Malawi WT/TPR/S/96
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. The reforms introduced by Malawi since the late 1980s have substantially liberalized trade
and investment.  Tariffs are Malawi's main trade measure.  Duty rates have been progressively
reduced, and averaged (unweighted) almost 14% in 2000/01.  Maximum tariffs of 25% apply to
consumer and other "non-essential" goods.  Discriminatory internal taxes on imports have beeneliminated.  A broad consumption surtax currently applies both to imports and domestic goods, and
non-discriminatory excise duties apply to a wide ra nge of products, including luxury products.  Such
broadening of the tax base has reduced the Government's reliance on tariff revenue, and facilitated
duty reductions.  Export taxes no longer operate.
2. While tariffs are virtually all ad valorem , the transparency of the tariff structure is greatly
undermined by the extensive use of end-use exemptions and other, often discretionary, rebates.  The
rationale for many of these rebates is unclear, and substantial overlap of product coverage exists
between schemes.  Widespread preferential treatment under regional and bilateral trade agreements
with substantial cross membership and various rules of origin also makes Malawi's tariff regime more
complex.  Mandatory preshipment inspection applies to import consignments of US$2,000 and above.Customs valuation is, in principle, based on transaction value.
3. The Government is preparing a new anti-dumping law to replace its existing long-standing
legislation, which has never been used, and intends to implement rules on countervailing and
safeguard measures.  Trade reforms have also included the removal of most import licensing
requirements.  There are no import quotas, and only a small number of items are prohibited or subject
to licensing, mainly for health, safety, security or environment reasons, including quarantine
measures.  Export controls and regulations are also minimal.  However, exports are assisted byrelatively generous incentives, including income and other tax concessions provided to exporters with
EPZ status.
4. Most state-owned enterprises have performed poorly.  The Government has divested a
substantial number of these operations.  The main focus is now on the privatization and deregulation
of important public utilities, such as telecommunications, electricity, and water.  The short suspensionof the privatization programme ended in October 2001.  The Government has also introduced
competition legislation to be administered by the Competition Commission, when formed, as a means
to protect consumers and promote economic efficiency.
5. Intellectual property legislation exists on mainly patents, copyright, and trade marks.  The
Government intends to revise this legislation comprehensively in order to meet its multilateralobligations but little progress has been made, due mainly to resource and capacity constraints.  A
"banderole" system has operated since 1998 to help control illegal sound- and audio-recordings.
Government procurement contracts currently provide price margins of up to 15% for domestic
suppliers.  Revised legislation is due to operate from mid 2002, which will improve transparency and
establish a Public Procurement Authority to monitor public procurement.  Preferential price marginsare to be retained.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Registration and documentation
6. The main legislation governing importation is the Customs and Excise Act 1972, as amended,
and the Control of Goods Act 1968, as amended.  Any entity may import goods commerciallyWT/TPR/S/96 Trade Policy Review
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provided it is legally registered.  Imports are financed mainly by standard bank letters, usually secured
in advance by cash to hedge against foreign exchange losses.  Most imports are handled by customs
clearing agents who must be registered by the Malawi Revenue Authority.  Such agents may be de-
registered if found to be engaging in inappropriate activities.
7. Malawi requires preshipment inspection (PSI) of all imports, including second-hand goods,
with a free-on-board (f.o.b.) price of US$2,000 and above.1  Goods exempt from PSI include mainly
fireworks;  certain agricultural products, such as live animals, fish, meat, fruit, vegetables and eggs;
scrap metal;  precious and semi-precious stones;  petroleum products;  and goods destined for export-
processing zones and bonded warehouses.  PSI services are currently contracted to Société Générale
de Surveillance (SGS).  The contract has been renewed until March 2003 when it is expected that
such services will cease.  Inspection covers mainly quality, quantity and value using governmentguidelines, procedures, and standards with which importers, suppliers, and SGS must comply.
2  SGS
also provides a suggested customs classification.  The goods must be inspected at the port of export,
and the importer must submit to Malawian Customs a Clean Report of Findings (CRF) from the SGS
affiliate in the exporting country to clear the goods through customs.  Other documents required to
clear imports depend upon the transport mode of entry into Malawi, but include the invoice, waybills,and consignment notes.  A preshipment inspection fee of 0.85% is levied by SGS on the c.i.f. value of
inspected imports.  There are currently no penalties for destination inspection.
8. Smuggling of goods is a major problem for Malawi, and substantial informal trade occurs
across borders.  In 1998-99, Flexible and Smuggling Teams (FAST) were established to extend
enforcement operations throughout the country.  Goods commonly smuggled include excisable
products, especially alcoholic beverages and tobacco products, cosmetics, and vehicles, mostly from
South Africa, Zimbabwe, and Mozambique.  Textiles are also smuggled in from the Far East.
9. Malawi is committed to implementing certain trade facilitation measures under the Regional
Integration Facilitation Forum (RIFF) (Chapter II(5)(iii)).  Malawi is yet to introduce a bond-
guarantee scheme for customs or a single-goods customs declaration form.
(ii) Customs inspection and clearance
10. The Malawi Revenue Authority (MRA), established in 2000, is responsible for Customs.  It
has started to computerize customs operations for it s main stations for both road and air shipments.
According to authorities, imports are cleared on average within two to three days, provided all
documentation is in order.
11. The Commissioner-General of the MRA may license private bonded warehouses for dutiable
goods that are the property of the licensee only.  Manufacturing under bond is encouraged in Malawi.General bonded warehouses also exist.  The licensee must provide sufficient security, as required by
Customs.  Licences are renewable annually for a fee of MK 2,000, and can be revoked or refused by
the Commissioner-General, without giving the reas on.  The maximum period of warehousing is six
months, but may be extended at the Commissioner-General's discretion for a further six months.
Operations in bonded warehouses can cover bottling or diluting of bulk spirits and wines as well asthe assembly, simple conversion or minor transformation  of finished goods, provided they are not
subject to excise duties.  Released warehoused goods must be entered for consumption, exportation or
re-warehousing.  The licensee must provide acceptable secure facilities and report-keeping functions,
                                                     
1 In order to prevent avoidance of inspection through the splitting of consignments, partial shipments
are subject to inspection if the total value of the goods under the contract exceeds US$2,000.  Preshipment
inspection was introduced in 1992, and a threshold of US$3,000 was applied until June 1996.
2 The WTO provisions on PSI are annexed to the contract.Malawi WT/TPR/S/96
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and is liable for payment of all appropriate duties on goods removed from warehouses.  According to
authorities, these arrangements work well and there is minimal leakage of goods onto the domestic
market. Temporary importation may be allowed at the Commissioner-General's discretion, subject to
any specified conditions, such as mandatory re-export and maximum time periods.  Temporary entry,
of up to six months, is normally reserved for goods in transit.  Goods exported for repair are dutiable
on re-importation based on the cost of such repairs.
12. Disputes concerning the amount of duty are initi ally subject to an internal review by the
Malawi Revenue Authority.  Its decisions can be appealed to a Special Referee appointed by the
Minister of Finance and Economic Planning.  The assessed duty must first be paid, or an acceptable
security lodged, once the goods have been imported, and appeals lodged within three months from
importation.  Any party with a legitimate interest in  the case, if it involves the classification of the
imported goods, may present evidence.  The Special Referee may either confirm or set aside for
reassessment the Commissioner-General's decisio n.  An Appeals Committee was also established to
handle valuation disputes with SGS.  It has heard 11 appeals to date;  all were unsuccessful and
decided in SGS's favour.  Appeals may also be made to the magistrate court.
(iii) Tariffs, other duties, and taxes
13. Imports to Malawi may be subject to four types of duties:  the customs tariff and, where
applicable, excise duties, surtaxes, and anti-dumping duties.  Excise duties and surtaxes apply to both
imported and domestically produced goods.  Malawi adopted the Harmonized System (HS) in 1989.
It currently uses the 1996 HS nomenclature at the eight-digit level.  There are 5,469 tariff lines in the
current customs tariff schedule.  The schedule lists the non-favoured ("general") tariff (column 5), the
MFN tariff (column 6) as well as preferential du ties provided to imports from COMESA countries
that are outside the Free Trade Area (column 7), and SADC (column 8) trading partners.  TheMFN duty applies to WTO members and to ACP states that are members of the Lomé Convention
(now the Cotonou Agreement) as well as any i ndependent Commonwealth country or protectorate
administered by the United Nations.  All lines have ad valorem  tariffs except for sets consisting of
woven fabrics and yarn for making, inter alia,  tapestries and rugs (HS 6308.0000).
14. Tariff policy is primarily the responsibility of the Ministry of Finance and Economic
Planning.  Tariffs are changed on a financial-year basis (1 July to 30 June) as part of budgetary
deliberations.  The Ministry proposes changes to tariff rates in consultation with the Malawi Revenue
Authority, and other relevant ministries, includ ing Commerce and Industry, and Agriculture.  If
agreed by Cabinet, the proposals are submitted to the National Assembly for approval.  The Customs
Tariff Schedule is contained in the Customs and Excise (Tariffs) Order, published in theGovernment Gazette .  The Order of December 1999 replaced the previous Order of 1996, and has
operated since 1 January 2000.  Several tariff rates have been changed since then, mainly as part of
the 2000/01 and 2001/02 Budgets.  Domestic produc ers may seek relief against competing imports by
applying for duty rebates on imported inputs.
15. Since embarking on trade liberalization in the late 1980s, Malawi has substantially
rationalized its tariff structure by lowering and amalgamating duty rates, thus reducing dispersion.
Maximum MFN tariffs of 70% were cut to 45% in 1988, and to 40% in April 1996 when the number
of bands was also reduced.  From April 1997, the maximum tariff rate was further lowered to 35%,
and tariffs were eliminated on raw materials used in manufacturing.  Consequently, unweighted
average tariffs declined substantially during the late 1990s, from 21% at end 1997 to 15.8% at end
1998.
3  The maximum tariff rate is currently 25%.
                                                     
3 IMF (1999),Table 5.WT/TPR/S/96 Trade Policy Review
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(a) MFN tariff levels and structure4
16. Malawi's applied MFN 2000/01 tariff comprised six bands.  Duty-free items include:
specified animal products;  certain cereals;  starches and inulin for industrial use;  certain oilseeds,
oleaginous fruits, miscellaneous grains, seeds and fruits, whether or not broken;  certain vegetable
saps and extracts, pectic substances, pectinates and pectates, mucilages and thickeners;  specified
vegetable products and plaiting materials;  certai n residues and waste from the food industry, and
preparations for animal fodder;  salt, pure sodium chloride, and sea water;  calcareous stone of a kind
used for the manufacture of lime or cement;  certain mineral fuels, oils, and products of their
distillation;  specified chemical products, including pharmaceutical goods;  fertilizers;  certain printed
books, newspapers, pictures, and other products of the printing industry;  specified machinery and
mechanical appliance;  and certain tractors, ambulances, hearses, and prison vans;  and motor vehiclesfor specified purposes.  A tariff rate of 5% is imposed on "necessities", consisting mainly of
foodstuffs, capital goods, and raw materials;  7.5% on white spirit and turpentine substitutes;  10%,
mostly on intermediary goods;  20% on coal tar distillates, residual fuel oils, greases, lubricating oil,
and master alloys of copper;  and 25% on fina l "non-essential", including many consumer, goods.
17. The simple average applied MFN tariff rate in 2000/01 was 13.6%, with a standard deviation
of 9.3% (Tables III.1 and AIII.1).
5  The modal (most common) rate was 25%, applying to some 38%
of all tariff lines.  The coefficient of variation of 0.69 indicated moderate dispersion of tariff rates
from one category of products to another.  Some 36% of tariff lines carried a rate of 5%, 21% a rate of
10%, and some 4% a zero rate (Chart III.1).
Table III.1
Tariff indicators, end-2000/01
(Per cent)
Indicator All goods AgricultureaNon-agriculturea
Bound tariff lines 17 100 0.3
Duty-free tariff lines 4 11 2.8
Simple average applied MFN rate 13.6 15.2 13.3
Range of MFN applied rates 0-25 0-25 0-25
Applied MFN tariff standard deviation 9.3 9.4 9.3
Ad valorem  duties (% of tariff lines) 100 100 100
a The WTO classification, based on the definition of agriculture adopted in the Agreement on Agriculture, is used.  The WTO
Agreement on Agriculture excludes fish and fish products (HS chapter 3 and parts of chapter 16) and includes items regarded as"agricultural" from HS chapters 29, 33, 35, 38, 41, 43, 50, 51, 52 and 53 (Annex 1 of the Agreement).  Petroleum products (HS
2709 and 2710) are included in non-agricultural products, although excluded from both WTO agricultural and non-agricultural
products.
Source : WTO Secretariat, based on data provided by the Malawi authorities.
                                                     
4 Several tariff changes were introduced in the 2001/02 budget, effective 23 July 2001.  MFN tariffs on
certain machinery and capital goods and agricultural hand tools were lowered from 5% to zero;  they were
increased on crude cooking oil from 5% to 10%.  These ch anges are not reflected in the tariff analysis contained
in this report based on the 2000/01 tariff.
5 Non-favoured or general tariff rates are commonly about 5 percentage points higher than the MFN
rate, although on many items they are identical.  Non- favoured tariffs ranged from zero to 30%, and averaged
17.9%.Malawi WT/TPR/S/96
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05001,0001,5002,0002,500
D u t y  f r e e 5 1 01 52 02 5
Includes one tariff line with rate equal to 7.5 %.
Figures in parentheses denote the share of total lines.
WTO Secretariat estimates, based on data provided by the Malawi authorities.Chart III.1
Applied MFN tariff distribution, 2000/01
Number of tariff lines
a
Note:
Source :(4.0)(36.5)
(20.8)
(0.1)(38.5)
a
18. Manufacturing was the most tariff-protected sector (ISIC Revision 2 definition), followed by
agriculture (including hunting, forestry, and fishing), with applied average MFN tariff rates of 13.7%
and 12.2%, respectively.  The average applied MFN tariff was 9.4% in mining and quarrying.  When
the WTO definition is used, agriculture became the most tariff-protected sector, with an average
applied MFN tariff rate of 15.2%.  Applied MFN tariffs averaged 13.3% on non-agricultural products,
including petroleum.
19. Malawi's tariff structure was characterized by built-in escalation whereby duty rates increased
with the degree of processing.  Consequently, the average duty of about 16% on fully processed
products substantially exceeded that on semi-processed and unprocessed products both at around
10%.  Similarly, the average tariff rate was highest on consumer products at about 21%, compared
with around 11% on intermediate goods, and some 9% on capital goods.  The breakdown of the tarifflines to the ISIC two-digit level depicts positive escalation mainly on:  textile, wearing apparel, and
leather industries, with average applied MFN tariff rates ranging from 8.8% on first-stage processed
products, 18.8% on semi-finished products, to 23.5% on fully processed products;  wood and wood
products, including furniture, with tariffs averaging 10% on first-stage processed goods, 18.6% on
semi-finished goods, and 21.6% on fully processed products;  and on fabricated metal products,machinery and equipment, with tariffs averaging 5% on semi-processed goods to 12.6% on fully
processed products (Table III.2).WT/TPR/S/96 Trade Policy Review
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Table III.2
MFN tariff escalation by ISIC 2-digit heading, 2000/01
(Per cent)
ISIC
codeDescription Number of
linesSimple average RangeStandard
deviation
Total 5,469 13.6 0-25 9.3
11 Agriculture and hunting 247 13.4 0-25 9.5
12 Forestry and logging 27 5.2 0-10 4.5
13 Fishing 49 10.4 0-25 3.4
21 Coal mining 4 0.0 0 0.0
22 Crude petroleum and natural gas production 3 3.3 0-5 2.9
23 Metal ore mining 23 10.0 10 0.0
29 Other mining 75 10.0 0-25 3.2
31 Manufacture of food, beverages and tobacco
- First stage of processing 93 13.0 0-25 7.1
- Semi processed 64 18.8 0-25 7.7
- Fully processed 322 18.4 0-25 8.6
32 Textile, wearing apparel and leather industries
- First stage of processing 38 8.8 0-25 4.7
- Semi processed 414 18.8 5-25 9.2
- Fully processed 445 23.5 5-25 4.8
33 Wood and wood products, including furniture
- First stage of processing 5 10.0 10 0.0
- Semi processed 33 18.6 10-25 7.5
- Fully processed 52 21.6 0-25 7.1
34 Paper, paper products, printing and publishing
- First stage of processing 19 8.9 5-10 2.1
- Semi processed 67 7.4 5-25 6.5
- Fully processed 70 15.0 0-25 9.6
35 Chemicals, petroleum, coal, rubber, plastics
- First stage of processing 57 6.9 0-20 4.7
- Semi processed 706 5.4 0-25 3.1
- Fully processed 315 13.3 0-25 10.0
36 Non-metallic mineral products except of petrol. & coal
- First stage of processing 2 10.0 10 0.0
- Semi processed 32 14.7 5-25 8.3
- Fully processed 139 14.2 5-25 8.6
37 Basic metal industries
- First stage of processing 16 10.0 10 0.0
- Semi processed 358 9.0 5-25 4.2
- Fully processed 2 15.0 5-25 14.1
38 Fabricated metal products, machinery and equipment
- Semi processed 6 5.0 5 0.0
- Fully processed 1,556 12.6 0-25 9.4
39 Other manufacturing industries
- First stage of processing 15 12.7 0-25 8.4
- Semi processed 4 8.8 5-10 2.5
- Fully processed 210 22.7 0-25 5.9
Source: WTO Secretariat estimations, based on data provided by the Malawi authorities.Malawi WT/TPR/S/96
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20. An escalatory tariff structure provides cascading protection levels that distort producer
incentives in favour of processed goods, and is therefore unlikely to maximize economic efficiency
(Box III.1).  Similarly, wide disparities in tariff rates, especially between substitutable products, can
undermine resource-use efficiency, even if average tariffs are relatively low.
Box III.1:  The advantages of lower, and relatively uniform tariffs
Tariffs reduce a country's economic efficiency by misallocating resources from their most productive use.
By how much resource-use efficiency is impaired depends upon the level of, and the degree of
non-uniformity between, duty rates.  For a given average rate, the wider the disparities in tariff levels,
especially between goods that are close substitutes in both consumption or production, the more distortingwill be the tariff structure.  Thus, a movement towards a lower and more uniform tariff would be expectedin general to improve resource allocation and raise national welfare;  a uniform tariff structure will haveless influence on the private decisions of producers and consumers, and allow resources to be directed more
by market outcomes.
A non-uniform tariff generally provides higher effective protection through tariff escalation, i.e. much
lower duty rates on raw materials with progressively higher tariffs being applied through to final processedproducts.  However, by providing greater incentives to produce downstream goods, an escalating tariffrisks generating inefficient activities that become dependent on government assistance.  High and disparatetariffs foster inefficiency and penalize efficient activities, including export industries, by promoting a high-cost economy.  Import taxes may end up taxing exports.
As well as promoting efficiency gains, a low uniform tariff is simpler, more transparent and easier to
administer.  It removes many of the incentives for making false customs declarations (mainly falsedescriptions and classifications of imports).  Moreover, by treating all producers and importers equally, it islikely to reduce lobbying or "rent-seeking" pressures on the Government for assistance, and make it easierto reject pleas for special treatment.  Tariffs also tax consumers, often regressively where, as in Malawi, the
highest import duty of 25% applies to essential products, such as clothing and basic foodstuffs, to which a
greater share of income of poor households is devoted.  Lowering such tariffs can therefore help alleviate
poverty, especially where other indirect taxes apply.  For example, clothing is taxed in Malawi at 55%
(tariffs of 25% plus an excise rate of 10% and a surtax of 20%).  Also, the equity benefits of having manyfoodstuffs exempt from surtax are reduced by applying the highest tariff rate of 25%.
It is often argued that adopting a low uniform tariff would substantially reduce government revenue
compared to a system of high tariffs, especially on consumer and so-called luxury goods.  However, this
may not be the case, especially during the transitional st ages of tariff reforms.  At lower tariffs, import
volumes may increase, as domestic consumers purchase more and local suppliers produce less.  Thisshortage in domestic production will be met by imports;  as higher tariffs are lowered, it is possible thatimport quantities could rise sufficiently to raise tariff revenue, depending upon the nature of the goods andmarket conditions.  Lower tariffs would remove (at least partially) the need for special duty exemptions and
concessions, which are usually a common feature of high and disparate tariff structures.  Such concessions
are liable to make the tariff structure more disparate and undermine transparency and economic efficiency.
In Malawi, the widespread use of exemptions and remissions on import duties (including preferential
tariffs), is evidenced by the 1999 duty-collection ratio, of about 5%, being well below the unweightedaverage of 14%.  This suggests that a uniform lower tariff could be set without significantly reducinggovernment revenue, provided that the many tariff concessions were abolished. Revenue considerations of
tariffs are now less relevant given the broadening of the tax base.  Tariffs accounted for only 15% of tax
revenue in 1999/2000, down substantially from 22% in 1994/95.  In moving to a uniform tariff rate, it isalso economically desirable to make it as low as possibl e so as to remove the distortions created by raising
lower rates to the uniform level and to reduce the burden of tariffs on exports.  This suggests that uniformtariffs, especially at a low rate, is a sensible "rul e of thumb" policy goal on efficiency grounds.  A low
(preferably zero) uniform tariff rate would elim inate the anti-export bias created by tariffs.
Box III.1 (cont'd)WT/TPR/S/96 Trade Policy Review
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A low, relative uniform, tariff structure without substantial escalation is therefore most likely to promoteeconomic efficiency and national welfare.  Positive es calation increases effective protection.  Therefore,
recent tariff reductions (contained in the 2001/02 Bu dget Speech) on raw materials and intermediate goods
without corresponding cuts in the highest rate of 25% may have actually widened overall disparities.  Thismay undermine improvements in economic efficiency if it raised already relatively high levels of effectiveprotection afforded final goods.  Reducing low tariffs while leaving higher duties intact may add to
distortions in Malawi's tariff structure, and further discriminate against production of machinery and
intermediate inputs in favour of consumer goods.
21. During the Uruguay Round Malawi bound customs duties on 17% of all tariff lines.  In
agriculture (WTO definition) all tariffs were bound, almost entirely at a ceiling rate of 125%, except
for lower ceiling bindings of 50% on rye, barley, and oats;  of 55% for cocoa paste, butter, and
chocolate, and other foods with cocoa;  and of 65% on cocoa powder.  Tariffs were bound on less than
1% of tariff lines for non-agricultural products, at ceiling rates of either 65%, 50%, 45%, 40%, 35%
or 30%;  these bindings cover mainly fertilizers, insecticides, printed material, agricultural hand tools
and machinery.  Malawi bound other duties and charges on all these products at 20%.
22. Although tariff bindings are always desirable, their practical significance in constraining
future tariff increases is undermined in Malawi as bound rates substantially exceed applied tariff
levels, especially on agricultural products.  Malawi has made no commitments to reduce these ceiling
bindings.
(b) Other duties and taxes
23. An important component of Malawi's trade reforms has been the elimination of
discriminatory taxes and the broadening of the tax base.  In 1989, the Government introduced a
consumption tax, called a surtax.  Although initially applied selectively to goods and services, it has
been extended progressively, and currently applies at a rate of 20% to most goods.  Many services,
including expenditure on legal services, telecommunications, motor vehicle repairs, and satellite aswell as cable television, are taxed at 20%, while certain other services are taxed at 10%, such as hotel
accommodation, restaurants, and photographic services.
6  Distortions between surtaxable goods were
reduced somewhat by replacing the initial range of rates with the uniform rate of 20% as from
26 March 1993.  However, maintaining a different rate of 10% on some services still weakens
taxation neutrality.
24. The surtax applies (at the same rate) to both domestic and imported products, and no longer
discriminates against imports.  On imports the tax base is the duty-inclusive c.i.f. price, while on
domestically produced goods it is the normal ex-factory price (including packaging).  The
discriminatory differential in the surtax rate against imports was abolished in 1992/93, and
compensated for by tariff increases. Previously, imports of luxury goods were subject to a surtax offrom 55% to 100% while domestic goods were taxed at 35%.  The surtax then effectively provided
additional protection, equivalent to a higher rate than the difference in tax rates of from 20% to 65%,
because the surtax is levied on the tariff-inclusive import price.
7  Removal of the discriminatory surtax
substantially rationalized Malawi's tax structure on imports.
                                                     
6 Electricity is taxed at either 10% or 20%, depending upon whether consumed by residential or
commercial users, respectively.  See Custom s Schedule, Third Schedule, Part III, 1999.
7 A tariff rate of 20%, for example, combined with a 65% surtax levied on imports but not domestic
goods would have been equivalent to an additional tariff in total of 98%.  A discriminatory rate of surtax would
be the same as the tariff rate equivalent only if the imported goods had a zero tariff.Malawi WT/TPR/S/96
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25. A number of products, especially certain basic foodstuffs, are exempt from the surtax, making
it distorting and complex to administer.  Close substitutes of taxable products are often exempt,
thereby creating distortion.  In 2000/01, for example, live poultry, except for small fowl, was
surtaxable, while other live animals were exempt from the surtax.  Seafood and meat were exempt,
except for poultry.  Similarly, vegetables were exempt, while fresh tomatoes, onions and frozen
vegetables, as well as most preserved or dried vege tables were taxed.  Fruits were exempt, apart from
grapes, apples, and pears.  Roasted coffee was taxed but not unroasted, black tea, but not green tea.8
Exports, and a number of products sold domestically, were zero-rated.  These covered animal feedpreparations, including dog or cat food, acorns and chestnuts, salt, pharmaceuticals, fertilizers,
insecticides, printed materials, specialized pumps for irrigation and certain other uses, tractors, certain
special purpose motor vehicles, such as fire trucks, motor vehicle chassis for assembly, tractor parts,tanker and certain other trailers, medical and scientific instruments as well as appliances.
9  Such
products have a zero rate of surtax, and manufacturers, like exporters, can claim tax credits for surtax
paid on inputs used for their production.  Producers of exempt goods cannot claim such tax credits.
26. The surtax has formed an essential component of the Government's policies to broaden the tax
base, including indirect and direct taxes, and to reduce its revenue reliance on trade taxes, especiallytariffs.
10  The share of tax revenue collected from tariffs fell from 22% in 1994-95 to 15% in 1999-00.
Over the same period, the share collected from the surtax rose from 34% to 36%, and from income
tax, from 34% to 42%.  An increasing proportion of the surtax is collected from imports, rising from
57% in 1994/95 to 61% in 1999/00.  The average implicit surtax rate on imports also increased over
this period, from approximately 9% to 13%.  Extending the coverage of the surtax to the retail and
wholesale levels has been deferred until July 2002, and is being discussed in Parliament.
27. Ad valorem  excise duties also apply to both imported and domestic products, and account for
around 5% of total tax revenue.  Malawi's legislation specifically applies excise duties to "goods
manufactured or produced in Malawi" (Section 82(d)).  Such duties used to be included as part of the
tariff.  However, excise duties are now levied separately on imports and are listed in a separate
column of the tariff schedule.  As well as the traditional excisable goods, such as tobacco products
and alcoholic beverages, coverage has been extended progressively, and the rates changedsubstantially, generally upwards.
11  While initially targeting designated luxury goods, such as perfume
and jewellery, which are predominantly imported, and along with alcoholic beverages and tobacco
attract the highest rates, excise duties currently apply to many more standard items.  The list of
products subject to excise duties is already considerable, and appears to be increasing.  It includes
consumer goods, such as shelled seafood, fruit juices, clothing (new and used), footwear, mostconsumer electronics and domestic appliances, and certain intermediate inputs;  it also includes
petroleum products, and plastic pipes and tubes of PVC, packaging bags and bottles, certain paper,
woven natural (silk, wool, cotton, flax and jute) and synthetic fabrics, electronic calculators,
accounting machines and cash registers, and certain tractors, trailers, motor cycles and vehicles.
Unlike the surtax, which taxes value added and consumption by automatically providing producers,including exporters, tax credits for surtax paid on inputs, no such general mechanism exists for excise
duties – although exporters of a wide range of speci fied products, as well as those with EPZ status,
                                                     
8 Other products exempt from the surtax include eggs, honey, cereals and cereal products (except wheat
or meslin flour, and starches/inulin), oilseeds and rela ted products (except flours, seeds used for sowing and hop
cones), vegetable planting materials, bread and certain waters, and, following the 2000/01 Budget, petroleum
products (but not coal).  The surtax on these products was replaced by an excise duty and the rates increased
from 5% to 10% for paraffin and from 10% to 20% for diesel and petrol.
9 The 2001/02 Budget removed the 20% surtax, and zero-rated fresh and processed milk.
10 Temporary export taxes applied from 1995/96 to 1997/98, primarily to raise government revenue.
11 The 2001/02 Budget, for example, increase d excise duties on a number of products.WT/TPR/S/96 Trade Policy Review
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and a few other manufacturers are exempt from excise duties on direct inputs, excluding petroleum
products (see also section (e)).
28. Excises at variable rates, ranging from 5% to 80%, may also distort consumption and
production decisions between excisable and non-exci sable products, as well as across excisable
products.12  Excise duties are best used sparingly, confined to only a few consumer products where
substitution possibilities are limited.13  As a general economic principle, indirect taxes should tax
consumption and not production to the extent possible.
29. While Malawi's excise duties on intermediate goods, generally at 10%, are well below the
rates applied to consumer goods, they can still be a substantial impost on producers.  Much higher
excise duties apply to common inputs of petroleu m products (up to 50%) and on motor vehicles (65%,
depending upon engine capacity and type of vehicle).  The costs from excise duties can also occurwell back down the production chain and therefore be hidden from manufacturers, including
exporters.  For example, excise taxes on petroleum products are embodied in higher prices for non-
fuel inputs used by firms, including machinery.  Such tax imposts can place additional competitive
pressure on producers, especially as their tariff protection against imports is actually reduced.
(c) Tariff preferences
30. Exceptions to MFN treatment include preferential access provided to WTO Members that
belong to regional trading arrangements in which Malawi participates (Chapter II(5)(iii)).  As a
founding member of the Common Market for Easter n and Southern Africa (COMESA), Malawi met
the timetable established for the progressive removal of tariffs on regional trade by end-October 2000.
Therefore, all goods are freely traded between Malawi and the other COMESA members that have
met the free-trade area (FTA) commitments.
31. A potentially more significant regional arrangement for Malawi is the Southern African
Development Community (SADC), because it includes South Africa, a major trading partner.  Under
the SADC Trade Protocol, which commenced operation from January 2001, Malawi has begun to
implement its commitments, and grants duty-free access, on a reciprocal basis, to imports of category
A products (mostly capital goods and equipment) from other members that have also adopted the
Protocol.
32. A bilateral trade agreement with Zimbabwe also  provides for reciprocal tariff-free access
(Chapter II(5)(iv)).  Malawi also has several old reciprocal customs agreements that are infrequently
used.  Duty-free access is granted to imports of all goods, except spirits, from Botswana (Botswana
Agreement).
14  Imports from Mozambique of:  live animals (except poultry);  fish, but not canned;
and unmanufactured products of "the soil of a vegetable nature (wild or cultivated, includingunmanufactured foodstuffs)" are also duty-free (Portuguese Agreement).
                                                     
12 Multiple excise duty rates apply:  5%, 10%, 15%, 30%, 35%, 50%, 55%, 60%, 65% and 80%.  Some
excise duties also apply at different rates to products that  are essentially the same or highly substitutable.  For
example, tobacco products are taxed at  80%, except for cigarettes selling at a retail price of below the equivalent
of MK 3 per ten cigarettes, which are taxed at 50%.  Similarly, "opaque" beer is taxed at a rate of 30% instead of
(from the 2001/02 Budget) 55% on other beer and alcoholic beverages.
13 Excise duties on petroleum products are also levied  as a user charge to fund road construction and
maintenance.  Such duties on cigarettes and alcoholic beverages are also frequently seen as desirable "socialtaxes" to help fund health services.
14 Malawi Customs Schedule, 1999, Part D, Exemptions of Duty Under Other Enactments.Malawi WT/TPR/S/96
Page 45
33. To be eligible for preferential access, imports must comply with the rules of origin specified
in the relevant regional or bilateral agreement.
(d) Rules of origin
34. Malawi has both non-preferential and preferential rules of origin for determining the country
of origin for levying import duties.  In general, goods are considered to be of the origin of the country
where they are grown or wholly produced.  Under the non-preferential rules of origin, the country of
origin of manufactured goods is their last place of processing, provided they contain not less than a
certain level of material or labour as local content, or have been subjected to certain processes,
specified in the Malawi customs schedule (Customs and Excise Act, Section 118).  Specified content
levels may be fixed at varying scales for different classes of goods, and relate to the factory or works
cost of the finished articles.
35. The general level of minimum content specified on manufacturing goods to determine origin
is 25% (Customs and Excise Tariffs Order).  High er minimum content levels, of 30% and 50%, apply
to certain printed and other textile fabrics, respectively.  A content level of 5% applies to certain
aluminium wire and bars;  wire, cable, bars and strip;  and copper products.  For certain other textile
fabrics all the processes of manufacture must be performed in the country, from natural or man-madefibres or filaments to the final product.
36. Preferential rules of origin also apply under regional and bilateral trade arrangements to
which Malawi is a signatory.  Imports from eligible countries must satisfy these special rules of origin
to be dutiable at preferential tariffs (Chapter II(5)(iii) and (iv)).  Imports must be accompanied by
appropriate certificates of origin issued by the exporting country to be eligible for the preferential
tariffs.  If not, they are subject to Malawi's MFN rates.  For countries that are covered by more than
one agreement like Zimbabwe, the importer can choose under which arrangement the goods are to beimported.
(e) Duty and tax concessions and exemptions
37. Malawi's customs legislation allows widespread duty and tax concessions in the form of
suspensions, rebates, remissions and refunds.  Tariff suspensions were contained in the Sixth
Schedule of the 2000/01 Customs tariff.  These allowed MFN and general tariffs on certain importedinputs, such as raw materials for the manufacture of plastic pipes, to be fully or partially suspended.
15
Customs duty was refunded on imported vessels and parts used in commercial fishing or for thecommercial transportation of passengers and cargo (Seventh Schedule).
16  T h e  M a l a w i  R e v e n u e
Authority is responsible for granting or withdrawing suspensions, rebates, remissions or refunds of
customs duties, by notice published in the Government Gazette .  Rebates of tariffs are provided to
registered manufacturers importing specified materials used in the production of a wide range of
goods (Eighth Schedule, Part I, Appendix A).  Th ese specified end-use industries would appear to
cover most of Malawi's manufacturing activities (Table AIII.2).  Eligible manufacturers must be
registered with the Malawi Revenue Authority and are responsible for ensuring and keeping the
necessary documentation, including the submission of monthly returns, to show that the materials
                                                     
15 Other imports with full tariff suspensions were tea-picking baskets made of bamboo;  plastic-coated
paperboard used in manufacturing containers;  and fishing nets made from polyethylene fibre. Partial
suspensions reduced the MFN tariff to 10% and the general tariff to 15% on motor vehicle tyres and tubes (for
incorporation on imported vehicles, subject to such post-importation conditions set by the Commissioner-General).
16 The schedule also covers duty refunds required under government agreements "with any other
government, organization, institution, body or person."WT/TPR/S/96 Trade Policy Review
Page 46
have been used to manufacture the specified products for which they registered.  According to the
authorities such arrangements work effectively.  Rebates are not provided where the inputs are
produced locally.
38. Selective rebates of excise taxes applied in 2000/01 on the use of solid cane sugar, otherwise
subject to an excise rate of 20%, to manufacture food, bottled mineral waters, including soft drinks,
and alcoholic spirits (excluding beer).  Ethanol used in making pharmaceuticals and medicaments wasalso eligible for excise tax rebates.  Such rebates applied to total production, including that sold on the
domestic market.  Farmers may also be granted rebates of excise duties paid on certain inputs;  but no
activity receives a rebate on petroleum products.
39. Additional concessional tariffs (and excise duties) also applied in 2000/01 to a few other
goods by virtue of "end-use" provisions specified at tariff line levels.  Starches and wheat gluten usedfor industrial purposes, for example, were dutiable an MFN tariff of zero instead of 25% and a "non-
favoured" rate of 5% rather than 30%.  Breweries could also import hop cones at MFN and "non-
favoured" tariffs of zero and 5%, instead of 25% and 30%, respectively.  Strong undenatured ethyl
alcohol used for industrial, pharmaceutical, research, and scientific purposes was importable at a
concessional tariff of 5% (instead of MFN and "non-favoured" rates of 30% and 25%) and aconcessional excise rate of 30%.  The importer must prove to the Commissioner-General that the use
of such materials meets the specified conditions (Customs Schedule).
40. Full drawback of tariffs and excise duties also apply on specified materials used to
manufacture or process certain goods in Malawi, pr ovided they are exported within two years from
the date of payment of the duty  (Eighth Schedule, Part II, Appendix C).  For some products,
drawback is available on all materials and components while for others it extends only to specified
materials (Table III.3).  For example, watch manufacturers are entitled to drawback on all materialswhile cigarette manufacturers receive it only on packaging materials.  The Export Incentives Act
(Section 15) provides for duty drawback to export ers;  these are computed according to ratios
prescribed by the Minister of Commerce and Industry on the recommendation of the Export
Promotion Council, in consultation with the Minister of Finance and Economic Planning.  This
legislation also specifies that duty drawbacks must be paid within 60 days from submission of theclaim, subject to proof that the goods concerned were exported and the duty being claimed was paid.
Exporters who make false claims are subject to penalties, including imprisonment.
41. According to the authorities, duty drawback determination is no longer based on ratios, but
rather on the actual material used in export production.  Manufacturers registered for drawback must
maintain sufficient records accounting for their use of materials.  They must apply to the
Commissioner-General of the Malawi Revenue Authority for drawback, and submit the necessary
documentary evidence before exportation.  Exported goods are in principle to be inspected.
17  The
Commissioner-General determines the quantity, value, and origin of materials used in the exported
goods in consultation with the manufacturer.  Such determinations and authorization "shall be
presumed correct, in the absence of evidence to the contrary" (Section 6 of the Customs and ExciseAct).  Although exporters heavily use the drawback scheme, there are conflicting views on the
timeliness of such payments.  While the authorities  indicated that these were generally completed
within four to six weeks, others stated that rece iving the balance of the drawback of up to 75% could
take several months or more.  Exporters must lodg e claims for drawback within six months from the
date of export.
                                                     
17 The Commissioner-General may approve other procedures.Malawi WT/TPR/S/96
Page 47
Table III.3
Industrial drawback of customs duties, 2000/01
Goods manufactured in Malawi Materials subject to drawbacka
Agricultural hand tools and animal-
drawn implementsAll materials and components
Articles made from netting Netting made from twine, yarn, cordage, rope or cables;  containing more than 50% by
weight of man-made fibres produced by polymerization or condensation of organic
monomers e.g. nylon
Biscuits Baking fat, glucose, paper, packaging cartons and foil wrappings
Blankets Blanketing and blanket cloth
Cafenol premix Aspirin, caffeine, and starch
Child cafenol Aspirin, dextrose monolydrate, orange flavour, saccharine, sodium, and starch,
Cigarettes Packaging materials
Cleartone skin toning cream and Envi
skin tonerAll materials, including packaging
Clothing Textile fabrics and lace
Curtains Curtaining polyester thread and ruffette type
Cycles Cycle parts and accessories
Dhall All materials and components
Dry cell batteries All materials and components
Enamelled hollow ware of iron and
steelRough worked, uncoated iron or steel shapes, parts and blanks
Electric fires All materials and components
Fishing nets, sports nets and twine All materials and components
Footballs All materials  components
Footwear All materials
Fluorescent light fittings All materials and components
Furniture Textile fabrics and component parts
Motor vehicle trucks and buses Chassis with or without cabs
Norolon premix Chloroquine, phosphate, calcium phosphate, magnesium stearate, starch, and talc
Panadol premix Paracetamol, potassium sorbate, provcidone, starch, stearic acid
Petroleum jelly, perfume, skin and
toilet preparationsAll materials, including packaging
Plastic products Polypropylene granules, polypropylene, polyethylene, polyvinyl chloride compound,
colouring, pigments and high/low density polyethylene
Foodstuffs and beverages Tomato paste
Printed textile fabrics Woven textile fabrics, knitted and crocheted fabrics
PVC tarpaulins Oven nylon textile fabrics and plasticisers
Refrigerators, deep freezers and coolers All materials and components
Radios, tape recorders andcombinationsAll materials and components
Stationery – lever and flat files All materials and components
Tents and tarpaulins Canvas cloth and PVC sheeting
Timber products Plywood, hardboard, chipboard and similar boards, veneers, glues, resin, woodflour,
impregnation salt, labels, polyester yarn
Umbrellas Textile fabrics and component parts
Watches All materials and components
a Drawback of both tariff and excise duties.
Source: Customs and Excise tariffs Order, 1999, Eighth Schedule, Part II.WT/TPR/S/96 Trade Policy Review
Page 48
42. The rationale for the widespread use of concessions, other than drawback for exporters, is
unclear.  Many of the eligible materials are not of dual use and are consumed as inputs not final
goods;  therefore the tariff rate could be reduced to zero.18  Without clear criteria and procedures for
administering these essentially end-use tariff concessions, including the selection of eligible uses, they
can become a source of administrative discretion and of distortions by discriminating between
manufacturers.  Such arrangements can lead to manufacturers of different products paying differentinput prices;  they may therefore undermine the transparency of the tariff structure by making it
complex, and can  provide "tailor-made" protection that adversely affects resource-use efficiency.
19  A
number of the rebates appear to be designed to encourage limited domestic processing operations,
such as tariff concessions on imported crude Sunlight dishwashing detergent.
43. There is a substantial overlap between the industries covered by end-use rebates and by
drawbacks.  Drawbacks include also excise dutie s on materials used in exports;  this duplication
creates confusion, providing what appears to be considerable scope for rationalizing and simplifying
these arrangements.  The concessions also make the tariff structure more escalatory in practice.  In
addition, they encourage rent-seeking activities by  firms to obtain special rebates, and impose
substantial administrative and financial burdens on the Government.  This also may create significantscope for administrative discretion and public corruption.
44. Tariff exemptions also apply on goods under the investment code and on enterprises with
EPZ status (see below).  In addition, the Minister  of Finance and Economic Planning can approve
tariff rebates to investors in the public interest (Chapter II(6)(ii)).  Government and parastatals are no
longer eligible for duty-free importation and pay the same duties as private importers.  Imports by the
Kamuzu National Foundation Trust were provisio nally duty free in 2000/01.  Imports by state
enterprises and materials used in government contracts are duty free.
45. An indication of the widespread use of tariff concessions is the relatively low share of tariff
revenue in total government tax receipts, at around 15%.  A further indication is that the implicit
trade-weighted average tariff rate (total tariff revenue as a proportion of total merchandise imports) in
2000/01 for Malawi was 5%, well below the simple MFN average of almost 14%.  These figures also
reflect the impact of preferential tariffs applied under Malawi's various regional and bilateralagreements, as well as of the general tariffs.
(iv) Customs valuation
46. Tariffs are levied on the c.i.f. price of imported products.  Malawi notified to the GATT in
1990, under the Tokyo Round Customs Valuation Code, that its Customs and Excise Act had been
amended to replace the Brussels Definition of value with the transaction value of imports for levyingtariffs.
20  According to this legislation, this is the price actually paid by the importer for the goods,
adjusted for several factors, including freight and in surance costs to bring it to a c.i.f. price.  Where
this cannot be ascertained, the first alternative valuation method is the transaction value of identical
products, followed by the transaction value of similar goods;  the deductive value; the computed
value;  and the fall-back method.  Malawi also informed the WTO that this legislation had not
                                                     
18 This would ensure that all importers using the pr oduct would receive the same zero tariff rate and
eliminate the need for special customs processing, which may delay clearance.
19 Tariff concessions on inputs raise the effective protection afforded activities using these inputs.
Since many of the eligible manufactured products are protected by relatively high tariffs of 25%, giving themduty-free access to major inputs is likely to increase alr eady high effective rates of protection, thus making the
tariff structure more distorting and undermining efficient resource allocation.
20 GATT document VAL/1/Add.27, 18 April 1990.Malawi WT/TPR/S/96
Page 49
changed and remained valid under the WTO Customs Valuation Agreement.21  The only special
provision for developing countries invoked by Malawi under the WTO was to reserve indefinitely the
right not to reverse the deductive and computed valuation methods at the importer's request
(paragraph 3 of Annex III of the Customs Valuation Agreement).22
47. Customs value is determined for most imports by SGS through preshipment inspection.
According to the authorities, this valuation is used if it is above the value given on the commercialinvoice, but not if it is below.  The authorities also indicated that minimum or reference prices are not
applied, except for certain second-hand goods, such as motor vehicles, where used-car values are used
and an absolute minimum value set at US$3,000.  The extent to which non-transaction values, such as
"guide" prices, are used for customs valuation in Malawi is not clear.  It has been suggested that tariffs
are not necessarily applied directly to import costs in Malawi because of the use of domestic valuesfor customs valuation.
23
48. Malawi is a member of th e World Customs Organization.
(v) Import prohibitions, quantitative restrictions, and licensing
49. Malawi maintains few non-tariff import restrictions;  most were eliminated under previous
trade reforms.  A negative list of imports requiring prior foreign exchange approval, introduced in1991, was abolished in 1994.
24  From June 1997, all licensing requirements on imports were removed,
except those maintained, according to authorities, for health, safety, security, and environmental
reasons.  The import licensing system is regulated by the Control of Goods (Import and Export) Act.
About 5% of Malawi’s imports are currently covered by licences.
50. Import licences apply to military, naval, air force, and police uniforms, for security reasons.25
These will be issued only if the importer has an order from the army or police authorities.  Licences
also apply to radioactive substances;  mist nests for capturing wild birds;  wild animals, trophies, andproducts of such animals;  live fish;  dieldrin;  aldrin;  compound products containing flour, meal
residues and other preparations used in animal feed;  live poultry;  eggs, whether in shell, pulped or
dried;  meat, including dressed poultry, but excluding especially all tinned and potted meats
26;  and
salt, which must have a maximum iodine level of 90%.  In addition, restrictions, including
prohibitions, apply to imports of firearms, ammunition, and explosives as well as certain drugs andpoisons.
51. Licences cover imports from all sources, and are not subject to import quotas.  They are
generally granted on the spot, and are issued throughout the year, mainly by the Ministry of
Commerce and Industry.  Any importer may apply for a licence, and no administrative fee is charged
nor is any advanced payment or deposit required.  Import licences are valid for six months, and can beextended if needed, provided an adequate explanat ion is given.  Licences are not transferable, and no
penalty is imposed for under-utilization of the licence by the importer.  An importer may appeal
against a decision to refuse a licence.
                                                     
21 WTO document G/VAL/N/1/NW1/1, 7 April 1998.
22 WTO document G/VAL/2/Rev. 12, 30 March 2001.
23 Page, (2001), p. 9.
24 The list included certain luxury items, mainly alcoholic beverages, precious metals, motor vehicles
and electrical goods.
25 WTO document G/LIC/N/3/MWI/1, 6 September 1999.
26 Also excluded from import licensing are meat soups;  meat pastes;  edible meat fats;  tallow;  and all
cooked or cured meats except for pork, ham, and bacon.WT/TPR/S/96 Trade Policy Review
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(vi) Anti-dumping, countervailing, and safeguard measures
52. Malawi's anti-dumping legislation is relatively old and is contained in the Customs and Excise
Act and the Fourth Schedule of the Customs Schedule.  The Minister of Finance and Economic
Planning may impose anti-dumping levies when an investigation launched by him shows that
"dumped" imports are to the "detriment" of domestic industries, and that to do so would be in the
"public interest", although this term is not defined.  The board or person conducting the investigationhas powers equivalent to a Commissioner under the Commissions of Inquiry Act, and the same
provisions apply to the investigation in collecting evidence.  Interested parties can initiate such an
investigation by making a formal complaint to the Commissioner-General of the Malawi Revenue
Authority.  However, according to authorities, this legislation has not been used.
53. The legislation allows for measures to be taken against six kinds of dumping, referred to as
ordinary, sales, bounty, freight, exchange, and surcharge.  The importer pays all anti-dumping duties,
except "sales" dumping, where the seller of the goods in Malawi pays them.  "Ordinary" dumping is
where goods are exported to Malawi at an export price below their domestic market value.
27  Where
domestic market values cannot be calculated or similar goods are either not sold in the exporting
country or are considered to be unusual or peculiar in the marketing of such goods, theCommissioner-General determines such a value.  The anti-dumping levy imposed is to be the amount
by which the domestic market value exceeds the export price.
28
54. "Sales" dumping covers imports on behalf of non-residents of Malawi or based on non-
independent transactions sold in Malawi in the normal course of trade at an amount below the
domestic market value plus certain specified charges.29  The amount of any anti-dumping levy set
would be the difference between the domestic market value plus the specified charges and the selling
price in Malawi.
55. "Freight" dumping is where the freight charges paid on imports are below the normal rate, as
certified by the dumping investigation.  The anti-dumping levy in this case would be the amount by
which the normal freight charges exceeds the actual freight paid.  "Exchange" dumping occurs where
goods are imported from a country whose currency has depreciated against the Malawi kwacha.  The
anti-dumping levy in this case is calculated as the amount by which the actual cost of the importedgoods is less than the cost expressed in the exchange rate determined by the Minister of Finance and
Economic Planning.  "Surcharge" dumping is where goods are exported to Malawi and the price paid
by the exporter for raw or manufactured materials is below the price at which these materials are
exported to Malawi.  In this case, anti-dumping levies are to be authorized at a rate in money terms
per unit of quantity equal to the difference in the prices of these materials contained in the "dumped"product.
56. "Bounty" dumping is said to occur when goods exported to Malawi receive a bounty in the
exporting country.  A levy may be imposed equal to the amount of that bounty, whether by way of a
                                                     
27 Export price is defined as the f.o.b. value.  The domestic market value is the "market price, when
purchased by the importer, of such or similar goods freely offered for sale or for consumption in the exportingcountry, in usual wholesale quantities in the ordinary course of trade in its principal market.  It includesadditional costs to bring it to an f.o.b. equivalent, but not drawbacks or remissions of duties granted by the
Government of the exporting country."
28 Where there is no export price, the amount of duty shall equal the domestic market value of the
goods.
29 These are freight, insurance, and all charges to the market including landing, transportation, and
delivery costs, and any custom duties paid, apart from dumping duties.Malawi WT/TPR/S/96
Page 51
bonus, rebate, subsidy or otherwise, or provided by the Government or a person.  This measure is
therefore designed as a countervailing measure against subsidized exports.
57. Some of the dumping defined in the legislation would appear to overlap, such as "ordinary"
and "sales" dumping.  The application of remedies  against so-called "exchange" dumping could work
against the benefits of Malawi's currency real ignments with major trading partners, and may
effectively discriminate against Malawi exporters.
58. Malawi notified its anti-dumping legislation to the WTO in 1995.30  It has not yet provided
responses to questions raised by several WTO Members in the Committee on Anti-Dumping
Practices.31  These questions centred around the inconsistency of Malawi's provisions with WTO
requirements.32 The Government is currently drafting replacement anti-dumping and countervailing
legislation with the aid of international technical assistance;  according to the authorities this willconform with WTO requirements.
59. Malawi has no safeguard legislation.  This is currently being drafted with overseas technical
assistance, and according to authorities will be consistent with Malawi’s WTO commitments.
(vii) Standards and other technical requirements
(a) Standards, testing, and certification
60. The Malawi Standards Board is the governing body responsible for standardization matters.
It was established in 1972 under the Malawi Bureau of Standards Act.
33  The Board, through the
Malawi Bureau of Standards (MBS), sets and implements standards, and conducts conformity tests,
including on imports and exports, and quality assurance.  In line with increased pressure for it to
become self-financed through revenue generated from its quality assurance and testing activities, its
reliance on government funding has fallen.  In 1998/99, the Board's total revenue was
MK 24.5 million, of which MK 6.6 million, equivalent to 27%, was from the Government.34  It is a
member of the International Organization for Standardization (ISO), and the Director-General is the
ISO African Regional Liaison Officer for 2000-03.  It also participates actively in the SADC and
COMESA regional activities on standardization, and is a member of the African Regional
Organization of Standardization and has the presidency for 2000-03.  The Board is responsible to the
Minister of Commerce and Industry.
61. Technical Committees examine the need for Malawian standards, and the suitability of
international norms.  There are over 40 such committees, grouped under three technical divisions –
chemicals and textiles;  engineering and materials;  and food and agriculture.  Where no international
norm exists, or is considered inadequate, standards from other countries are usually used, increasingly
from the region, especially South Africa.  International standards have been found to be inadequate in
                                                     
30 WTO document G/ADP/N/1/MWI/1/Corr. 11, 19 February 1996.
31 WTO document G/ADP/W/415, 17 October 2000.
32 Questions were raised by Australia;  Hong Kong, China;  Korea;  and the United States.  See WTO
documents G/ADP/W/335, 12 April 1996, G/ADP/W/349,  15 April 1996, G/ADP/W/362, 17 April 1996, and
G/ADP/W/391, 24 April 1996.
33 The Bureau has been notified to the WTO as the national enquiry point required by the Agreement
on Technical Barriers to Trade (WTO document G/TBT/ENQ/18, 19 march 2001).  Malawi also notified the
WTO that the Bureau had accepted the Code of Good Practice for the Preparation, Adoption and Application ofStandards from 25 November 1996 (WTO documents G/TBT/CS/N/63, 8 January 1997, andG/TBT/CS/2/Rev.7, 8 February 2001).
34 In 1994/95, revenue was MK 4.9 million, of which the Government provided over 40%.WT/TPR/S/96 Trade Policy Review
Page 52
only a few cases to date, so that Malawi has de veloped only a small number of its own standards,
(approximately 50).  Most of these have been demanded by domestic industries for goods not subject
to any existing international standards.  Examples include certain foodstuffs, such as Thombwa
powder, and oxen-drawn carts.  Malawi attaches a high priority to harmonizing standards, especially
within the SADC region.
62. Malawi had 256 MBS standards at end-2000.  Most, over 70%, related to technical
specifications.  Approximately 39% of its standards covered food and agriculture;  32% engineering
and materials;  and the rest chemicals and textiles.  Over half are international standards, such as those
recommended by the ISO and Codex Alimentarius.  In 1999, 13 new standards were approved, and
four were revised.  A further 68 standards were being devised.  A National Quality Management
Certification System was launched in 1999, aimed at compliance with the ISO 9000 series ofstandards.  This scheme is to be accredited by either the SADC Accreditation Programme (SADCA)
or the African Regional Accreditation Scheme (ARAC).
63. Malawi also imposes mandatory standards as technical regulations.
35  These are allowable in
the legislation for safety, health, consumer or environmental reasons, or where they are of economic
importance at the national level.36  The Minister of Commerce and Industry, on declaring a standard
as mandatory in the Government  Gazette , sets an effective starting date after which the good cannot
be manufactured, sold or used without compliance.37  An additional 172 technical standards
(regulations) were made mandatory, effective 1 January 1999.38  There can be a substantial delay
between the date standards are introduced and when they become mandatory.  For instance, many of
the mandatory standards with declared starting dates from 1999 were developed before 1995, and as
early as 1990.  Products complying with Malawi  standards receive the MBS Quality Mark.
64. The same standards apply to imports and domestic goods.  Malawi recognizes conformity
tests from accredited foreign testing agencies on imported products.  While it has no formal mutual
recognition agreements, the MBS has several such "informal" arrangements with overseas bureaux
responsible for standards.  It also has cooperation memorandums on standards with several countries,
such as Botswana, Kenya, Zambia, and Zimbabwe, a nd is currently developing one with South Africa.
SADC countries also cooperate to recognize each other's standards as far as possible.  Imports subjectto mandatory standards are inspected on a consignment or batch basis where there are "reasonable
grounds" for suspecting they may not be compliant.  An import quality monitoring scheme was
introduced in 1995 requiring designated imports to be certified by Bureau inspections.
39  This is
equivalent to the product certification sche me applied to locally manufactured products.
65. Imported items covered by the Monitoring Scheme are a subset of 16 products subject to
mandatory standards, such as hand pumps, beer (clear), compound fertilizers, paints, and wheat flour.
Each consignment of these goods (shipment of same brand-name goods from the same manufacture
                                                     
35 Malawi Bureau of Standards Act, Section 21.  The Minister may exempt persons or entities from
complying with mandatory standards where it is in the "public interest".  Such provisions have been used twice
for food industries.  Exemptions are time bound, renewable once, and are used in such cases to provideadditional time to industries in the process of complying.
36 The "economic importance" criterion is rarely used ;  it covers such industrie s that are considered to
have significant export potential, or employ substantial labour or have a high local content in their production.
37 The need for a mandatory technical regulation is assessed by a Policy Advisory Committee.  This can
take up to nine months or longer if no international technical regulation is available.  Nine mandatory standards
operated from 1 November 1987;  14 more from 1 January 1988;  and a further 74 from 1 January 1992.
38 All standards are published in a general document while the Malawi Standards (Effective Dates)
Order, 1999 determines those that are mandatory.
39 Imports Quality Monitoring Regulations, 2000.Malawi WT/TPR/S/96
Page 53
and country of origin) must be inspected.  Inspection is not required, however, if they are certified as
complying with Malawian standards by a reputable recognized testing organization in the country of
origin, and tests of the first four consignments show that the goods conform with the foreign test
certificates.  Importers satisfying these requirements are issued with an annual import quality
certificate for each product consignment.  The other import commodity clearance issued for compliant
products is the batch certificate of conformance.40  It becomes invalid upon expiration of the product's
purported shelf life, and will be re-issued only on re-evaluation, and applies only to the individual
consignment or batch.  Products with less than half of their purported shelf life remaining will not be
granted a certificate.
66. Certificates will be withdrawn if random sampling in the open market indicates
non-conformity.  If this occurs, all imports must be withdrawn from the market.  There is an implicitwarranty from sellers and importers that any designated product will meet relevant specifications.
The importer must meet all expenses associated with the monitoring scheme, including inspection
costs, testing fees, and fees charged for the issuance of conformance certificates.  These requirements
apply to all mandatory standards imposed on designated products, as well as to any foreign standards
developed by the ISO, IEC, Codex or other international bodies accepted by the Bureau forcertification purposes.
67. Importers are required to make application for inspection by completing an import inspection
request form.  Inspections cover technical assessments, such as dimensions, defects, and completeness
of parts.  Performance testing is also required, where appropriate.  In 1999, 18 requests were made for
inspection, and 30 samples were tested for analysis.  According to authorities, domestically produced
goods are subject to the same requirements and inspections under the product certification scheme.
The Bureau's certification fees are the same for imported and domestically produced goods.
68. The Bureau also certifies that exports meet overseas or international standards under the
export quality certification scheme.  In 1990, 80 requests for export certification were received, and
97 export certificates issued.  The Bureau occasionally tests tea for export, as well as chillies, peas,
and macadamia nuts.  Tobacco exports are tested for pesticide and insecticide residues.
69. The MBS authorized the establishment of the Consumers Association of Malawi (CAMA) in
1994.  The Bureau is also responsible for metrology inspection, verification, and calibration to
validate measuring and weighing instruments for trade and industry.  Certain product-specific
(domestic) legislation, such as the Standardization of Soap Act of 1985, require goods produced or
imported into Malawi to meet the Bureau's standard s.  However, such legislation is now used less
frequently.  Another example is the legislation restricting the iodine level of salt for health reasons.
(b) Sanitary and phytosanitary (SPS) requirements
70. SPS measures in Malawi on plants and plant products are the responsibility of the Plant
Quarantine Services of the Ministry of Agriculture a nd Irrigation.  The relevant legislation is the Plant
Protection Act of 1969.  Accompanying regulations include the Plant Protection (Import) Regulations,
the Plant Protection (Export) Regulations of 1969, and various government notices, such as Notices107/1969 and 32/1982.  Malawi is a member of the International Plant Protection Convention and the
Phytosanitary Council of the OAU.  Malawi is also participating in efforts to harmonize phytosanitary
arrangements among SADC members.
71. Imports of all plants and parts (whether living or dead) are subject to quarantine and must be
inspected.  A permit issued by the Plant Quarantine Service is required to import seeds and plants for
                                                     
40 Goods may be conditionally released if complian ce testing exceeds 20 days, but they cannot be sold.WT/TPR/S/96 Trade Policy Review
Page 54
sowing, planting, and processing, as well as plant products for consumption.41  Imports of seeds as a
means of propagation are preferred, and a plant import permit will not be granted for importation of
vegetative propagating materials that can be grown equally well from seed.  Imports of all plants and
plant products must be accompanied by phytosanitary and inspection certificates.
72. Soil is a prohibited import.  Cereals, like maize and rice, and honey must be accompanied by
a fumigation certificate.  Imports of plants and seeds, such as tomatoes, potatoes, sugar cane,groundnuts, ginger, cassava, taro, soybeans, and ch rysanthemums must be grown in post-entry
quarantine facilities approved by the Plant Quarantine Service.  Imports may be prohibited or subject
to additional conditions when originating from countries with dangerous pests and diseases.  Imports
of certain fruit, such as grapes, apples, peaches, plums, pears, citrus, bananas, pumpkins, gourds, and
strawberries from countries other than Africa, the EU, and North America, are prohibited.Tobacco-leaf imports are prohibited, except from sub-Saharan African countries.  Sweet potato and
Irish potato from all countries are prohibited imports.
73. Imports of flower bulbs, for propagation, from  outside Southern Africa, the Netherlands,
Germany, the United Kingdom, Israel, North Americ a, Australia, and New Zealand are prohibited.
Seeds for sowing tea are also prohibited, except from sub-Saharan African countries;  as are rubberseeds from tropical America;  and passi on fruit from Australia and New Zealand.
74. Animal quarantine is handled by the Department of Animal Health of the Ministry of
Agriculture and Irrigation.  The main legislation is the Control and Diseases of Animals Act of 1967,
as amended.  This provides authority for the Minister responsible for agriculture to issue orders to
prohibit or regulate imports of animals, including use of quarantine stations.  Subsidiary legislation,
the Animal (Import) Rules of 1968, specifies that imports of animals and animal products require a
permit issued by the Chief Veterinary Officer, subject to any conditions considered necessary toprevent the disease spreading to Malawi.  Animals and animal products must be certified as free from
disease before importation.  Quarantine periods for live animals must be at least 28 days;  quarantine
is applied selectively and is not required if the animal was imported from a disease-free country.
75. Malawi applies temporary restrictions, including bans, on imports of animals and animal
products from certain countries known to have certain  diseases.  It currently maintains a temporary
ban on such imports, including livestock feed, from the EU because of BSE.  Although the legal basis
is currently uncertain, Malawi does not allow imports of GM foods, or poultry and other meats subject
to growth hormones.  Animal imports from certa in disease-infected regions in Zimbabwe and
South Africa are also banned.  As from 1 March 2001 poultry and eggs imported as re-exports from
third countries are prohibited.
42  Imports may resume with countries that have disease-free status for
six months.
76. No distinctions are made between imported and domestic products in the application of
Malawi's quarantine measures.  The Ministry, specifically the Department of Animal Health and
Industry (for animal protection) and the Bvunbme Agricultural Research Station (for plant protection),
has been notified to the WTO as Malawi's national enquiry points under the SPS Agreement.43  The
                                                     
41 Special permission is needed to import weeds, micro-organisms potentially capable of causing plant
disorders, insects, and certain other materials and organisms.
42 WTO document G/SPS/N/MWI/1, 8 January 2001.
43 WTO documents G/SPS/GEN/27/Rev.8, 8 March 2001, G/SPS/ENQ/12, 4 July 2001, and
G/SPS/NNA/2, 5 July 2001.  Malawi presented a case study on the roles of the Department and the Station tothe WTO Committee on SPS Measures under the transparency provisions of the Agreement in 1999 (WTOdocument G/SPS/GEN/150, 6 December 1999).Malawi WT/TPR/S/96
Page 55
Ministry of Commerce and Industry has been notified as the national notification authority.  Malawi is
a member of Codex Alimentarius, OIE, and IPPC.44
(c) Marking, labelling and packaging
77. A national standard stipulates labelling requirements for pre-packed foods sold domestically.
These mainly reflect Codex Alimentarius labelling requirements.  From 1 March 2001, imports of
eggs and poultry meat require "best before" labelling.  This was introduced by amendments to theimport permit requirements so as to prevent the introduction of sub-standard, unwholesome poultry
products into Malawi.
45  It was handled by the Ministry responsible for agriculture.
(viii) Government procurement
78. Existing Interim Procurement Guidelines were issued in 2000, and are contained in Cabinet
Circular No. 1/2000.  All ministries and departments must source their supplies from governmentstores, irrespective of limits and price.  If the goods are not available, approval can be sought from the
Stores Controller to procure directly from approved suppliers within specified limits.  A list of
approved suppliers is maintained and circulated to ministries.  While foreign firms are not excluded,
only domestic suppliers are currently approved.  At least three written quotations are required.  All
tenders by ministries and departments, except mainly the Army, Police, and the National IntelligenceBureau, must be cleared by the newly established Contracting-Out Unit, located within the Office of
the President and Cabinet.  Ministries and departments are to establish internal procurement
committees to deal with procurement.  Disputes – there have been none so far – would be referred to
an arbitrator acceptable to the procurement agency and the suppliers.
79. The general limits on approval of procurement contracts for the Contracting-Out Unit are
MK 3 million per contract on goods, works, and services, and MK 5 million on plant and motor
vehicles.  The Office of the President and Cabinet must approve larger amounts.  Procurement ofplant and vehicle hire must be from the Gove rnment Plant and Vehicle Hiring Organization.
Procurement of all medical drugs and supplies, including equipment, above MK 500,000 is by tender
issued by the Medical Buying Committee, and must be approved by the Contracting-Out Unit if above
MK 2.5 million.  Contracts below MK 500,000 can be processed by the Central Medical Stores.
80. Procurement is to be by written invitation to tender, with a minimum period allowed of
28 days.
46  Bidders must indicate whether the goods to be supplied are imported or locally produced.
A 15% margin of price preference applies to domestic suppliers of goods and services, and a 7.5%
margin for civil works.  Bids for goods and services are to be evaluated based on price (30%),
delivery period (20%), financial capability (20%), previous performance (15%), and adherence to
technical specifications (15%).  To be eligible for civil works, suppliers must be registered with the
National Construction Industry Council.  Civil works contracts are evaluated based on specific
experience (20%), adequacy of proposed work plan (20%), qualifications and competency of key staff
(20%), local participation (15%), pervious performance (15%), and financial capability (10%).
Evaluations are submitted by the procuring agency to the Contracting-Out Unit for approval, which is
to be given within 14 days.  The Unit is also responsible for monitoring procurement by agencies toensure that the guidelines are implemented.
                                                     
44 WTO document G/SPS/GEN/49/Rev.2, 23 October 2000.
45 WTO document G/SPS/MWI/1, 8 January 2001.
46 Restrictive tenders (minimum of three suppliers) and single tenders require prior approval from the
Contracting-Out Unit, which will be provided only in special circumstances.WT/TPR/S/96 Trade Policy Review
Page 56
81. The size of the Government procurement market in Malawi is unknown.  Approvals by the
Contracting-Out Unit are believed by the authorities to cover well under half of total public
procurement.  In 2000/01, procurement approved  by the Unit amounted to MK 5.5 billion
82. The Government intends to reform public procurement by introducing codified rules that will
be administered by a central body.  A Public Procurement Act has been drafted, but is not expected to
be implemented until mid 2002.  This will establish a Malawi Public Procurement Authorityresponsible for monitoring and oversight of public procurement, and for the development of an
appropriate regulatory and legal framework.
47  To bid or be eligible for award of a public contract,
bidders must be suitably qualified and entities must be registered with the Registrar of Companies,
and contractors with the National Construction Industry Council of Malawi.  Corrupt and fraudulent
practices are specifically illegal.48  All public procurement is to be covered by the legislation.
Procurement agencies are expected to implement the Government's small and medium-sized
enterprise promotion programme and to increase their participation in procurement activities.
83. The draft legislation specifies open tender as the main procurement method.  Restricted
tender, using a minimum of three bidders, where possible, may be used only when there are a limited
number of bidders that are well-known to the procuring entity, or when the cost of processing a largenumber of bids is "disproportionate to the value of the procurement."
49  International tenders are to be
invited, via appropriate advertisements overseas, when the amount exceeds a set level, still to be
determined, or when there is no national supplier or only one supplier, and when the goods or services
are not available at competitive prices.  Two-stage tendering is required, whereby initial tenders
contain proposals without prices.50  Quotations must be requested from at least three bidders for
procurement of consultants' services.
84. Margins of price preference in favour of domestic bidders are proposed in the draft
legislation:  20% for goods and 10% for works and construction.  Any bidder may request the
procuring agency to review its decision, provided it is submitted within ten working days.  The
agency must complete the review within ten working days.  These decisions may in turn be appealed
to the Authority within ten working days, and are to be processed within ten working days.  The
Authority's decision may be appealed to the High Court.  The Authority is required to auditprocurement regularly.  Compliance with the proc urement regulations is obligatory for procuring
entities and other participants in public procurement (Section 49 of the draft legislation).
85. Malawi is neither a member of, nor observer to, the Plurilateral Agreement on Government
Procurement.
(ix) Local-content requirements
86. A number of end-use industrial tariff rebates on imported inputs included in the customs
schedule are subject to manufacturers producing domestically certain components or other production
                                                     
47 The Authority is to be governed by a Board comprising seven members appointed by the Minister,
including representatives from key ministries, such as Treasury, and the private sector.
48 Corrupt practices, in accordance with the Corrupt Pr actices Act, cover the offering, giving, receiving
or soliciting of a pecuniary value to influence a public of ficial in the procurement process or contract execution.
Fraudulent activities mean a misrepresentation of facts to influence procurement decisions, including collusive
practices to establish artificially high prices.  It is also illegal to "artificially" divide procurement contracts to
avoid monetary thresholds set in the legislation.
49 Section 18 of the Third draft of Public Procurement Act, 2001, 5 February 2001.
50 Single-stage tendering is permitted only in specified circumstances, such as where the contract value
does not exceed the set threshold (yet to be determined).Malawi WT/TPR/S/96
Page 57
approved by the Minister of Finance and Economic Planning.  These apply to televisions, radios and
sound recorders, refrigerators and other cooling equipment, and motor vehicles.  These impose local-
content provisions on domestic manufacturers.  For example, to obtain the tariff rebate on eligible
materials imported for use in making televisions, radios, and sound recorders, "at least the basic
chassis or such alternative parts and components as approved by the Minister in Malawi" must be
made in Malawi.  Utilization of local raw materials is also among the factors considered in grantingexport-processing zone status (section (3)(v) below).
(x) Other measures
87. According to the authorities, Malawi has not taken any trade sanctions, except those endorsed
by the United Nations Security Council or other regional organizations of which it is a member.
88. No official countertrade or offset arrangements, or agreements designed to influence the
quantity or value of goods and services exported to Malawi are currently in force.
89. Strategic reserve stocks are required for products such as maize (Chapter IV(2)(ii)(b)).
(3) M
EASURES DIRECTLY AFFECTING EXPORTS
(i) Registration and documentation
90. There are no specific requirements for exporters.  Export documentation includes an exchange
control (CDI) form for all exports exceeding US$1,000 as well as any certificates of origin required
for preferential treatment purposes.  Export receipts must be collected within two months from the
date of export.
91. Export surrender requirements were abolished in February 1994, except for traditional
products such as tobacco, tea, and sugar.  The share of export receipts surrendered to the Reserve
Bank on these products was reduced from 60% to 40% in May 2001.  Foreign currency deposit
accounts are allowed for exporters and full repatriation of profits is permitted.
(ii) Export taxes
92. Dutiable products are tobacco, tea, and sugar (Fifth Schedule of the Customs tariff).
However, since April 1998 the rate of export tax has been zero.  Temporary export duties were
previously applied for revenue reasons to tobacco and sugar from April 1995, initially at a rate of
10%, but reduced to 8% from April 1996 and to 4% from April 1997, when coffee was also included.Such duties would be levied on the "normal selling pr ice", i.e. the "price fetched at the time the goods
are free on board, including packaging and any other duty payable."  The rate and coverage of export
duties are prescribed by the Minister responsible for finance.
(iii) Export prohibitions, controls, and licensing
93. There are no general export licensing requirements.  Export licences apply only to war
implements other than arms and ammunition;  cert ain atomic energy materials of strategic importance;
petroleum products;  wild animals, trophies, and products of such animals;  maize and maize meal;
and unmanufactured tobacco and tea.  These are maintained on various grounds, including for
environmental reasons as well as to ensure essential or sufficient supply of certain products, such as
maize.  Export licences are generally issued by the Ministry of Commerce and Industry, and areregulated by the Control of Goods (Import and Expo rt) Act.  Export licences for tobacco and tea are
administered by the Tobacco Exporters Association of Malawi and the Tea Association of Malawi.WT/TPR/S/96 Trade Policy Review
Page 58
94. Malawi maintains export prohibitions only under international agreements and conventions.
No export quotas apply.
(iv) Export assistance
95. Malawi assists exporters by providing various tax incentives (Export Incentives Act, 1989).
Such incentives apply only to exporters registered with the Malawi Export Promotion Council
(MEPC).  Registration is approved if the Council is satisfied that the business will contribute towardsthe economic development of Malawi and will generally be in the interest of the national economy
(Section 18).
51  Registered exporters receive a tax allowance for income tax purposes equal to 12% of
the gross receipts from non-traditional exports, that is, goods other than tobacco, tea, coffee, and sugar
(Export Incentives (Exclusion) Order).  The allowance was introduced in 1989 at a rate of 4%. Based
on export performance, the incentives may be seen as export subsidies.  Moreover, although theincentives are aimed at export diversification, by excluding traditional exports, they place the latter at
a disadvantage.  Some 80% of Malawi’s exports are from registered exporters.
96. The Export Promotion Council also provides technical assistance to registered exporters
aimed at diversifying products and markets;  quality improvements;  effective export marketing;
reducing production costs;  and promoting investment in export-oriented enterprises.
97. Several other incentives apply generally to all exporters, whether or not registered with the
MEPC, including firms manufacturing under bond and t hose eligible for drawback (section (2)(ii)(e)
above).  Exporters receive an allowance equivalent to 25% of the international transport costs incurred
on non-traditional exports to offset these costs.  Since Malawi is landlocked, most exports are either
transported directly by air or hauled by road and rail through neighbouring countries to seaports.  No
excise taxes apply to purchases of raw materials and packaging materials made in Malawi for those
firms manufacturing under bond.
98. The incentive schemes are a clear recognition by the authorities that the taxation system and
the tariff structure impose a substantial bias against exports.  However, export incentive schemes
create new distortions by effectively discriminating against companies producing for the domestic
market.  Lower overall tariffs and ensuring indirect taxes fall on final consumption only (instead of
production) could be a more efficient approach.
52
99. Malawi does not currently apply any export performance requirements on investors.
However, the proposed introduction of a points scheme as the basis for approval of tariff and surtax
rebates on materials for investors includes export potential as one of the criteria (Chapter II(6)(ii)):
the higher the total points awarded, the greater the rebate levels.  The points range from one for export
shares of up to 20% to five if exports exceed 85% of production.
(v) Export-processing zones
100. Legislation to establish export processing zones (EPZ) was passed in December 1995 (Export
Processing Zones Act), based on the Mauritian model.   Applications for EPZ status are appraised by
the Export Processing Zones Appraisal Committee, and the scheme is administered by the Ministry of
Commerce and Industry.  Factors considered in granting EPZ status include the labour intensive
                                                     
51 Refusals by the Council are referred to the National Export Policy Committee for review.  Such
decisions, including cancellation of registration, may be appealed to the Minister of Commerce and Industry.
52 The Malawian surtax, by providing tax credits on inputs used in production whether exported or not,
has such appeal, but further rearrangement of taxes to shift the burden from manufacturing to consumption isneeded.  National Bank of Malawi (2001).Malawi WT/TPR/S/96
Page 59
nature of the activities and their contribution to employment;  use of advanced technology;  utilization
of local raw materials;  export-oriented activities other than traditional exports;  availability of
sufficient storage facilities;  and evidence of export markets.  Any factory or area of land may be
declared an export-processing zone.  Thus, single enterprises can be designated as having such status
(free points) without physically locating in a nominated export-processing zone.  Eligible exports
include non-traditional exports and services.  EPZ stat us is given for five years, then subject to two-
yearly renewals.  As well as receiving duty-free materials and equipment, such enterprises also benefit
from corporate income tax exemption;  until 1998, they were taxed at 15%.  This assists exporters
substantially since the standard tax rate for companies headquartered in Malawi is 30%.53
101. The major condition for granting EPZ status is that total production is exported.  However, a
small share of production can be sold on the domestic market with the approval of the Minister ofCommerce and Industry, subject to the payment of the appropriate duty on all materials used to
produce those goods (Section 17 of the Act).  Although not specified in the legislation, the authorities
indicated that such permission would mainly cove r product rejects that companies could not export,
and domestic sales would normally be limited to 20% of the enterprise’s annual production.
54  While
other criteria apply, export-processing zones effectively operate as a general export incentive scheme.In sum, Malawi provides more generous incentives to export-oriented companies than to firms
producing for the domestic market.
102. As at July 2000, 21 firms had been approved for EPZ status, of which 19 were operational.
Most produce textiles and garments.  Foreign and domestic investors are entitled to EPZ status.
(vi) Export promotion and finance
103. The Government funds export promotion activities undertaken by the Malawi Export
Promotion Council, which was established in 1971 by the Export Promotion Council Act, 1971.  Itsobjective is to facilitate the development of sustained and competitive exports of agricultural and
manufactured products, in particular, focusing on high-value non-traditional exports, aimed at
promoting diversification.  The Council identifies potential overseas markets and advises exporters on
product development, costing, and pricing.  It orga nizes trade fairs, and works with the Government in
rationalizing export procedures and formulating export policies.  The Council's total funds in 1998-99amounted to MK 17.8 million, of which the Government provided MK 12.5 million.  It is responsible
to the Minister for Commerce and Industry.
104. The Council's Medium Term Strategic Plan 1997-2001 is aimed at achieving annual export
growth of 2.5% for non-traditional exports, and increasing regional exports by 20% by 2001.
Regional markets are the main outlet for non-traditional exports, which include textiles, garments,macadamia nuts, cotton, flowers, pulses, and dhals.   The Plan proposed commercialization of the
Council's activities and the phasing-out of gove rnment funding by 2005,  the introduction of 1.5%
levy on luxury imports to finance the Council.  However, the feasibility of this plan is uncertain, and
the Council is still fully government funded.
105. An export financing scheme established by the Reserve Bank was abolished.  It was
unsuccessful as the conditions imposed, such as having to provide 30% of the finance commercially,
could not be met by the small and medium-scale exporters targeted by the scheme.  An export
guarantee fund providing 100% loan finance is now being considered.
                                                     
53 Companies that have their head offices located overseas are taxed at a rate of 40%.
54 According to authorities, there is minimal leakage of unapproved production and duty-free materials
onto the domestic market.WT/TPR/S/96 Trade Policy Review
Page 60
(4) MEASURES AFFECTING PRODUCTION AND TRADE
(i) Incentives
106. The Investment Promotion Act of 1991 establis hed the Malawi Investment Promotion Agency
in 1992.  Its objective is to promote and facilitate investment, both domestic and foreign.  The Agency
is directly responsible to the Ministry of Commerce and Industry.  It is legislatively required to give
priority to investment in manufacturing, agriculture, mining, fisheries, tourism, and forestry, as wellas to any other subsector determined periodically by the Ministry.  The Agency is fully funded by the
Government.  Malawi's investment policy is contained in the Statement of Investment Policy and the
Investors' Guide, both of which are incorporated in the legislation and revised periodically by the
Government.
107. Various incentives, such as income tax holidays, are provided to encourage investment
(Chapter II(6)).  Income tax concessions also apply, including an accelerated depreciation allowance
(in the first year) of 40% of eligible expenditure on new buildings and machinery (20% on used
items).  Manufacturing companies may deduct all operating expenses incurred up to two years prior to
commencing production.  Manufacturers may also  import duty-free raw materials and heavy goods
vehicles with capacity of at least ten tonnes.  Life insurance businesses are allowed to a concessionalcompany income tax rate of 21%.
(ii) Credit arrangements
108. The Government intends to establish a credit guarantee scheme for small- and medium-scale
enterprises.  Concessional loans ranging from MK 50,000 to MK 500,000 are granted.  The Malawi
Rural Finance Company also provides loans to small-scale farmers, generally on commercial terms.
(iii) State-owned enterprises and privatization
109. The parastatal Petroleum Control Commi ssion (PCC) no longer has a monopoly on the
importation of petroleum products;  this ceased in 1999, and petroleum products are now imported by
a private sector consortium.  The marketing and export of sugar are controlled by the parastatal Sugar
Corporation of Malawi.  The exportation of tobacco has been liberalized substantially, but all exports
are still required to take place through a single auction house.
110. The Government embarked on a privatization programme in 1996 with the enactment of the
Public Enterprise (Privatization) Act and the creation of the Privatization Commission.  The
Commission is solely responsible for implementing the divestment programme approved by Cabinet.
It also formulates privatization policy guidelines for cabinet approval.  Foreign investors have
participated in about 50% of all privatization transactions to date.
55  The Government's intention is to
divest all ownership, except in exceptional cases where the regulatory framework is consideredinadequate.  In these cases, the Government would consider retaining a special shareholding to enable
it to intervene in the national interest, but it does not apply "golden share" status to state ownership.
The Government has refrained from divesting unregulated monopolies or giving special privileges to
privatized enterprises, with a view to avoiding the creation of private monopolies.  Divestment is
mainly by competitive tender or negotiated sales of shares to the private sector.
111. Privatization proceeds are deposited in a specially created fund, called the Privatization
Revenue Account, controlled by the Ministry of Finance and Economic Planning and held at the
Reserve Bank.  The proceeds are used for funding the direct costs of the Commission and the
                                                     
55 Kaluwa (2001).Malawi WT/TPR/S/96
Page 61
privatization programme;  restructuring public enterprises to be privatized;  and as part of the
Government's development budget.  Government ownership currently includes directly owned
enterprises (e.g. public utilities), and substantial indirect equity holdings in private enterprises through
the state-owned Malawi Development Corporation (MDC).  This state-owned development finance
institution was created to develop agricultural, commercial, industrial, and mineral activities by
investing in such projects, often with private sector partners.  A number of its shareholdings havebeen privatized.
112. The objectives of the privatization programme are to improve efficiency, to reduce
monopolies so as to increase competition, to increase  local participation in privatized enterprises and
to raise government revenue.  Many parastatals had accumulated large losses, thereby becoming a
heavy burden on the government budget.  Privatizations are based on a Divestiture Sequence Plan thatcovers 100 public enterprises (Table AIII.3).
56  At end-June 2000, almost 40 enterprises had been
privatized, mostly in manufacturing and hotels, with total proceeds of approximately MK 1.1 billion
(Table AIII.4).57  However, many of these were relatively small enterprises.  The major public
enterprises, such as the utilities and banks, remain state-owned.  The main privatizations to date were
of Malawi Railways (Chapter IV(5)(iii)(a));  the Mchenga Coal Mine;  and the Commercial Bank ofMalawi, The National Insurance Company Ltd, SUCOMA as well as the National Bank of Malawi
have also been partially privatized (Chapter IV(5)(i)).
113. Recent emphasis has shifted to the privatization of public utilities, especially
telecommunications and power.  During 2000, the Privatization and Utility Reform Act was passed.
This legislation approved the Government's deci sion to borrow US$30 million to finance advisory
services to privatize large enterprises, especially of utilities, such as Malawi Telecom (MTL), power
and the two main urban water utilities, as well as in financial services and agriculture (Chapter IV(5)).The funds will also be used to enhance the re gulatory functions of the Malawi Communications
Regulatory Authority and the National Electricity Council.
114. The privatization programme has had mixed success, and has been slow at times, hampered in
part by a lack of buyers for many enterprises.  Major delays have also been experienced in preparing
some of the enterprises for privatization, due to management deficiencies, large accumulated debt,and internal resistance.  State-owned enterprises still employ over 500,000 people and account for
some 20% of GDP.  Commercial parastatals continue  to perform poorly, with total overall losses of
MK 945 million in 1999/00, up from MK 56.8 million in 1998/99.  Major losses of MK 853.8 million
were incurred by the Agricultural Developmen t and Marketing Corporation (ADMARC), and of
MK 142 million by the Malawi Development Corporation in 1999/00.
58
115. The Government suspended the privatization programme on 10 July 2001 – to enable a
review of the policy, amid general employment and other concerns, especially over the divestment of
Malawi Telecommunications – at a time when an international partner was about to be selected to
purchase a 30% stake.59  However, the review found that privatization had, on balance, generated
positive effects on the economy, including improved efficiency and export performance of divested
                                                     
56 Since the Plan was established, the Government has decided to retain several relatively small
enterprises originally listed for privatization.
57 In 1999-00, six privatizations, including Malawi Railways and the Mchenga Coal Mine, were
completed, raising MK 165.0 million.  The Commercial Bank of Malawi was privatized in 2001.
58 Four commercial parastatals recorded profits in 1999/00:  ESCOM, Malawi Housing Corporation,
Blantyre Water Board, and the Lilongwe Water Board (National Economic Council, 2001, pp. 66-67).
59 UN Integrated Regional Information Networks (2001).WT/TPR/S/96 Trade Policy Review
Page 62
firms, and the Government resumed the privatization programme in October 2001.60  This decision
should help restore confidence in the privatization programme.
(iv) Competition policy
116. The Government believes that the development of an effective competition policy will help
protect consumer interests and promote economic efficiency.  It therefore endorsed the need for
competition policies in August 1999, and the Competition and Fair Trading Act, passed inDecember 1998, became operational in April 2000.  The legislation is to be administered by an
independent Competition Commission.  However, due  to financial constraints, the Commission has
not yet been established.  It will outlaw the use of restrictive business practices, such as price fixing
and collusion, and maintain competitive markets by ensuring that companies do not abuse their
dominant positions, such as engaging in predatory pricing, or create conditions for doing so throughanti-competitive cartels or mergers.
61  Consumers' interests are also to be protected through a
proposed Consumer Protection Bill, which is intended to provide a coordinated, effective, and
efficient legal and institutional framework for addressing consumer protection issues.  This legislation
is expected to become operational in 2002.
(v) Assistance to research and development
117. Several bodies provide public research and development.  The Malawi Industrial Research
and Technology Development Centre is responsible for developing technologies for industrial
application.  Agricultural research activities are conducted by the Ministry of Agriculture and
Irrigation, including the provision of limited extension services to farmers.  Research and extension
services for tobacco are provided privately by the Agriculture Research and Extension Trust.  Forest
research is provided by the Forest Research Institute, under the Ministry of Forestry, Wildlife and
Natural Resources.
(vi) Protection of intellectual property rights
118. Malawi's legislation on intellectual property provides not only protection for Malawians, but
also deals with international applications originating from other members of the Paris Convention.
Malawi became a member of the World Intellectual Property Organization on 1 January 1989, and the
Berne Convention for the Protection of Literary and Artistic Works in 1991.  It joined the NiceAgreement Concerning the International Classification of Goods and Services for the Purposes of the
Registration of Marks in October 1995.  It has been a member of the Patent Cooperation Treaty since
January 1978 and the Strasbourg Agreement Concerning the International Patent Classification since
July 1996.  It is a signatory to the Patent Law Treaty .  In addition, Malawi is a member of the African
Regional Industrial Property Organization.
119. Malawi intends to revise its intellectual property legislation to meet commitments under the
TRIPS Agreement.  However, little progress has occurred to date.  This will require substantial
foreign technical assistance, including from international institutions like the World Intellectual
Property Organization (WIPO), if it is to have WTO-compliant legislation fully implemented by 2006,
as required under the TRIPS Agreement.  A major hurdle in achieving full compliance with TRIPSwill be to provide effective enforcement, both judicially through the courts and at customs.
                                                     
60 Kaluwa, (2001).
61 Cartel agreements that are "likely to affect comp etition to an appreciable extent" are prohibited, as
are mergers that "are likely to substantially lessen competition", unless there are sufficient offsetting economicbenefits.  These may include improvements in efficiency, exports, employment, economic or technologicaldevelopment or in reduced prices to consumers.Malawi WT/TPR/S/96
Page 63
(a) Copyright
120. Copyright is protected under the Copyright Act of 1989.  Malawian legislation also provides
for protection of neighbouring rights of performers, producers of sound or video recordings and
broadcasters.  It is administered by the statut ory Copyright Society of Malawi (COSOMA), under the
Ministry of Sport and Culture.  COSOMA is responsible for registering copyright material, and
currently has about 600 registered composers/author s with about 7,000 declared works.  Copyright
protection covers both economic rights and moral rights.  The rightholder has exclusive economic
rights to reproduce or use the work.  He also has the exclusive moral right to ensure that the work is
not misrepresented.  The duration of copyright prot ection extends for 50 years after the author's death,
or for audiovisual work, 50 years after it was created or first made available to the public.  For
computer programs, the duration is ten years from the first date of use, while for photographic work itis 25 years from the date of first publication.
121. Compulsory, non-exclusive, licences may be granted to allow written work to be translated
and sold in Malawi by a citizen or resident.  Such licences can be granted only after three years for
material to be translated into a foreign language, and after one year for translation of material into a
Malawian language.  Such translated works must be sold only in Malawi, and the right owner must becompensated adequately.  Compulsory licenses to reproduce musical or artistic works may also be
granted after five years, or seven years for certain materials, under specific conditions
122. Copyright infringements are punishable by a fine of MK 15,000 and imprisonment of up to
one year.  Rightholders may also be granted compensation by the court by way of damages,
injunctions, and confiscation of profits.
123. Special regulations apply to sound record ings under the Copyright (Production and
Distribution of Sound Recordings) Regulations, 1998.  COSOMA operates a "banderole" system to
control pirated goods that are infringing copyright.  Persons producing, distributing or importing for
distribution sound recordings must have a licence issued by the COSOMA.  Such licensed materials
must have affixed an adhesive label (the "banderole") to verify their authenticity.  Other recordings
are illegal and can be seized.  They are to be held for 60 days, after which they will be destroyed
unless their authenticity is proved.  Customs officers are empowered to seize imports of more thanthree copies of recordings until such imports have  been authenticated by the COSOMA.  Applications
to clear imported recordings must be lodged wi th the COSOMA, and proof shown of authorization
from the rightholder.  Infringements are regarded as  criminal offences liable to a fine of MK 10,000
and imprisonment for five years.  According to authorities, this system has worked effectively.
(b) Patents
124. Patent protection is provided under the Patent Law of 1958.  This law provides for a patent
protection term of sixteen years from the date of lodgement of the complete application.  The patent
may be extended for up to a further period of five years, or ten years in exceptional circumstances,
under certain conditions, such as showing that adequate remuneration has not been derived from the
patent.  An invention is patentable if it is "a new and useful article (whether producing a physicaleffect or not) process, machine manufacture or composition of matter, or improvement thereof, which
is not obvious, capable of being used in trade or industry".  A national application must provide the
complete specifications of the invention.  A provisional specification is allowed, provided the
complete specification is submitted within eighteen months from the application date.  The
Government or any interested party may oppose a patent being granted within three months from the
date of advertisement, on the grounds that:  the applicant is not entitled;  the invention does not fall
within the legislative definition;  it is obvious or not useful;  the complete specification is imprecise orWT/TPR/S/96 Trade Policy Review
Page 64
inadequate;  or the application contains misrepresenting material.  Successful applications are
registered by the Registrar-General (Ministry of Justice), which administers patents.  The patentee has
full power and authority to use the invention.
125. The Patents Tribunal hears appeals against the Registrar-General's decisions.  Tribunal
decisions can be appealed to the High Court.  An interested party may apply for a compulsory licence
in the case of abuse or insufficient use of a patent right, after three years from the date the patent wassealed, or four years from the date of lodgement of the patent application, whichever is the longer.
The grounds for compulsory licences are "the reasonable requirements of the public".  This includes
insufficient use, as determined by the tribunal;  th at demand for the patented article in Malawi is not
being met adequately and reasonably;  or that the refusal to grant a licence by the patentee is
prejudicing Malawi's trade and industry interests and it would be in the public interest to grant such alicence.  The patent holder may seek relief against infringements in the High Court.  Relief by way of
injunctions and damages are available.  Offences under the legislation, such as the unauthorized claim
of a patent right, are liable to a fine of MK 500 and to imprisonment for three years.  Since 1995, 516
patents have been granted, with 107 in 2000 and 131 in 2001 (to end-July).
126. The Government is to modify the term of patent protection to 20 years.  It also envisages
changing the legislation concerning the rights conferred to the patent owner, to comply with TRIPS.
In addition, the provisions governing compulsory li cences are to be changed, especially those dealing
with non-working patents.  Other changes envisaged include deleting the provisions on issuance of
non-voluntary licences for inventions relating to food, medicine or curative devices, and revision of
legislation covering patent use for government services.  Provisions that currently allow revocation of
non-working patents impaired by importation are also to be amended.  The amendment will ensure
that the onus for burden of proof is reversed in infringing cases where the patent is in the applicationprocess.  The grace period allowed for late payment of fees is also to be changed from "not
exceeding" to "a period of " six months.
(c) Trade marks
127. The Trade Marks Act of 1958 provides for registration of trade marks.  It does not apply to
service marks.  The Trade Marks Office, headed by the Registrar, is responsible for processingapplications and maintaining the trade mark registrar.  The Registrar's decisions may be appealed to
the Patents Tribunal.  Owners of trade marks are entitled to their exclusive use.  Registered holders of
trade marks in member states of the International Convention for the Protection of Industrial Property
are entitled to registration in Malawi.  The period of trade mark protection is seven years, extendable
for a further period of 14 years.  The Trade Mark Registrar comprises four parts and every applicationmust specify the class of registration sought.  "Defensive" trade marks may be registered.  Any person
may oppose the registration of a trade mark within tw o months from the date of advertisement in the
Government Gazette .  Since 1995, 3,270 trade marks have been registered, with 620 in 2000 and 215
in 2001 (to end-July).
128. Legislation is to be amended to protect service marks, which are not currently covered, and to
allow trade marks to be renewable indefinitely.  The provisions on rights conferred by registration
will also be amended to provide protection against use of identical or similar signs for goods or
services that are likely to cause confusion, and of well-known trade marks.  In addition, non-use
provisions will be amended to provide that a mark be de-registered only after a minimum
uninterrupted non-use period of three years.  New provisions are to be added covering collective
marks and protection of national emblems, as well as layout designs (topographies of integrated
circuits) and of "undisclosed information".Malawi WT/TPR/S/96
Page 65
129. Although legislation does not provide for criminal procedures and penalties for wilful
counterfeiting of marks, the Trade Descriptions Act of 1987 makes it an offence to forge a trade mark
or to falsely apply to goods a mark likely to deceive.  The Merchandise Marks Act of 1958 also
prohibits the forgery of trade marks or the false application to goods of any trade mark.  Importation
of goods with forged trade marks or false or deceptive trade descriptions is also prohibited.  Offences
are punishable by fine and imprisonment for one year (two years for subsequent offences).
(d) Designs
130. Registered designs are protected by the Registered Designs Act of 1958, which is
administered by the Designs Office headed by the Registrar of Designs.  The Registrar is responsible
for maintaining a register of designs and for examinin g applications for registration.  Disputes arising
under this legislation can be appealed to the Patents Tribunal.  To be registered, the design must beoriginal and not similar to a design already registered.  The period of protection is five years,
extendable for two five-year periods.  Compulsory licences may be granted where the Registrar
determines that a design is not applied in Malawi to a "reasonable extent".  Excluded from registration
are sculptures or similar works;  wall plaques and medals;  and printed matter.  The Government may
make use of or authorize the use of a design by persons other than the registered owner in certaincircumstances.  Since 1995, 43 designs have been registered;  15 in 2000 and 3 in 2001 (to end-July).
131. Infringing cases are heard by the High Court.  Relief by way of injunctions and damages may
be awarded to the registered design holder.  Damages are not possible where the defendant was not
aware and had no reasonable grounds at the time for supposing the design was registered.  False
representation of a design is subject to a fine of MK 500 and imprisonment for six months.  Malawi is
a member of the International Convention for the Protection of Industrial Property (the Paris
Convention).  As such, Malawi accepts registration of designs registered in member countries.  It hasalso acceded to the Protocol on Patents and Designs Within the Framework of the Industrial Property
Organization for English Speaking Africa.
(e) Geographical indications
132. Malawi intends to introduce legislation protecting geographical indications, either as a
separate act or incorporated in the Trade Mark Act.  Only partial protection currently exists.Certification marks can be registered under the Trade Marks Act.  These are marks that distinguish
any goods by "origin, material mode of manufacture or performance, quality, accuracy, or any other
characteristic".  The Trade Description Act also make s it an offence to apply false trade descriptions,
including "place or country where the goods were assembled, manufactured, produced or mixed".