Everything About Malaysia Licensed Manufacturing Warehouse

What is a Licensed Manufacturing Warehouse (LMW)?

A Licensed Manufacturing Warehouse (LMW) in Malaysia is authorised facility that conducts warehousing and manufacturing of goods, with at least 80% intended for exports, mainly using raw materials and components sourced from other countries.

It is designed for businesses operating in this mode but are ineligible for the application of Free Industrial Zones (FIZs) due to unmet geographical criteria. 

LMW provides similar benefits as FIZs offers, exempting import duty and sales taxes on raw materials, components, machinery, and equipment that are new, unused and directly used in the manufacturing process. This exemption covers the entire production lifecycle, providing cost-effectiveness in importing goods. Business owners can import materials at a reduced cost, avoiding taxes and duties, thereby optimizing financial resources.

The LMW license is granted by customs. However, for manufacturers with over 20% local sales from their manufacturing goods, special approval is required from the Malaysian Investment Development Authority (MIDA).

It's important to note that the exemptions of duties and taxes under LMW do not apply to:-  

• Cranes

• Forklifts

• Staff uniforms

• Office equipment or furniture

• Air conditioning and related equipment 

• Firefighting and pollution equipment, vehicles

• Construction or building materials and equipment

What other approved activities are allowed to be carried out in LMW?

At an LMW, certain activities are allowed with approval from the State Customs Director / Zone Operations Director. They are:-

• Product design
• Quality control
• Testing and commissioning
• Calibration and configuration
• Research and development (R&D)
• Labelling, packaging and repackaging
• Re-manufacturing, repairing and servicing
• Marketing, only for manufacturers with International Procurement Center (IPC) status
• Distribution, only for manufacturers with Regional Distribution Center (RDC) status
• Supply chain management, strategic procurement operation and total support solutions

The value-added activity must have a direct connection to the company's manufacturing operations and should strictly function as a secondary task. Sales from this activity must not surpass 40% of the total annual sales value. This condition, however, does not apply to companies with IPC and RDC status.

How to apply for a Licensed Manufacturing Warehouse?

The process of obtaining LMW license involves 3 stages, including eligibility check, document submission, and licenses issuance. This can be further broken down into 7 milestones: 

1. Eligibilility Check

Firstly, you need to check if your company meets these three eligibiltiy criteria:

1. Manufacturing License:

Manufacturers must either possess a Manufacturing License under the Industrial Co-ordination Act 1975 (ICA) or hold an exemption letter from the Malaysian Investment Development Authority (MIDA).

2. Export Requirement: 

Manufacturers need to demonstrate that they export more than 80% of the total value of finished goods over a continuous 12-month period.

3. Adherence to Manufacturing Criteria: 

Manufacturing operations must align with the definition of "manufacture" as outlined in Section 2(1) of the Customs Act 1967. 

• For intoxicating liquors: distilling, brewing, fermenting, bottling, and processes like adding substances (excluding water), blending, compounding, and varying liquors with the intent to sell for human consumption. This excludes compounds prepared on the purchaser's order for immediate consumption.
• For tobacco: any process converting any raw or leaf tobacco into tobacco fit for smoking, snuffing, or chewing, including making cigarettes from manufactured tobacco.
• For petroleum: refining processes involving separation, conversion, purification, and blending of refinery or petrochemical streams.
• In other cases: the conversion, by manual or mechanical means, of organic or inorganic materials into a new product by changing their size, shape, composition, nature, or quality. This includes the assembly of parts into machinery or other products but excludes the installation of machinery or equipment for construction purposes.

Step 2: Prepare Required Documents

There are 12 documents in total that you will need to provide for LMW application:

1. Form JKDM No 1 - General application form for licence
2. Copy of Certificate of Completion and Compliance (CCC)
3. Copy of business license/certificate issued by Local Authority
4. Form A – Application for Licensed Manufacturing/ Warehouse under Section 65/65A of the Customs Act 1967 
5. Form D - Certificate of Registration
6. Memorandum and Articles of Association
7. Form 9 - Certificate of Incorporation of Private Company
8. Form 24 - Return of Allotments of Shares
9. Form 44 - Registered Office
10. Form 49 - Name of Board of Directors
11. Copy of Manufacturing License issued under the ICA 1975
12. Factory location plan (certified by Registered Architect)
13. Factory layout plan  (certified by Registered Architect)
14. Elevation plan  (certified by Registered Architect)
15. Flow chart of the manufacturing process
16. List of machineries
17. List of raw material
18. List of finished goods
19. Input/output ratio
20. Rental of Premises Agreement Letter
21. Other relevant documents

Step 3: Application Submission

Fill out and submit the required documents to the State Director of Customs where the proposed warehouse is to be located through the nearest customs office. This submission marks the formal initiation of the application process.

Step 4: Compliance with Conditions

Ensure that your business operations comply with the conditions outlined by the Director General of Customs in Appendix C.

Step 5: Inspection and Evaluation

Customs may conduct an inspection of your premises to assess your manufacturing capabilities, based on 4 areas: