Business Prospects And Investment Opportunities
(Source: Jabatan Custom & Eksais Di Raja Malaysia)

1. Labuan as a duty free port
1.1 Labuan was declared a duty free port on 1 September 1956 under the Custom Ordinance (Amendment No. 2) 1956, except for liquor, cigarettes and petroleum products. It means that every goods are exempted from custom duty except for liquor, cigarettes and petroleum.

1.2 In the 1991Budget announced on 14 December 1990, every goods imported into Labuan are exempted form custom duty and sales tax, except on petroleum and petroleum products. This annoucement effectively exempted liquor and cigarettes from custom duty and sales tax.

2. Concept of a duty free port
2.1 The status of a duty free port is similar to the concept of a free trade zone basing on the definition of Section 2(1A) Custom Act 1967. A free trade zone is considered as an area outside the country. This enables goods and materials to be moved in and out of the free trade zone without any imposition of duty and taxes.

2.2 The status of a duty free port minimises custom control on activities pertaining to establishment, administration, factory and building on the island. The custom control is only enforced at entry and exit points such as seaport and airport.

3. Approved activities
3.1 Every product and services except those prohibited by law is allowed to be imported, exported, manufactured, distributed and re- packaged in Labuan without any imposition of duty and taxes (except for petroleum).

3.2 The relaxed custom control on the above in Labuan is ideal for the set up of various entreport trade activities in Labuan as follows:

a) Manufacturing The manufacturing industry operating in Labuan can produce goods specifically for export. Every raw material, component, packaging material, plant and equipments such as imported machinery imported for manufacturing in Labuan are exempt from duty and taxes. Manufactured goods are also exempted from local sales tax.

b) Trading Labuan has the potential to become a re-routing and distribution centre where goods may be freely imported and re-exported without any duty and taxes. This will in effect reduce the cost of re-export.

c) Re-Packaging Imports of cargo and re-packaging activity can be done in Labuan for redistribution to buyer countries. Imported packaging materials are also exempted from duty and taxes. Sales tax are also exempted if local packaging materials are used.

d) Breaking Bulk Goods imported in bulk can be broken up basing on orders of buyers.

e) Relabelling Labuan also has the facility to re-label imported goods basing on customers' requirements.

f) Transhipment 'Transhipment' means the transfer of goods from ships or aircrafts to ships or aircrafts or the removal of goods from ships or aircrafts to be kept in Labuan for purpose of transporting the goods out of Malaysia (Labuan) using other aircrafts or ships. These activities are ideally suited for Labuan in view of the island's strategic location within the region's sea and air routes.

g) International Procurement Centre (IPC) IPC is a new product of the Custom Department which was approved by the Ministry of International Trade And Indutry (MITI) to encourage investment by local and foreign companies in the free trade zone. Since Labuan free port status is similar to free trade zone, the concept of IPC can also be implemented in Labuan. This concept provides companies with multiple manufacturing facilities throughout the world, to implement re-routing and sales of raw material, component or finished goods in and out of the country on a global and tax free basis. Such activities will encourage the set up of distribution centre by multinational in this country, in particularly Labuan.

h) Barter Trade Besides the normal trading system, Labuan also offers barter trading facililties or the exchange of goods. Goods traded under this system includes electrical goods; canned food and drinks; and used clothings. Barter trade usually involves Philippine and Indonesian traders.