Labuan was declared a duty free port on 1 September 1956 under the Custom Ordinance (Amendment No. 2) 1956. Presently, all products and services except those prohibited by law are allowed to be imported, exported, manufactured, distributed and re-packaged in Labuan without any imposition of duty and taxes (except for petroleum).The relaxed custom control on the above in Labuan is ideal for the set up of various value-added logistics activities in Labuan as follows:-
Manufacturers operating in Labuan can produce goods specifically for export. Every raw material, component, packaging material, plant and equipment imported for manufacturing in Labuan is exempted from duty and taxes. Manufactured goods are also exempted from local sales tax.
Labuan has the potential to become a re-routing and distribution centre where goods may be freely imported and re-exported without any duty and taxes. This will in effect reduce the cost of re-export.
Imports of cargo and re-packaging activity can be done in Labuan for redistribution to buyer countries. Imported packaging materials are also exempted from duty and taxes. Sales tax is also exempted if local packaging materials are used.
BREAKING BULK GOODS
Imported in bulk can be broken up based on orders of buyers.
Labuan also has the facility to re-label imported goods based on customers' requirements.
These activities are ideally suited for Labuan in view of the island's strategic location within the region's sea and air routes.
INTERNATIONAL PROCUREMENT CENTRE (IPC)
IPC provides companies with multiple manufacturing facilities through-out the world to implement re-routing and sales of raw material, component or finished goods in and out of the country on a global and tax free basis. Such activities will encourage the setting up of distribution centre by multinationals in Labuan.
REGIONAL DISTRIBUTION CENTRE (RDC)
RDC is similar to IPC in that it is a collection and consolidation centre for finished goods, components and spare parts produced by one group of companies for its own brand to be distributed to dealers, importers or its subsidiaries or other unrelated companies within or outside the country. Among the value-added activities involved are bulk breaking, repackaging and labelling.
Labuan also offers barter trading facilities which was widely used in the 1970’s and 80’s to cater for traders from the Southern Philippines.