Malaysia has begun to strengthen compliance management to ensure that only goods approved by the Malaysian government can be exported to the United States, in order to curb the behavior of products from non-Malaysian origin being transshipped through Malaysia.
As of Monday (May 5th), the Ministry of Investment, Trade, and Industry of Malaysia (Miti) announced that starting from May 6th, it will be the sole authority issuing Non-Preferential Certificate of Origin (NPCO) for exports to the United States, and will cease authorizing local chambers of commerce, associations, or other Miti-appointed entities to issue such certificates.
NPCO is a document that helps identify the origin of international goods to meet customs or trade requirements of the importing country.
Currently, the United States has intensified scrutiny on goods originating from China and those being transshipped through third countries to the U.S. These Chinese goods attempt to use third countries for export to disguise their true origin and avoid high tariffs imposed by the U.S. on Chinese products.
Since the announcement of “Liberation Day” tariffs on April 2nd by the Trump administration, transshipment has become a focal point in trade enforcement by U.S. customs.
The Malaysian Ministry of Trade and Industry stated in a release, “The government is committed to upholding the integrity of international trade practices,” and will take additional measures to combat improper transshipment activities through Malaysian ports to the U.S. These measures include enhancing audits of NPCO applicants and cooperating with Malaysian Customs to investigate and penalize violators.
The statement also noted, “Therefore, any attempt to evade tariffs through incorrect or false declaration, be it related to the value of goods or their origin, will be deemed a serious violation of the law.”
Local media reports have indicated that some Chinese manufacturers are using Malaysia as a transshipment hub, even forging origin certificates to circumvent U.S. tariffs. In certain instances, individuals involved can obtain forged origin certificates for as little as around 100 Malaysian Ringgit (approximately $24) for shipment to the U.S.
In response, Minister of Trade and Industry, Tengku Zafrul Aziz, stated during a parliamentary session on Monday that they have received “numerous complaints from industry partners.”
“Many items from other countries are being labelled with Malaysian tags, as if they originated from our country,” he said.
Malaysian exports to the U.S. will face a 24% retaliatory tariff in July. In contrast, the U.S. imposes at least 145% tariffs on Chinese products.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) voiced support for the actions of the Ministry of Trade and Industry, stating that Malaysia’s tariff advantage with the U.S. has led businesses to alter shipping routes and misclassify products to avoid higher export duties.
“Transshipment can distort trade data and result in dumping of foreign goods, posing a threat to the already slender profits of local small and medium-sized enterprises,” the statement said.