Vendor Managed Inventory Scheme to begin in Thilawa SEZ

“Vendor Managed Inventory” (VMI) scheme will begin its operation in Thilawa Special Economic Zone (Thilawa SEZ), allowing alternative method for non-resident foreign companies to distribute their products into Myanmar. Such instruction about the new scheme was issued by Thilawa SEZ Management Committee on 7th October 2016. Warehouse operators in Thilawa SEZ will be required to apply for SEZ Warehouse Certificate by fulfilling the criteria specified by Thilawa SEZ Management Committee.

The export oriented Free Zone investors in Thilawa SEZ are deemed to be situated outside of Myanmar, and are therefore exempted from customs duty and other import related taxes for their import of raw materials and products required for their production. Under the new vendor managed inventory scheme, Thilawa SEZ Management Committee will also permit storage of “cargo held on account” owned by non-resident foreign companies.

This will allow non-resident foreign companies to stock their goods in transit for storage in a free zone warehouse pertaining to the temporary storage of cargos from a foreign supplier without paying duties and other taxes until such time that these cargos are withdrawn for consumption in Myanmar or shipped outside of Myanmar.

Warehouse operators must obtain SEZ Warehouse Certificate from SEZ Management Committee in order to provide such service. According to the instruction, criteria for their approval include; a dedicated office space for the Customs Officer, CCTV Camera, physical separating units between free zone and promotion zone storage area and 24 hour security guards. As free zone area is deemed to be out of Myanmar, it has no restriction on the storage period for cargo held on account. For domestic cargo stored in the promotion zone warehouse, the maximum storage period is three years.

Tax benefits & reduction in lead time

Vendor managed inventory scheme is especially beneficial for import of goods with high duties and other taxes for the purpose of delaying payment of duties until the goods are sold from local distributors to the end users. There are also benefits in not requiring import licenses when forwarding the goods into SEZ Warehouse, which means no more problems with penalty fees to be paid at Yangon Port.

These benefits will apply to, for example, the storage of brand new vehicles which has been approved as “regulated cargos”. “Regulated cargo” indicate any cargos which require special clearance as may be prescribed under relevant laws in Myanmar, or by relevant authorities of Myanmar for the import into Myanmar, which includes 4-wheel and 2-wheel vehicles, regulated food products, pharmaceutical products, alcohol, tobacco, cigarettes, and other products.

Trading companies with numerous buyers in Myanmar may utilize this scheme for importing large volume of grain or raw materials into Thilawa SEZ followed by assorting, packaging and selling to the local market in accordance with the needs of each individual buyer in Myanmar. This will lead to a reduction in logistics cost in comparison to importing separately for individual buyers in Myanmar.

The benefit of the scheme also includes much shortened lead time compared to the conventional method of selling goods to local distributors from stock points in Japan, Singapore, Malaysia and Thailand. Local distributors can benefit considerably by shifting their stock to the supplier’s side in Thilawa SEZ minimizing their necessary stock level without causing any stockout.

Brand new distribution channel in Myanmar for foreign suppliers.

“This scheme gives non-resident foreign companies an alternative distribution method for their products regardless of whether the companies are registered in Myanmar or not.

We are excited to see this progression since we believe this will accelerate the economic development of Myanmar”, says Tomoaki Yabe, the managing director of Daizen Myanmar; one of the total logistics solution provider based in Thilawa SEZ.

Source: The Global New Light of Myanmar

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