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1. |
Subcontract activity refers to transferring of raw materials / components from LMW company to a subcontractor with the approval of customs. The transfer is for finishing a specific manufacturing process. Upon completion, the processed goods shall be returned to LMW or it can be exported directly from the subcontractor’s premise. |
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2. |
Subcontract work can be done between LMW company and the manufacturing company registered under the Companies Act 2016 and the Business Registration Act 1956: |
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2.1 |
LMW company with other LMW companies. |
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2.2 |
LMW company with companies in the Free Industrial Zone. |
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2.3 |
LMW company with companies within the Principal Customs Area. |
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2.4 |
LMW companies with overseas companies (registration requirements under the Companies Act 2016 and the Business Registration Act 1956 does not apply). |
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3. |
Guidelines of the subcontract work; |
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3.1 |
Applications of subcontract within Country:
The value of raw materials / components that can be transferred for subcontract work is not exceeding 50% of the actual total production value OR not exceeding 50% of the overall manufacturing process of the specific finished goods. |
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3.2 |
Application of subcontract to overseas:
The value of raw materials / components that can be transferred for subcontract work is not exceeding 30% of the actual total production value OR not exceeding 30% of the overall manufacturing process of the specific finished goods. If exceeds 30%, prior approval must be obtained from SME Corporation Malaysia. |
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3.3 |
LMW company is allowed to send the imported raw materials / components directly to subcontractor company with the approval of the State Director of Customs / Zone Operations Director. Customs Form No.1 (K1) shall be used and the LMW company will be the consignee (importer). Import Duty exemption dan sales tax relief should be claimed under the name of the LMW company. |
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3.4 |
LMW Company is also allowed to export their finished goods directly from subcontractor premises with the approval of the State Director of Customs / Zone Operations Director. Customs Form No.2 (K2) shall be used and the LMW company will act as a consignor (exporter). |
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3.5 |
The application of subcontract should be submitted to the Head of Customs Division / Head of Section using the format as per Appendix G1 attached with the manufacturing process flow and related supporting documents. |
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3.6 |
LMW Company must submit a monthly statement of movement / transfer of raw materials and components for subcontract work to the controlling customs station not later than the 28th of the following month using Appendix H. |
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3.7 |
LMW company is allowed to receive subcontract work from companies as specified in Para 2 above. Application must be submitted to the Head of Customs Division / Head of Section using the format as per Appendix G3 for consideration. The approval letter for subcontract work from the customs controlling station should be attached as supporting documents. However, this requirement does not apply to companies that receive subcontract work from overseas. |
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3.8 |
LMW Company is not allowed to outsource subcontract work received from the other companies. All work must be done at the approved LMW premises only. |
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3.9 |
Transfer of raw materials / components from LMW Company for subcontracting purposes shall be declared using the prescribed form. Import duty exemption (if applicable) can be claimed under item 85 of the Customs Duties (Exemption) Order 2017 whilst sales tax exemption is claimed under item 54 of the Sales Tax (Persons Exempted from Payment of Tax) Order 2018 subject to specific conditions imposed. |
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4. |
The forms to be declared for the movement of raw materials / components / semi-finished goods for subcontract work are as follows: |
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4.1 |
Movement from LMW company to subcontractor company;
| No. | Subcontractor | Document | | a. | LMW | GPB 1 | | b. | FIZ | Customs Form No.2 (K2) | | c. | PCA | Customs Form No.9 (K9) | | d. | Oversea | Customs Form No.2 (K2) |
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| | 4.2 | Movement from subcontractor company to LMW company;
| No. | Subcontractor | Document | | a. | LMW | GPB 1 | | b. | FIZ | Customs Form No. 1 (K1) | | c. | PCA | Invoice and Delivery Order (DO) | | d. | Oversea | Customs Form No. 1 (K1) |
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