A licensed warehouse is a building or secure area that store imported dutiable goods in which payment of customs duties is deferred until such goods are taken out to be exported or sold locally. Operators of licensed warehouse must obtain a license under Section 65 of the Customs Act 1967 from the Royal Malaysian Customs Department (RMCD) before commencing operations. The function of licensed warehouses was expanded to allowed operators to use it as a storage and distribution centre for international and domestic trade. Among activities permitted in a licensed warehouse are warehousing dutiable goods; break bulking; re-packaging; re-labelling; buying and selling; consolidation/merger; and entreport trade (that is importing goods to be processed or stored and reexported). For the year 2012 to 2014, revenue collected by RMCD through public and private licensed warehouses amounted to RM3.922 billion. As at 31 December 2015, a total of 64 (18.1%) from 353 public and private licensed warehouses were involved in warehousing of liquors and cigarettes.
The audit performed from May to September 2015 at Warehousing Management and Control Unit, Trade Facilitation and Industry Branch, Customs Division, RMCD Headquarters; Industry Branch/Unit, State Customs Department; and 43 (67.2%) public and 4 7 private licensed warehouses for liquors and cigarettes in 5 states (Federal Territory Kuala Lumpur, Perlis, Johor, Sabah and Sarawak) revealed that generally, the management and controls of public and private licensed warehouse for liquors and cigarettes were satisfactory. Audit findings also revealed that 26 (96.3%) out of 27 public and private licensed warehouses visited were conducting permitted activities and dutiable goods were labelled and stored properly within licensed areas. In addition, all 5 State Customs Department audited had proper controls on the transfer of dutiable goods from/to licensed warehouse as well as to Duty Free Island of Langkawi and Tioman. However, some of the weaknesses identified are as follows:
i. Federal Territory Kuala Lumpur Customs Department and Perlis Customs Department did not determine the correct value of bank guarantee for 3 Private Licensed Warehouse resulted customs duties amounting to RM14.06 million were not covered by bank guarantees to safeguard Government‟s interests;
ii. RMCD did not claim customs duties amounting to RM2.10 million from 6 Private Licensed Warehouse with dutiable goods stored more than 2 years without approval of extension of time;
iii. transfer of dutiable goods did not comply with the stipulated procedures such as:
four Private Licensed Warehouse in Perlis did not comply with the additional requirement of 4 8 preparation and submission of monthly balance statements (containing particulars of exports and proof of payment from importers in Thailand); and
four Private Licensed Warehouse in Johor involved in ships supplies with customs duties amounting to RM20.27 million for a period of 3 years. However, no evidence to confirm whether the transfer of dutiable goods from all four Private Licensed Warehouse were escorted by Customs officers to the ships for the purpose of sealing the ships‟ stores; and
iv. weaknesses in monitoring by State Customs Department such as:
a total of 41 (95.3%) from 43 licensees did not submit annual stock statements verified by Certified Auditors;
for a period of 3 years, State Customs Department only carried out 68 (54.8%) out of 124 times annual 100% physical examination; and
from 26 public and private licensed warehouses visited, one Private Licensed Warehouse had expired dutiable goods with duties amounting to RM238,433.