Customs ruling the biggest Labuan duty- free block
Published on: Sunday, May 19, 2019


Customs have been imposing all sorts of regulations including the stationing of Officers at every shop selling beer and liquor in Labuan.

Customs also want all goods going out of Labuan to be declared at Labuan Port. This is not right, it should be declared at the receiving end, just like goods leaving Singapore are declared at Johor and Hong Kong at the mainland of China.

Labuan island should be free. The whole island is a bonded area for Duty Free Goods.

Recently Tun Dr Mahathir removed all Customs Restrictive Regulations, except that Customs still require a Custom Declaration at Labuan Port and not at the receiving ports.

Customs stated a few years ago that they seized more than RM1 million Duty Free goods, mostly beer and liquor from Labuan. This must be their imagination. Simple reason is that at any one time in the whole of Labuan, there is no stock of beer and liquor worth RM1 million. Therefore, how can these have come from Labuan?

Smuggling actually happens on a larger scale from Port Klang or Singapore.  Small ships loaded fully or partly with beer and liquor bound for Hong Kong or Jakarta are diverted into the river mouths of Sarawak and Sabah, where the goods are unloaded onto small boats to ferry the Duty Free goods inland.

It was reported that the Barter Trade introduced by Umno in Kudat, Sandakan and Lahad Datu is where smuggling is already rampant.  Boats (kumpit) loaded with beer and liquor declared bound for Zamboanga (Philipppines) just make a U turn into Sabah rivers instead of proceeding to Zamboanga.

As far as barter trade, it is not about “closing or opening”. The question is how trading or business is conducted by merchants.

Any company or merchant can start doing barter trade any time, it is as simple as just obtaining a Trading Licence.

Remember also that Labuan was the 6th largest sugar trader in the world during the 1970’s. 

Therefore there is no reason why barter trade cannot be revived immediately. However, remember also that barter trade is getting less and less as most countries have already built their ports and highly efficient banking systems.

Barter trade can also be done from Kota Kinabalu Port. For example a company in  Kota Kinabalu confirmed the purchase of GI pipes to the value of say RM60,000. The supplier in Shanghai wants payment in rubber to the equivalent value. 

However, if the Monetary Authority or Customs forbids such an arrangement, it can be done in a “wasteful way”.

 Company at KK can open a LC for the cost of the GI pipes and the Chinese company opens a LC for the rubber amounting to the same amount as the cost of the GI pipes. 

The normal taxes of imports and exports apply. That is all. Actually, barter trading is still practised by America in the Alaskan provinces where Red Indians or Eskimos will harvest marine life but are not allowed to sell to visitors. However, they are allowed to barter trade with visitors by exchanging for wine and cigarettes.

The Malaysian Government has also practised Barter Trade. One such example was the construction of the Kinabatangan and Segama bridges. The contract with an Indian company was through Barter Trade. 

The Indian company built the bridge, and the Malaysian Government paid in Palm Oil to the equivalent value of the contract. Therefore, Barter Trade is not a big deal as Labuan merchants would have to make us believe.

Having said all the above, the biggest problem for Labuan is the Custom Restriction on Duty Free goods. The present Customs requirement that any goods exported out of Labuan must be declared at Customs at Labuan. 

To make Labuan a Free Port as originally declared in 1884, this Custom requirement must be removed immediately.

It is understood the Federal Minister of Federal Territories will be visiting Labuan soon and this matter must be collectively presented to the Minister to make Labuan a completely Free Port. 

With proper presentation and submissions, the Minister will definitely agree to make Labuan a completely Free Port as provided by law declaration. 

Customs requirement is only policy for administrative purposes.

I have contributed these points in order to facilitate Labuan to be the progressive island economy it once was.

Benn Osman 





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