Case Study: Engineering Firm Cut Import Costs by Specific Duty Exemptions
Background:
The client, a reputable engineering firm, specializes in the design, development, manufacturing, and supply of products and services across various sectors, including Defense and Aviation. As a registered government supplier, they are eligible to apply for duty and tax exemptions on goods imported for government projects. However, challenges arose when purchasing goods through a third-party company recognized by overseas suppliers, complicating customs clearance and preventing effective utilization of available exemptions.
Challenges:
Challenge 1: The client was unable to directly apply for duty and tax exemptions on goods purchased through the third-party agent, resulting in unexpected import costs.
Challenge 2: The government agency overseeing the importation did not acknowledge the need for duty and tax exemptions on government-imported items, leading to financial losses.
Compliance Issues: Miscommunication regarding eligibility for duty exemptions posed compliance risks, potentially affecting future government contracts.
Operational Complexity: The reliance on a third-party agent created additional complexities in the import process, complicating the client’s ability to manage costs and compliance.
Solution:
Baryk Partners provided a comprehensive solution to address the client’s challenges through the following strategies:
Customs Compliance Strategy: We developed a tailored customs-certified operational movement that allowed the client to indirectly manage the importation process and apply for necessary duty and tax exemptions.
Establishment of a Marketing Office: We registered a marketing office inside the free zone, enabling the client to conduct trade activities within the zone while benefiting from free duties and taxes. The third-party company sold the goods to the marketing office, from which the client purchased the items before importing them into Malaysia.
Government Exemption Applications: We applied for the government exemption for duties on behalf of the client and obtained the sales tax import certificate, qualifying them for sales tax exemption. This approach allowed the client to import goods tax-free and supply them to government agencies.
Training & Development: Baryk Partners conducted training sessions for the client’s team, educating them on the customs exemption process and enhancing their ability to manage compliance effectively.
Results:
Through the intervention of Baryk Partners, the client achieved significant improvements:
Compliance Rate Improvement: The client saw improvement in compliance regarding duty and tax exemption applications after implementing the new strategy.
Cost Savings: The firm experienced a reduction in import duty costs by 40%, translating into substantial savings on government contracts.
Efficiency Gains: Operational efficiency improved, with a reduction in processing times for customs clearance.