As it is, the LMW saves you lots of money for the tax relief, provided that you remain within the threshold, and that you successfully applied for it. However, many eligible entities are not of LMW status because they are intimidated and puzzled by the regulations and processes. The good news is that although somewhat lengthy, LMW application procedures are clear and defined, the rules are well published on the RMCD’s website, as follows:

Eligibility for application to LMW:

Manufacturers wishing to apply for LMW status must fulfill the following criteria:-

  • Carry out manufacturing activities as defined under the defination of “manufacture” in the Customs Act 1967.
  • Export as least 80% of their finished product. The actual percentage of export will be determined by MITI at the time the project approval is given. For manufacturers who are exempted from licensing under ICA 1975, the percentage of export will be decided by customs.
  • The project has been approved by the MITI and licence under the Industrial Coordination Act 1975 has been issued by MITI or the project has been exempted from licensing (if the company paid up capital less than RM2.5 million or workers less than 75 people).

Note: Premises considered suitable for LMW must be of permanent construction and must be secured to the satisfaction of the Director General. The building must contain separate storage space for raw materials, finished products and space to be used solely for manufacturing of dutiable goods.

Location of LMW:

A company wishing to have Licensed Manufacturing Warehouse facilities should be located in less developed area so as to be in line with the Government Policy to disperse export oriented and labour-intensive industries to less developed areas. However, in this respect, a certain degree of flexibility is exercised. If there are compelling reasons to select a specific area, not in a less developed area, on account of the special nature of manufacturing operation, etc. the Director General of Customs may consider granting Licensed Manufacturing Warehouse in such a case.

Thus, a LMW can be also located in any place within the PCA according to the manufacturer’s own choice to locate their manufacturing operations in suitable areas in terms of availability of materials for manufacture, labour etc., but must be considered to be appropriate by the approving authority.

LMW Application Procedures

  • The Director General of Customs has the absolute discretion to approve licences. This authority has been delegated to the State Director of Customs. As such, application to establish a warehouse for storage of dutiable goods (under section 65) and to manufacture such goods for production of other dutiable goods (under the provision of section 65A) can be made simultaneously by submitting such application to the State Director of Customs where the proposed warehouse is to be located.
  • All application have to be made in the JKED No. 1 form and whatever certificate, plans and other documents asked for should be submitted. This will expedite the processing of application and approval.
  • The licence so granted shall be subjected to such conditions as the Director General of Customs may specify. It is for a period of one or two years subjected to renewal. Application for renewal of licence must be made at least one month before expiry date of the existing licence.
  • Fees for Successful Applicants:
  1. License Warehouse Fee: RM1,200.00/annum
  2. Manufacturing License Fee: Rm1.00

Note: A banker’s guarantee will be required and the amount is equal to 10% of total duty/tax on raw materials/components for a month. It will be returned after 3 months from the date of expiry of licence, subjected to the company not owing any amount of duties to the department.