Interpretation of Malaysia's recycled aluminum import and export policy #铝 #再生铝

On April 25, at the 2024SMM (19th) Aluminum Conference and the First Aluminum Industry Expo - Electrolytic Aluminum and Raw Materials Forum hosted by SMM, Chen Wenkai, President of the Malaysian Nonferrous Metals Chamber of Commerce, explained the import and export policy of recycled aluminum in Malaysia.

Malaysia, a country with a unique geographical location, is located between two major Asian powers, India and China. As we all know, China is the current aluminium giant, while India is seen as the future powerhouse of the aluminium industry. Malaysia's proximity to the strategically important Strait of Malacca is vital to global trade. Malaysia is a culturally diverse country, and this diversity deepens our understanding and connection with our neighbours. Malay is the official language, but most countries are also fluent in English, Chinese and Hindi, reflecting the diversity of our education. Malaysia's geographical advantages and cultural diversity give it great potential to grow in the global aluminium industry. In order to achieve greater success in the aluminium industry, it needs government support and clear policy guidance for Malaysia to play a more important role in the global aluminium industry.

Malaysia's free trade agreements with India and China have made it cheaper and easier for Malaysia to sell to these two big countries and has attracted a lot of investment, especially in the manufacturing sector. These agreements also allow Malaysia to learn new technologies and improve production efficiency. As a result, many international companies choose to invest in Malaysia, hoping to use Malaysia as a springboard into the larger Asian market. Moreover, as a member of the Association of Southeast Asian Nations (ASEAN), many products made in Malaysia are sold duty-free to other Southeast Asian countries, which brings great benefits to Malaysia's international trade and economic development. To put it simply, these agreements have not only helped Malaysia gain a strong position in the international market, but also boosted economic growth.

Federal Constitution of Malaysia

The Constitution of Malaysia is the fundamental law of the country and provides the framework and guiding principles for legislation. Article 235 of the Constitution specifically empowers Parliament to enact laws regulating the collection of customs and excise duties, which provides the basis for the enactment of relevant laws such as the Malaysian Customs Act.

Malaysian Customs Act

The Malaysian Customs Act (1967) was enacted in accordance with the Constitution to establish a unified customs administration system to boost national revenue and meet the development needs of international trade. The law sets out in detail the rules governing the import and export of goods, the collection of customs duties and the crackdown on smuggling, and is key to understanding how Malaysia regulates import and export activities.

The Customs (Import Prohibition) Order was enacted under Section 31(1) of the Malaysian Customs Act.

Customs (import ban) orders

According to the Customs (Import Prohibition) (Amendment) (No. 2) Order 2022, all imports of metal scrap must obtain a Certificate of Approval (COA) issued by SIRIM

This order stipulates that businesses or individuals importing recycled metals must follow specific import procedures to ensure the legality and compliance of import activities.

This set of laws and policies forms the framework of Malaysia's import and export management, and SIRIM (Malaysian Institute of Standards and Industries) is a designated body by the Malaysian government to develop and promote national standards, as well as provide testing and certification services for quality and standards. When it comes to import policy, especially in relation to the import of recycled metals and other important materials, the guidelines issued by SIRIM play a central role.

Guidelines for the import and inspection of metal scrap

The Guide to the Import and Inspection of Metal Scrap aims to provide guidance on the importation and inspection of metal scrap in Malaysia. The guide details the requirements for the issuance of a COA and the metal scrap quality standards.

The purpose of importation is to manufacture in Malaysia for the production of finished products or commodities in various fields.

Starting from 2022, Malaysia has started to control imports, and the tariff codes for metal scrap are as follows:

· (i) HSCode7204：铁或钢的废料

· (ii) HSCode7404：铜废料或碎料

· (iii) HSCode7602：铝废料或碎料

As of May 1 of this year, SIRIM has expanded the tariff codes for metal scrap that controls imports, adding 23 new tariff codes. This means that a total of 26 HS (HS Codes) are now used to control the import of metal scrap. This change significantly increases the coverage of the types of metal scrap imported, reflecting the further refinement and strengthening of the Malaysian government's regulation of imports.

The quality standards for imported recycled metals are as follows:

a)HSCode7404（铜废料或碎料）

1. Solid copper scrap minimum: 94.75%

2. Solid iron and other metals are the highest: 5.0%

3. Other recyclable materials including plastic max: 0.25%

4. Hazardous solid waste, including electrical and electronic waste: 0%

Total: 100%

c)HSCode7602（铝废料或碎料）

1. Solid aluminum scrap is the lowest: 94.75%

2. Solid iron and other metals are the highest: 5.0%

3. Other recyclable materials including plastic max: 0.25%

4. Hazardous solid waste, including electrical and electronic 0%

Total: 100%

According to SIRIM, these standards are based on two key grounds:

1) Malaysia's Environmental Quality Act 2005 on Solid Hazardous Waste

2) the provisions of the Basel Convention on hazardous wastes or other wastes.

However, if you take a closer look at these two criteria, you will find that Malaysia's import policy standards are actually more stringent than those required.

Looking at Malaysia's import standards again, we can see that there are some similarities between its standards and those in China. Such an import policy essentially puts Malaysian companies on the same level and track as their Chinese counterparts. Given China's leading position in the recycled aluminium industry, this situation is undoubtedly a big challenge for Malaysian companies as a pioneer and giant in the industry. Putting Malaysia and China on the same track means that Malaysia may not even be able to reach China's shadow in the catch-up, let alone compete. This suggests that Malaysia needs to change its policy to gain a foothold in the competition.

In addition to the above stringent standards, recycled metals must also undergo an inspection process

SIRIM has set out four types of Pre-Shipment Inspections, which are usually carried out during the loading process in the shipping country, to ensure that the imported scrap metal meets Malaysian standards.

These metal inspection methods are similar to the AQSIQ and CCIC scrap metal inspections that China has implemented in the past in the country of origin. Although China has abolished such measures to some extent, Malaysia still insists on implementing the system. This actually adds an extra challenge for businesses in Malaysia, as if an extra hurdle has been added to the same track. With this import policy, we are placed on the same track, and obstacles are set up on the track.

In addition to the above stringent standards and hurdles, secondary metal importers must also possess the following qualifications:

· (i) manufacturers who have obtained a Manufacturing License ("ML") approved by the Ministry of International Trade and Industry (MITI);

· (ii) manufacturers who are exempt from manufacturing licenses ("ICA10 Manufacturers");

· (iii) A bank guarantee letter is required. As a certificate of guarantee to comply with the guidelines

Malaysia's Ministry of Investment, Trade and Industry (Miti) has imposed a two-year moratorium on wholesale manufacturing licenses. From August 15, 2023, all inquiries, evaluation of current applications, new applications, license transfers, expansion, normalization and diversification of manufacturing licenses, and certificates of exemption from manufacturing licenses (ICA10) are temporarily suspended. This suspends manufacturing activities targeting iron and non-ferrous metals, including metal recycling activities.

However, the silver lining is that this moratorium may be waived for those projects that support the New Industrial Master Plan 2030 (NIMP2030). The New Industrial Master Plan 2030 is a strategy developed by the Malaysian government to promote the country's industrial development to 2030. The plan emphasizes the importance of innovative, sustainable and high value-added industries, with the goal of improving production efficiency, promoting environmental sustainability, and strengthening the competitiveness of the value chain.

Malaysia is a key point in import and export duties on recycled aluminium and semi-finished products

1) A 10% tax rate will be levied on the export of recycled aluminum scrap. Although its imports are duty-free, as mentioned earlier, there are many restrictions.

2) The import of aluminum ingots is duty-free, and the export is also duty-free

3) The import of most semi-finished or finished aluminum materials is subject to customs duties, but the export is duty-free. These policies reflect the Malaysian government's intention to encourage the processing of raw materials into higher-value products for re-export.

epilogue

With increased global regulation of carbon emissions, including the introduction of a carbon tax system, recycled metals are an environmentally friendly and cost-effective option due to their lower carbon footprint. Policymakers should consider this and support the use of recycled metals and the development of the industry to adapt to the global trend towards a low-carbon economy.

Therefore, we call on Malaysia's policymakers to recognise this trend and adjust their policies accordingly to promote industry development and environmental protection. In this way, Malaysia will not only play an important role in the global metals supply chain, but also contribute to the domestic economy and environmental protection.

Finally, I would like to emphasize that despite the restrictions, our government, especially the Ministry of Investment, is very open to downstream industries. Malaysia warmly welcomes entrepreneurs from all walks of life. We look forward to the participation of more downstream industries to drive the demand for metal raw materials and promote the balanced development of the entire industrial chain.