Date: 17 September 2026
By: Nicole Leong
Low-value direct-to-consumer imports offer Malaysian consumers lower prices, wider choice and greater convenience. However, the price displayed at checkout may not reflect the full cost of bringing a product into Malaysia, ensuring that it is safe and compliant.
The rapid growth of low-value direct-to-consumer imports into Malaysia has already generated considerable discussion in Malaysia. From a local business perspective, concerns include unequal compliance costs, tax and customs enforcement, counterfeit goods and the market power of large platforms. From a consumer perspective, attention has focused much on product safety and seller traceability. These are important issues and are increasingly reflected in the government’s policy response.
Potential environmental issues
A less discussed question is who bears the environmental cost when cheap, short-lived products become waste in Malaysia. This environmental dimension deserves greater attention. Not every imported product contains dangerous chemicals and low prices are not evidence of environmental non-compliance. However, from consumer perspective, some products are so cheap that consumers may treat them as disposable and give little thought to what happens after they are thrown away. If those products contain hazardous chemicals or substances and are discarded with ordinary household waste, they may end up in Malaysian landfills, potentially contaminating the surrounding soil or water. The environmental cost does not disappear simply because each parcel is small. Millions of individually low-value parcels may create a significant cumulative impact to the environment.
These concerns should not be used as a reason to protect Malaysian businesses from legitimate competition. The objective should be competitive neutrality: businesses selling to Malaysian consumers should bear comparable responsibilities, regardless of where they are established. Those responsibilities should reflect the nature and scale of their activities and may extend beyond tax and customs compliance to product safety, consumer protection and, where appropriate, the environmental impact of the products they place in the Malaysian market.
What is Malaysia doing in curbing issues identified from low-value direct-to-consumer imports into Malaysia?
Malaysia has begun responding on several fronts towards curbing what it calls unfair competition from foreign online market place or retailers:
- Low-value-goods tax by Kastam: Currently, impose low value goods (excluding certain cigarettes, tobacco products, intoxicating liquors), i.e. goods sold at a price not exceeding RM500 and are brought into Malaysia by land, sea or air bought through online marketplace are subject to 10% sales tax. Foreign LVG sellers and online marketplace operators is required to be registered under the Sales Tax Act 2018 if the total sale value of LVG brought into Malaysia exceeds RM500,000 in 12 months. This is regulated by Royal Malaysian Customs Department.
- Local corporate presence: Minister of Entrepreneur Development and Cooperatives Steven Sim recently was reported to have said the government had decided that foreign e-commerce platforms operating in Malaysia must register a company locally.[1]
- Inter-agency coordination led by Finance Ministry: A Finance Ministry-led committee involving several ministries is considering enforcement, support for Malaysian businesses and policy changes.
- New e-commerce legislation by KPDN: KPDN is developing a broader legal framework addressing platform accountability, consumer protection and overseas operators affecting Malaysian consumers.
- Registration or licensing by MCMC: The Communications Ministry and MCMC was reported to have discussed platform registration and the possible need for licensing.[2]
As can be seen from above, customs, consumer protection, product safety and online communications matters sit with different authorities. Different authorities are responsible for different stages or consequences of the same online transaction. Currently, there is no coherent framework connecting those mandates across the full lifecycle of an imported product. Malaysia needs a coherent framework that follows the product throughout its lifecycle from its online listing and purchase to customs clearance, consumer use, recall and eventual disposal.
What is the latest reform introduced by the EU to deal with rapid growth of direct-to-consumer imports?
In June 2026, the European Commission announced a policy initiative with the aim of overhauling the legal framework known as European Product Act to address certain problems associated with the rise of ‘e-commerce’, i.e. low-value items ordered online from third countries, to ensure inter alia only compliant products are made available on the EU market. It has a crucial role to play in ensuring fair competition for European businesses, notably regarding imported products, as well as the protection of European consumers. It was reported that the European Product Act is expected to be published on 6 October 2026.[3]
On 16 September 2026, the European Parliament approved a major customs reform directed partly at the rapid growth of direct-to-consumer imports. It introduced stricter customs rules for e-commerce. Under the reform, 2 measures are notable, i.e. platform responsibility and handling fee:
- Platform responsibility
Platforms facilitating direct sales from outside the EU will be treated as responsible importers. They must provide customs authorities with the required transaction and product data. They must pay or guarantee applicable customs charges. They must help ensure that imported goods comply with the EU law. The responsible business must be established in the EU or represented by an EU-based entity having either authorised economic operator or trusted trader status. The aim is said to prevent the use of shell companies to circumvent the new rules
Companies that repeatedly ignore EU rules may be punished with a fine of at least 1% (and up to 6%) of the total value of goods imported into the EU in the previous 12 months. Additionally, customs authorities may suspend, revoke, or annul their trusted trader or AEO status and flag them as high-risk operators.
- Customs handling fee
A new handling fee will apply to goods ordered directly from outside the EU by no later than 1 November 2026. This is separate from the existing €3 duty on low-value items. Based on the press release by , the new rules establish a handling fee for each item bought from non-EU web shops and sent directly to EU consumers. This will help cover the ever-increasing cost of managing the avalanche of individual parcels. The handling fee will be paid by the same entity responsible for paying other customs charges for the same parcel, to avoid shifting the cost to consumers. The exact amount of the handling fee will be determined by the European Commission and will be revised every two years to keep it proportional to the actual costs.
Should Malaysia adopt the EU model?
In curbing low value good import, the EU connects corporate presence, customs responsibility, and product compliance, transaction data and enforcement. Malaysia can consider studying the EU framework closely, but be careful to adopt it wholesale:
Consider platform responsibility for selected imports
Making every online marketplace fully responsible for every third-party product may be disproportionate. Malaysia could begin with:
- Major platforms exceeding defined transaction or user thresholds; and
- High-risk products such as electrical goods, food, cosmetics and children’s products.
Consider any new handling fees carefully
Any customs parcel or handling fee should reflect genuine administrative costs. It should not become a disguised protectionist measure. The government would need to assess:
- Whether bulk or consignment shipments should receive different treatment; and
- Whether the measure unintentionally favours established platforms over new entrants.
The goal should be competitive neutrality, not protection of particular competitors.
Concluding remarks
Malaysia has moved from asking whether foreign online marketplace platforms should be regulated to deciding how they should be regulated. However, requiring a local presence is an important first step, but it is only useful if the legal framework clearly answers who is responsible for which products and sellers, which authority may take action and what happens when the platform fails to comply. The EU model offers Malaysia a valuable reference point as it moves beyond registration and assigns operational responsibility to the businesses that control the transaction from customs perspective.
The next phase should involve careful engagement among government agencies, platforms, consumer groups, logistics providers and competition specialists. Early engagement will be important to ensure that Malaysia preserve the benefits of open and competitive e-commerce without allowing its safety or environmental costs to be transferred to Malaysian consumers and the public.
This update is for general information only and does not constitute legal advice.
Please reach out to us at general@wenlaw.co if you have any questions.
[1] https://www.thestar.com.my/news/nation/2026/09/15/govt-mulls-e-commerce-link-to-boost-local-goods
[2] https://bernama.com/en/general/news.php?id=2599161
[3] https://www.euronews.com/my-europe/2026/09/10/eu-commission-eyes-major-import-overhaul-to-crack-down-on-illegal-chinese-products