Malaysia and Indonesia have a lot in common. Both are known as Tiger Cub Economies,1 meaning they have the potential to become Tiger Economies like Japan or South Korea. Both countries also have large Muslim populations, meaning that products that appeal to most Indonesians also have high chances to appealing to most people in Malaysia too.
Malaysia’s economy is currently a force to be reckoned with. Compared to its neighbours, Malaysia is the third most prosperous nation in Southeast Asia,2 with a GNI per capita of USD 9,690, a sharp increase from 1981’s figure of USD 1,930.3 It’s a country that is on track to become a developed nation and it’s seeing a massive increase in the middle class, which brings along with it an increased demand for retail and eCommerce.4
With Indonesia sharing ocean borders with Malaysia, there’s plenty of action on the supply chain front as well. Sea freight within Southeast Asia is noteworthy as most major Southeast Asian international sea freight hubs are comparatively close to one another, allowing intra-SEA sea freight to arrive at relatively faster speeds compared to other major trade lanes like the USA to China.
For businesses in Indonesia looking to tap on Malaysia’s comparatively similar tastes to Indonesians, it’s good to know how sea freight works and how it can fit into your supply chain.
How Does Shipping Sea Freight from Indonesia to Malaysia Work?
Shipping with sea freight, or ocean freight, generally follows these steps:
- Collection – Your shipping company collects the goods from your origin address. This could be your supplier’s address or your own warehouse in Indonesia.
- Origin Customs – Your goods are transported to the port and is cleared for export by Indonesian Customs
- Loading – If your goods are Less-than-Container-Load (LCL), your shipment will be consolidated in a container with other businesses’ shipments. If they’re Full-Container-Load (FCL), the whole container is reserved for your shipments. While Indonesia has 7 international ports, the busiest port is Port of Tanjung Priok (IDTPP) in North Jakarta.
- Mid-mile – The shipment is sailed to Malaysia.
- Destination Customs – Once the shipment reaches Malaysia, they will be processed by Malaysian Customs. Peninsular Malaysia’s main port is Port Klang (MYPKG).
- Unpacking (LCL) – For LCL goods, they’ll be unpacked from the shared container then loaded onto vans or trucks to prepare for the last mile delivery.
- Last-mile delivery – After unpacking, or if your goods are FCL and use only a single mode of transport, the shipments will enter this stage to be transported to your destination.
Collection in Indonesia
The way your sea freight order will be handled, containerised, and charged will change depending on whether yours is a full-container-load (FCL) order or a less-than-container-load (LCL) order. Usually, logistics providers and freight forwarders like Janio will help advise you on which method you should use depending on your order’s requirements.
Should I ship by LCL or FCL?
Shipping with an FCL order means you’ll pay for the whole container to transport your goods. At a certain weight break, FCL will be more cost effective than LCL in terms of cost per cubic metre (CBM).
LCL orders are charged by the amount of volume of your shipments. This is measured in terms of CBM. LCL orders can be cheaper than FCL if you don’t need a full container for your shipments or don’t have the volume to justify the cost.
As a rule of thumb, FCL is a better arrangement than LCL when your shipment has filled about half of a container. This is around 10 cbm for a twenty-foot-equivalent (TEU) container. A TEU’s volume is usually between 23 to 25 cbm.
Flexibility and Speed
LCL shipments require more handling due to the need to consolidate multiple different orders into a single container heading to the same destination. This need for consolidation could also slow down loading times by 1 or 2 days. This also makes sailing dates for LCL less flexible than FCL. FCL is usually faster as you have the entire container to yourself.
Since LCL shipments need to first be consolidated into a container, get unpacked after clearing customs at the seaport then be assigned to a last mile truck before finally arriving at the destination address, all this extra handling could increase the chances of items getting damaged or misplaced. However, you can check with your shipping partner on how they cover potential losses during transit.
On the other hand, FCL shipments can be packed and sealed at the container at the origin address then opened only once it arrives at the destination. This ensures that all of your items are in place during transit and you have control over the packing and sealing of your items. Depending on the nature of your shipments, shipping partners like Janio will advise you on which of the two arrangements is better.
Looking to start shipping with FCL or LCL? Janio’s flexible freight solutions will help you get your shipments into Singapore fuss-free! Contact our representatives and get a quote today:
Origin Customs Clearance in Indonesia
After collecting your shipments, it needs to be cleared for export by Indonesia’s Customs at the international port closest to your origin address such as Port of Tanjung Priok for those shipping out of the Greater Jakarta region. While most goods that are exported out of Indonesia are exempted from export duties and taxes, certain commodities will incur an export tax. These product types include:
- Palm Oil
For more information on taxable exports, you may look into this page from Indonesia’s Directorate General of Customs and Excise.5
Aside from this rule, exporting out of Indonesia would require you or your shipping provider to provide the following for origin customs clearance:
- The exporter of record (usually your company) is a Legal Entity in Indonesia, in the form of either:
- CV (Commanditaire Vennotschap)
- PT (Limited Liability Company)
- Persero (Limited Liability Company)
- Perum (Public Corporation)
- Perjan (Departmental Company))
- Nomor Pokok Wajib Pajak (NPWP, a taxpayer number)
- Having licenses applicable to the export issued by the government, such as:
- Trading Business License (SIUP) from the Department of Commerce
- Industrial License from Department of Industry
- Domestic Investment Business License (PMDN) or Foreign Investment (PMA) issued by the Investment Coordinating Board (BKPM)
- Export Identity Number (APE)
If you’re unsure of which documents you’ll need to export from Indonesia, you can check with our customs clearance experts to find out more.
After checking these documents and clearing your shipments for export, your shipments can be loaded onto a vessel.
Loading and Mid-mile
After your shipment is cleared for export from Indonesia, it will be loaded onto a Singapore-bound vessel.
Since Indonesia is an archipelago of over 17,000 islands, this country has extensive connectivity through sea freight, with multiple international ports that your goods can sail from. The Indonesian government is working to develop a maritime highway across 24 strategic ports in Indonesia.6 Some of these notable ports include Tanjung Priok (IDTPP), Tanjung Perak (IDTPE), Kuala Tanjung (IDKTJ), Soekarno-Hatta (IDMAK), Port of Bitung (IDBIT), and Port of Sorong (IDSOQ). Tanjung Priok, Indonesia’s busiest port located in Jakarta, has processed 7.6 million TEU in 2018 alone.7
Sea freight between Southeast Asian (SEA) countries can be a better alternative to air freight in certain cases. Major sea ports in SEA can be found in a relatively small geographical area. Thus, sea freight shipments between these countries aren’t that slow, with some lanes being a few days to a week slower than air freight. For the Indonesia-Malaysia lane, sea freight delivery timing ranges between 5 to 8 days, compared to air freight’s 1 to 2 days for a fraction of air freight’s cost.
Considering the high competition for air cargo space due to grounded flights following COVID-19, sea freight is a competitive alternative for shippers looking to bring their goods outside of Indonesia to Southeast Asian markets.
Destination Customs in Malaysia
Once the ship carrying your goods arrives at Malaysia, your goods will be unloaded at the destination port to be cleared for import into Malaysia. In West Malaysia the main port where your goods would be commonly unloaded is at Port Klang (MYPKG), whereas in East Malaysia, there’s Kuching Port (MYKCH) for Sarawak destinations and Kota Kinabalu Port (MYBKI) for those in Sabah.
To clear your goods for import into Malaysia, you’ll generally need the following documents:
- Customs Export or Import Declaration
- Commercial Invoice
- Bill of Lading
- Packing List
- Certificate of Origin
Your importer must first register with the Companies Commission of Malaysia to import or export goods which require a license. Some of these items include certain livestock, batik sarong, electric domestic equipment, pharmaceutical products, and more. You may check out the list of items that require a license to export or import on Malaysia’s Customs website.8
Once registered, the importing company then needs to apply for an import license from the Ministry of International Trade and Industry (MITI). Malaysia uses a privatized single digital window for all import and export regulations called Dagang Net.9
Once the above documents are reviewed and your goods clear customs, it enters the last mile delivery stage. How this is handled depends on whether the shipments are FCL or LCL, and where the consignee’s address is.
Last Mile in Malaysia
If your shipment is shipped with LCL, it needs to be unpacked at a container freight station (CFS) at the destination port first prior to entering the last mile delivery stage in Malaysia. Depending on how it was packed prior to entering an LCL container, it will be transported as loose cartons or as pallets. The order will then be transported via vans or trucks depending on the size of your shipment.
FCL shipments don’t need to be unpacked from their containers and will be transported as-is to the consignee’s address during this leg of the journey. The container is first loaded onto the chassis of a lorry and then transported to the final address. Then the goods are unpacked at the address before a haulier comes back to bring the container back within a few days from unpacking.
What is Sea Freight and When Should You Use It?
Sea freight is the transportation of goods within containers by sea. Carrying 90 per cent of goods worldwide,10 sea freight is the most common way of transporting goods while also being cheaper and more environmentally friendly compared to other transportation methods.
On the other hand, sea freight isn’t for everyone. You’ll need to consider the following before considering whether you should use sea freight.
- The weight and size of your shipment
- The products being shipped
- Shipment Speed
While not as fast as air freight, sea freight works best when you’re prioritising cost savings over speed. Sea freight is also great for a wider range of goods that may be too costly to ship via air freight like bulky or oddly-sized items, or too dangerous to meet air freight’s tight restrictions on what can be shipped.
For instance, these products generally can’t be shipped via air freight: products containing gases, all things flammable, toxic or corrosive items like batteries, magnetic substances like speakers, perishable items and more.
Sea freight between Southeast Asian nations has the added benefit of only being slower by a few days compared to air freight while costing much less. You can also check in with logistics service providers like Janio who can help you optimise your supply chain with the right proportion of both sea freight and air freight.
This is great news for eCommerce merchants during the current COVID-19 pandemic. If you’re currently working with Janio for air freight, switching to sea freight involves the exact same steps. You simply need to tell us that you’d like your parcel shipped by sea freight and we’ll take care of the rest.
If you’d like to find out more about how we can solve your SEA eCommerce cross-border delivery needs, come and have a conversation with us.
- Investopedia – Tiger Cub Economies
- World Atlas – The Richest and Poorest Countries of Southeast Asia
- Nikkei – Malaysia on track to developed country status — but has far to go
- SGSME – Rise of Malaysia’s middle class presents opportunities at our doorstep
- Official Website Direktorat Jenderal Bea dan Cukai
- PWC – Maritime highway: Keeping the spirit and hope of people in eastern Indonesia
- World Shipping: Top 50 World Container Ports
- Royal Malaysian Customs Department – Import/Export
- Dagang Net – Welcome to ePermit