in Malaysia
Operating a bonded warehouse in Malaysia is a significant undertaking governed by Section 65 of the Customs Act 1967.
To prevent the misuse of the duty-deferral system, the Royal Malaysian Customs Department (RMCD) enforces strict regulations.
Prerequisites
To obtain a licence, operators must meet several key requirements:
- Financial Guarantees: Applicants must provide a Bank Guarantee or a General Bond to the Customs Department. This secures the estimated duties and taxes on the goods stored and protects government revenue in case the goods are improperly released into the local market.
- Security Standards: The warehouse must meet stringent security measures, including specific building requirements and 24/7 surveillance, to safeguard the cargo.
Application Process
a) Prepare Essential Documentation:
- Business License
- Business Plan
- Security Measures Document
- Warehouse Operations Flow Chart
- List of Goods for Storage
- Bond or Bank Guarantee for potential customs duties
b) Choose the Right Type of Bonded Warehouse: Select a warehouse category that suits your goods, operations, and business goals to boost efficiency and profitability.
c) Submit an Application to Customs: Submit your application with all necessary documents to the regional customs office. A complete, well-prepared application can speed up approval.
d) Set Up Strong Record-Keeping Systems:
- Product entries and exits
- Detailed records
- Audit trails for transparency
e) Prepare for Customs Inspections: Customs will inspect your warehouse before approval and may conduct random checks later. Maintaining high standards ensures compliance and smooth operations.
Bonded vs. Non-bonded Warehouse: What’s the difference?
| Bonded Warehouse | Non-bonded Warehouse | |
| Duties and Taxes | Deferred until goods are moved for the local market or re-exported. | Paid when goods enter the warehouse. |
| Cash Flow | Improves cash flow by deferring tax payments, reducing costs for goods not sold immediately. | No tax deferral advantage; costs are incurred upfront. |
| Regulation | Regulated by a customs authority (e.g., Royal Malaysian Customs) and requires a bond or bank guarantee. | Lacks direct customs control and operates as standard storage. |
| Primary Focus | Supports import-export activities, allowing duty-free storage for processing, re-exporting, or future local sales. | Serves domestic distribution, storing goods already cleared by customs and ready for the local market. |
| Strategic Role | Key to the global supply chain, offering strategic advantages for international trade. | Primarily serves as a storage and distribution point for the domestic market. |
How businesses can find the perfect bonded warehouse through Industrial Malaysia?
The right location can make all the difference in offering the best service and accessing the necessary infrastructure. It also increases accessibility and reduces overall expenses.
Working with knowledgeable industrial property agents will help you expand more quickly than if you manage your warehouse operations on your own.
If you want to enhance your revenues and cut down on wait times, consider Industrial Malaysia. We provide a list of bonded warehouses where you can outsource the management of your goods.
This allows you to enjoy the benefits of bonded warehouses without the hassle of setting one up yourself. Check out our bonded warehouse listing here.
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