The Ministry of Planning and Finance (“MOPF“) recently issued two important notifications affecting businesses engaged in Cut-Make-Pack (“CMP”) operations in Myanmar. Notification 77/2024 dated 13 November 2024 (“Notification 77”) provides exemptions on customs duties and taxes on the importation of raw materials and packing materials used in CMP operations, while Notification 75/2024 dated 13 November 2024 (“Notification 75”) outlines the procedures for claiming these exemptions.
Effective 1 December 2024, these updates are expected to provide operational benefits while presenting new compliance requirements for CMP businesses.
We provide the key highlights of these notifications.
Scope of Exemption
The exemptions apply to the importation of raw materials and packaging materials used for CMP operations, provided the finished goods are re-exported in compliance with the notifications. Under Notification 75, the term ‘raw materials’ refers to raw or partially finished goods imported for producing finished goods, which are subsequently re-exported under the CMP framework. Meanwhile, the term ‘packaging materials’ refers to materials imported for packaging or supporting finished products intended for re-export after CMP production.
These notifications do not specifically address duties and import tax exemption for CMPs registered with the Myanmar Investment Commission (“MIC”). However, they are consistent with the provisions of Section 77(b) of the Myanmar Investment Law, which grants exemptions or relief from customs duties and internal taxes on imports of raw materials and semi-finished goods used by export-oriented businesses for manufacturing export products.
Timeline for the Re-export of Finished Goods and Extensions
Under Notification 75, finished goods must be re-exported within one year from the submission date of the Import Declaration form for raw materials and packaging materials.
If re-export cannot be completed within the timeframe, the CMP contractor must request for an extension from the Director General of the Customs Department at least two months before the deadline. Upon approval, the Director General may grant an extension of up to one year, with a maximum of two extensions allowed.
Documentation and Record-Keeping
Notification 75 specifies the required documents for importing raw materials and packaging materials, as well as exporting finished goods. These include the import declaration form, import/export license, invoice, packing lists, contracts, purchase orders, endorsement letter from the relevant ministry (as applicable), and other specified forms. It also details the schedules to be submitted during import and export processes and maintained for tracking raw materials and packaging materials.
As part of the compliance procedures, CMP contractors should:
- Retain import and export-related documents for seven years, as required under the Sea and Customs Act.
- Maintain prescribed forms (Schedule 3 and Schedule 4) for raw materials and packaging materials.
- Submit details of the closing balance of raw materials (Schedule 6) and packaging materials (Schedule 7) to the Customs Department by February of each year, or the second-to-last month of the Myanmar financial year.
- Notify the Customs Department of changes in the quantity or standards of raw materials used per unit of production.
Repayment of Duties and Taxes (Including Penalties)
Exempted customs duties and import taxes must be repaid, along with penalties, in the following cases:
- Domestic sale of finished goods due to failure to meet quality standards;
- Domestic sale of imported raw materials and packaging materials;
- Re-exported finished products rejected by the receiver and subsequently re-imported for domestic use; and
- Failure to provide documentation for export of finished goods, the approved disposal of goods, or the utilization of raw materials in the production process.
Exemption for Damaged Goods Due to Force Majeure
CMP contractors may request an exemption from repaying duties and import taxes from the Director General of Customs Department for goods damaged due to force majeure, provided they are inspected and confirmed by a physical inspection team from Customs.
Exemption for Disposal of Goods
CMP contractors may request an exemption from repaying duties and taxes from the Director General of the Customs Department for disposing of raw materials, packaging materials, or finished goods instead of using them domestically. To avail this exemption, CMP contractors should:
- obtain approval from the MIC and the MOPF;
- ensure disposal complies with Environmental Protection Requirements and occurs in the presence of a physical inspection team;
- provide a detailed list of the goods to be disposed of, using the prescribed form (Annex-8); and
- bear all disposal costs.
Compliance Requirement
Non-compliance with customs procedures for CMP operations will result in enforcement actions under the Sea Customs Act and applicable laws. Customs Notification 28/2024 dated 13 November 2024 stipulates fines ranging from 2% to 20% of the assessable customs duties, depending on the duration beyond the expiry date, in case of extensions after the prescribed term. Meanwhile, the penalty for domestic use of materials for goods imported under CMP procedures is equal to the assessed value plus duties and taxes for those materials or goods.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
