The Spices Industry in Malaysia

Spices are dried parts of natural plants which are aromatic and the color, constitution and other characteristics varied among spices and relied on time, place of harvest and other factors (Takemasa and Hirasa, 1998). Malaysia is diverse in agricultural products that yield various kinds of spices. Those spices included black and white peppers, clove, cinnamons, curry powder, capsicum and pimenta fruits. There are 282 hectares of land in Peninsular Malaysia used for the purpose of plantation of herbs and spices in year 2006 (DOA, 2008). Nevertheless about 4,720 hectares of land in Malaysia used for plantation of spices in year 2007 and increased to 4,835 hectares in year 2008 (DOA, 2008). Increment of land usage in spices plantation implied the development of spices industry. Increased demands of Malaysian spices that lead to the action of explore new hectares of land for spices plantation.

The most developed spices industry in Malaysia is pepper industry. Malaysia is the 5th major exporter of pepper to worldwide after Vietnam, Brazil, Indonesia and India. Malaysia had been exported total amount of 90,895 tonnes in five years within 2005 to 2010 (Malaysia Pepper Board, 2010). Instead of international market, domestic demand upon pepper was also raised to about 6,000 tonnes in year 2010 when compared with the 2008 domestic comsumption which was 4,500 tonnes (Wong, 2010).

1.1 Statistic of Exportation

Each year, Malaysia spices have progressive statistics of spices exportation. There are many countries importing Malaysian spices and the demand increases annually. Those countries included Japan, Singapore, Thailand, South Korea, United States, Indonesia and China. Within year 2000 to 2007, increasing trend of export qualities of spices in Malaysia have been observed, which is from 12,043.25 kg in year 2000 to 115,035.00 kg in year 2007. This had impacted valuable revenue to the industry with the proximate amount of RM 1,604,967.00 in year 2007 (Globinmed, 2011).

1.2 Demand of Japan upon Malaysian Spices

Japan has high demand upon Malaysian spices, especially black pepper and white pepper. In year 2010 (January to June), about 22.9% of Malaysian pepper were exported to Japan (Malaysia Pepper Board, 2010). Japan is also one of the major importing countries of other Malaysian spices, such as cinnamon (HS 0906), piper, capsicum and pimenta fruits (HS 0904), clove (HS 0907), cumin fruit (HS 090930), nutmeg (HS 090810) and curry powder (HS 091050). The total volume of importing certain Malaysian spices in Japan for year 2004, 2005 and 2006 are tabulated in Table 1.

Table 1: Total Volume of Certain Spices Imported by Japan and Exported by Malaysia for Year 2004, 2005 and 2006.

Total volume of Japan

Importation (kg)

Total Volume of Malaysia Exportation (kg)

2004

2005

2006

2004

2005

2006

Cinnamon

(HS 0906)

12,035

44,490

45,843

215,045

188,990

190,212

Piper, Capsicum & Pimenta Fruits

(HS 0904)

4,068,228

4,254,528

5,122,711

45,563,109

37,876,867

38,483,009

Clove

(HS 0907)

8,016

6,024

7,500

139,526

414,244

100,630

Nutmeg

(HS 090810)

4,850

0

3,440

63,626

57,044

212,288

Cumin Fruit

(HS 090930)

0

0

800

72,420

6,350

58,075

Curry Powder

(HS 091050)

100,459

31,497

11,452

1,384,707

1,709,023

1,813,685

Sources: globinmed.com.

Since the demand of Malaysian spices in Japan is high, understanding of the relevant importation regulations and requirements of spices in Japan is necessary among Malaysia exporters. Comprehension of relevant regulations and requirements is crucial to avert cases of rejection and recall. It is also for the purpose to maintain demand of Japan and exportation volume and consequently improving the economy nationally and reputation globally.

2.0 Summary of Importing Procedures of Spices in Japan

The procedures of importing spices in Japan is basically similar to other countries. The involvement of acts and laws in Japan differentiated the requirements of Japan upon importing spices with other countries.

Arrival of Cargo

Delivery to Bonded Area

Custom Clearance Procedures

Import Declaration

Examination/Inspection at Customs

Payment of Customs Duty, Consumption, tax and other expenses

Collection of Cargo

Distribution and Sales

For spices in bulk, sub-divided process is done by JAS certified sub-divider and re-append of JAS mark is done.

For spices in retails form, the labeling must accordance to JAS law.

Notification and inspection under Food Sanitation Law and Plant Protection Law

JAS – Quality Labeling Standard

Can only be done by organizations that have been certified by Registered Certifying Bodies.

Figure 1: Flowchart of Relevant Procedures of Importing Spices in Japan

Figure 1 shows the necessary steps for the exportation of spices to Japan. Exportation of spices from Malaysia to Japan divided into 2 categories, which is in bulk and in retail packaged form. For both categories, the spices should be labeled with JAS marks by the producers themselves with condition being certified by the JAS Registered Certifying Bodies. Without JAS certification, the labeling process can be only done by registered grading organization.

When all the Malaysian spices arrived in Japan, it will be delivered to bonded area or quarantine area, where all the spices will undergo custom clearance procedures. Under the custom clearance procedures, import declaration and notification from the exporter are required. Besides, all the spices will undergo inspection under Food Sanitation Law and Plant Protection Law. After the inspection of the spices, the exporter required to pay the customs duty, consumption, tax and other expenses.

After the custom clearance procedures, the spices will be released. The released spices will then being distributed and sold. For spices that imported in bulk, sub-divided process is done to divide the spices in small packaging for distribution. The sub-divided process can be only done by JAS certified sub-divider. The JAS mark will be re-append by the sub-divider. For spices that imported in retails form, the labeling must accordance to JAS law.

3.0 Customs Clearance Procedures

3.1 Import Declaration

Importers of spices have to make declaration to the Director-General of Customs and obtain an import permit after examination of the goods concerned. Declaration details include the quantity and value of goods as well as any other required particulars. Upon necessary inspection, document reviews and confirming payment of Customs duty and excise tax, an import permit will be issued for the approval of importation. Importers of spice are required to submit Import Declaration Form and following documents in triplicate.

Invoice

Air Waybill

Certificate of origin

Packing lists, freight accounts, insurance certificates if necessary.

Licenses, certificates required by laws and regulations other than customs-related laws

Customs duty payment slips (when spices are dutiable)

In Japan, spices fall into group of ‘import restrictions’ under various domestic laws and regulations. Exportation of spices into Japan is subjected to three main relevant regulations: Plant Protection Act, Food Sanitation Law and JAS Law. For example, as enforced by Food Sanitation Law, importers of spices are obliged to submit import notification to a quarantine station of Minister of Health, Labour and Welfare. Importers of spices must submit import notification before the end of custom clearance procedures. If the cargo was imported without import notification, the cargo will not be able to use for sale or for business purposes.

Acceptance of import notification is followed by items validation or document examination executed by food sanitation inspector. The judgement will be made based on the information reported in the Notification Form, such as the country of export, imported items, manufacturer, the place of manufacture, ingredients and materials, methods of manufacturing and use of additives. For cargo that ‘passed’ the inspection, a certificate of notification would be issued from quarantine station and given to importers.

3.2 Customs Duty Rates

Importations of spices from Malaysia into Japan are bound to Customs duty and consumption tax. Tariff rates of spices importation into Japan are varies for each product category according to raw processing method, shapes or ingredients. Normally, every particular product have different tariff rate which harmonized and classified by General Rate. However, the actual applied rate could be prevailed by Temporary Rate under Temporary Tariff Measures Law.

Nevertheless, Japan and Malaysia are partner countries for Economic Partnership Agreement (MJEPA) since year 2006. An effort to enforce trade activities, a preferential tariff treatment (EPA Rates) was established by Japan government for goods imported from Malaysia. Besides the customs duty, exportation of spices to Japan also subjected to consumption tax at rate of 5% in general. The amount of consumption tax payable on imported spices is calculated on the basis of the Customs value of the goods plus Customs duty payable.

3.3 Custom procedures for EPA

Malaysia’s exporters of spices who claim EPA rates are required to fulfil the Rules of Origin (RoO) and submit a Certificate of Origin (CoO) to Japan Customs at the time of import declaration. However, a Customs Commissioner would accept ex post facto submission of a certificate of origin in the event of inevitable occurrences or when importation before payment system is approved. The Rules of Origin is a criterion that determines the nationality of a product. Spices products being exported must be wholly obtained from or have undergone substantial transformation in Malaysia, in order to enjoy the preferential treatment. The transformation is considered in term of change in tariff classification or the percentage of contents originating from Malaysia or meeting certain process requirements.

Based on the RoO of EPA, the certificate of origin shall be issued after exporters’ application at the time of exportation of the good in order to certify that a good is originated in the Partner country. In Malaysia, a CoO is issued by the Ministry of International Trade and Industry Malaysia (MITI). The certificate will enable the importers in Japan to claim for tariff preferential treatment under MJEPA and valid for 12 months from the date of issuance. For spices goods that transported through one or more non-Parties for the purpose of transit or temporary storage, exporters have to submit Bill of Lading or other related documents to claim preferential treatment under EPA rates.

3.4 Authorized Importers’ Program

Authorized importer’s program is one type of comprehensive Authorized Economic Operator (AEO) concept developed by Japan Customs authority, which included in Standards to Secure and Facilitate Global Trade (SAFE) Framework initiated by World Customs Organization (WCO). The purpose of AEO in Japan is to simplify Customs procedure and to less Customs intervention as well as supply chain security standards for any party involved in the international movement of goods.

This program provides Authorized Importers with benefits such as compliance-reflected reduced examination and inspection, and allowed in pre-arrival lodgement of import declaration and permission, release of cargoes before duty/tax payment declaration and duty/tax payment, and periodical lodgement of duty/tax payment declaration. Besides that, another program in AEO that facilitate importers from foreign countries is Authorized Customs Brokers. If a non-authorized importer delegates its import declaration to an Authorized Customs Broker, release of goods is allowed before duty/tax payment declaration and duty/tax payment.

Figure 2: Lodgement of Import Declaration.

Source: Customs & Tariff Bureau, Ministry of Finance, Japan.

3.5 Requirements to be an Authorized Importers

The eligibility and requirements to be an AEO are consistent with the standards included in the “SAFE Framework” adopted by the WCO. There are four core elements: appropriate compliance records, capability to use e-system for Customs procedures, capability to conduct related operations properly and establishment of a compliance program.

Appropriate compliance records refer to proper records of Customs and trade related compliance no any violation against Customs Act over a designated period. Next, eligible applicant should cover the capability to take advantage of e-system, NACCS (Nippon Automated Customs Clearance System) for Customs procedures. Applicant should capable in conducting related operation properly for instance, capability to control cargoes securely and capability to maintain a good financial standing or financial integrity. Establishment of a compliance program (CP) mean a CP organization and capability to maintain the operation in conformity with the CP. An extensive CP shall cover up the security standards as an important element.

The building blocks included in a CP are organizational setup, contracting parties’ requirements, cargo or premises security, due customs procedures, consultation/cooperation/communication with Customs, crisis management, education or training, and internal audit. Currently Japan Customs has been conducting studies with her major trading partners, including Malaysia to achieve a mutual recognition to maximize the compliant stakeholders. There are two obligatory elements for facilitating mutual recognition. One is proper IT system for Customs procedures to operationally realize mutual recognition and the other is the steady and well-functioning channel for information exchange for smooth implementation.

4.0 Plant Protection Act

Plant Protection Act is applied at the custom quarantine stage. Exporters have to abide and fulfill the Plant Protection Acts in order to export plant products to Japan. The purpose of Plant Protection Act is to ensure the safety and promotion of agricultural production through the quarantine on imported, exports and domestic plants as to control animals and plants injuries to plants and prevent them from spreading. Spices are compulsory to go through inspection under Plant Protection Act.

4.1 Procedures of Exportation involves Plant Protection Act

Below is the brief procedure for the plants export which involves Plant Protection Acts:

Application for export plant inspection.

Export inspection and sterilization subject to the requirements of import country (Japan). (Export inspection, Field inspection, laboratory tests for detecting virus, confirmation of sterilization)

Conformity with the requirements of import country (Japan).

Issuance of plant phytosanitory certificate after the inspection passed.

Plant quarantine is held except for import-banned items and items exempt from quarantine.

Application for import inspection.

Import inspection.

Agricultural products imported for both with or without permits or Phytosanitory Certificates are subjected to inspection by Plant Quarantine Officers upon arrival. There are three classifications of plants and plant products, which are items subject to quarantine, items not subject to quarantine, and import-banned items. Plant quarantine is held upon arrival of the spices except for spices or spice products that are in the category of import-banned items or items not subject to quarantine.

In the category of import-banned items, any spices and spice products that attach by soil or spices which serve as host for the pests that have not been introduced by Japan, technically difficult to discover in an import inspection, no availability of practical control measures to combat them, and have the potential in causing serious damage to agricultural crops if introduced have to be listed as banned items. For the examples, one of the quarantine pests for turmeric and ginger is Banana burrowing nematode (Radopholus similis). However, spices fall under this category may be imported if importer can prove that actions have been taken to prevent the spreading of pests, such as proof of disinfecting technology or proof that no outbreak of pests has occurred in the region of origin which is Malaysia. Those actions have to satisfy the standards for disinfection prescribed by the Minister of Agriculture, Forestry and Fisheries. Besides, for some quarantine pests which are technically difficult to detect at the point-of-entry inspection, the host plants are required to undergo phytosanitory inspection in the field during the growth period in exporting countries. It will not be allowed to enter Japan if does not accompanied with due certification to show that they have undergone growing site inspection in exporting country. Whereas, spices in the category of items not subject to quarantine and can be exempt from import inspection are depending on their process and packaging. Dried spices canned are under this category.

Spices that fall under category of items subject to quarantine must be inspected and must obey the rules to import inspection requirements. Importers must first submit the designated Plant or import-banned item import inspection application form and a phytosanitory certificate issued by governmental agency in the country of export to the Plant Protection Station to apply import inspection. Whereas, exporters need to prepare a phytochemical certificate, which in the format stipulated by the International Plant Protection Convention issued by governmental agency in the country of export and other relevant documents.

Spices can be imported by the means of freight, personal luggage, and parcel post. Plant Protection officer will carry out ordinary port-of-inspection. Inspection on cargo shipments is carried out on board, warehouse, and container yard or log yard. For hand luggage, the quarantine will be conducted in customs at the entry port, and for parcel matters, the inspection is done at the customs house in the presence of postal clerk. Post–entry-quarantine is carried out to check for harmful pests and viruses which cannot be detected in the ordinary port-of-entry inspection.

4.2 Restriction and Prohibition on Importation

The restriction stated in Article 6 is imported spices (excluding plant that are not used for cultivation and those with little possibilities of quarantine pests being attached) and their containers or packages shall not be imported without a phytosanitory certificate or its copy issued by the governmental organization of the exporting country to state that quarantine pests is not attach to these spices. It shall not apply to the plants and containers or packages imported from countries without governmental organizations for plant quarantine or if the matters to be stated in the phytosanitory certificate or its copy are transmitted from the governmental organization of exporting country to an electronic computer used by the plant protection station by the way of a telecommunication line and are recorded in a file stored in such electronic computer. Besides, spices sent from areas that need to be inspected at their place of cultivation shall not be imported except if the inspection of the area of cultivation is carried out and has conforms no attachment of quarantine pests. They shall not be imported at any place other than ports and airports except if they imported as postal post. Small packages and postal items other than parcel shall not be imported.

The prohibition on importation from this Acts (Article 7) is spices which contain quarantine pests, soil or plants which soil attached, and containers or packages of goods listed above are prohibited. Both restriction and prohibition on importation is not applicable on the statement which has the permission of the Minister of Agricultural, Forestry and Fisheries.

4.3 Plant Epidemic Inspection

Importers shall notify the plant protection station about the importation of spices without delay and shall receive an inspection of the present state of those spices by the officer (Article 8). It does not apply to spices that have received an inspection on cultivated area and those that are imported as postal items. The inspection shall be carried out in the port or airport and the officer may inspect imported spices and containers or packages in vessel or aircraft prior to importation if they think that it is necessary to do so. If the officer thinks it is necessary to judge after the inspection at port or airport, they may order the owner of spices to carry out an isolated culture and may inspect them at the place of cultivation. If quarantine pests are found, the officer shall disinfect or destroy the particular spices and containers or packages or order the ownership of these spices to destroy them in the presence of the officer. The Plant Protection officer may destroy or ask the owner under supervision of the Plant Protection officer to destroy those spices that imported in the violation of Article paragraph 1 through paragraph 5 of Article 6 (Restriction on Importation) or paragraph 1 or 6 of Article 8 (Inspection of Imported Plants). The spices imported in the violation of Article 7 shall be destroyed. If the spices and containers or packages do not fall under the Prohibited Imports nor contain any Quarantine Pests, the officer shall certify the pass of the inspection. These methods and procedures of inspection and the standard of disposition shall be approved and publicly announced by the Minister of Agriculture, Forestry and Fisheries.

4.4 Restriction and Prohibition on Transfer and Loading

According to Article 16-2, spices and their container or packages which need to be restricted to prevent the spread of injurious animal or injurious plants shall not be transfer to other areas except it is approve by Ministry of Agriculture, Forestry and Fisheries, and the results of an inspection carried out prove that it does not contain injurious plant and animal, or it has been disinfected according to the standards. Article 16-3 stated that plants (spices), injurious animal or injurious plants or soil within an area that need prohibition on transfer to other area same as the purpose of Article 16-2, shall not be transferred to other areas except with the permission of Ministry of Agriculture, Forestry and Fisheries for the use in test and research. The officer may order person who own or administrate these spices not to load or unload nor bring in to vessels, vehicles or aircraft according to Article 16-4.

4.5 Plant Quarantine Procedures

The diagram of Plant Quarantine Procedures is shown in Figure 3. If foreign pests detected, the relevant products would be refused to enter the country. Three alternative steps would be undergone: disinfestations, destruction or reshipment depended on the seriousness of the case.

Disinfestation

Application for import plant inspection

Quarantine pests detected

Free from quarantine pests

Entry refused

Inspection passes

Destruction

Reshipment

Issue of plant quarantine certificate

Import inspection

Figure 3: Plant Quarantine Procedures.

5.0 Food Sanitation Law

Food Sanitation law is purported to prevent the incidences of health hazards resulted from human consumption on food.

5.1 Import Notification

Importer should notify the Minister of Health, Labour and Welfare regarding the importation of spices. In this case, importer of spices should submit an import notification to the director of the quarantine station before the cargo is carried into the entry of cargo, on or after the seventh day before the estimated arrival date of the cargo.

The items to be stated in the Import Notification includes the name and address of the importer or name and address of the main office (if the importer is a corporation), the classification of the cargo as a food, the product name, the amount and weight of the cargo, the type and purpose of the packing method, the time when the cargo is marked with a code, ingredients and the processing method, the name and address of the manufacturer of the cargo or its name and the address of the main office(if the importer is a corporation), the name and address of the production place of the cargo containing spice, the shipping port, the shipping date, the unloading port, the arrival date, the vessel name or the flight number of the aircraft carrying the cargo, the name and address of the warehouse for storing cargo and the entry date of the cargo.

5.2 Inspection Requirements

Spice in rotten and decayed condition, containing toxic materials, contaminated or suspected to be contaminated with pathogenic microorganisms and or added with extraneous materials which may pose hazards to human health upon consumption is prohibited to be imported into Japan. Imported spice shall contain pesticides, which are not exceeding the established residue limits. Imported spices intended for sale should not be packed in the packaging or container containing materials toxic and harmful to human health.

Importer shall put in efforts to obtain techniques in ensuring the imported spice safety, safety of the raw materials of the spice and practice of self-imposed inspection. Handling of imported spices made for sale shall be in hygienic and sanitary conditions. An importer may be instructed by Minister of Health, Labour and Welfare to undergo inspection for the spices provided that the importer had previously produced and imported the spices in the conditions of containing toxic materials, either contaminated or suspected to be contaminated with pathogenic microorganisms and containing pesticides, which exceeded the established limit.

6.0 Quality labeling system by Japanese Agricultural Standard (JAS)

Every food being imported into Japan either processed food, fresh food or genetically modified food has to be label according to what stated in the Japan Agriculture System (JAS). JAS had come out with a mandatory standard for quality labeling for all the manufactures to comply, in order to educate and provide information for the consumer regarding the product or food they are consuming. JAS did not make it mandatory for labeling if the processed foods are trades among the dealers before putting it up at the shelves for the consumer. The purpose of this Quality Labeling System is to gain consumer’s confidence in food they are buying through product labeling. On top of that, the standards are tools for manufactures to comply to prevent deceptive and misleading labeling practices.

6.1 The Quality Labeling standard

The importation of spices by Japan from Malaysia require the Malaysian manufactures to comply with their local standards of labeling before it can be sold to the ultimate consumer. The product that are to be export by Malaysia exporters to Japan are the local spices. These local spices are either in dried seeds form or in powder form. Under the quality labeling standard both the dried seeds and powder form of pepper are classified as processed food.

According to the Quality labeling Standard it is stated in the first Article (article 1) that: “This standard shall apply to all processed foods. Processed foods for non-institutional use are limited to those in containers or packages”. On top of that, the statement in the second Article (article 2) define Spices (black pepper, white pepper, red pepper, cinnamon, clove, nutmeg, saffron, bay leave, paprika, all spices, Japanese pepper, curry powder, mustard powder, “wasabi” powder, ginger and other spice) are processed food. Hence, spices that exports from Malaysia into Japan are classified as processed food and shall comply the Quality Labeling System.

6.1.1 The labeling format and rules of the Quality Labeling System

The label has to label in an identified place where it shall be label on the container or package with transparent wrapping pepper or just label it without covered by the wrapping paper or box.

Colors of letters and frames shall be in contrast with the background

Font size has to be uniform and no less than 8 point. For packaging approximately 150cm3 font size of 5.5 may be used.

Prohibited to use any letters, pictures, photographs or other labeling which will give erroneous impression on the contents.

Prevent from stating the name of place which may mislead the place of origin.

Avoid wordings which conflict with labeling.

6.1.2 Basic mandatory labeling item under Quality Labeling System

In the Quality Labeling System, third article (article 3) stated that only food that sold directly to the consumer or being sold and eaten or drink at the facilities need not to be label. Other than that, items are subject to mandatory labeling under the Quality Labeling system.

Manufactures, processors/packers, importers or distributors have to label the following items on their containers or packages of the processed food:

Name of the food

The name used has to be a generic name which can be easily understandable and expressing the product content.

Names of the Ingredients of the food

The ingredient as well has to be label with the most generic name and write it in the descending order by weight.

Net contents of the foods.

Net contents have to be labeled with weight in grams or kilograms, volume in milliliters or liters, and quantity in numbers with a clear indication of the unit.

Best before

Items those are perishable that which has to be consumed immediately after manufacture shall be label “use-by” instead.

The standard 4 ways to write the date of best before or use-by are as follow:

平”12年4月1日

12.4.1 or 120401

2000.4.1or 20000401

00.4.1 or 000401

Storage instruction

It should be labeled according to the property of the products. Eg, “Avoid the direct sunshine and store at the normal temperature”, “Keep at cool places”

Name or trade name and address of manufacturer

The name and address of the manufactur