This article first appeared in The Edge Financial Daily, on February 25, 2016.

KUALA LUMPUR: Customs officers have raided more than 10 steel companies, including four public-listed entities, in the past two days, stepping up efforts on curbing illegal imports of steel products, particularly hot-rolled coils (HRC).

According to industry players, this is an “unprecedented scale”.

It is understood that Customs officers brought along policemen in a scale of more than 20 personnel and conducted audit of multiple steel sites across the country to check if the imports of steel have followed the proper procedures.

“We are not sure of the reason for the raid in such [a] scale, [and] who initiated it,” an industry source told The Edge Financial Daily, adding that the raid may continue over the next few days.

According to the source, there were about four listed steel players, who are mainly involved in imported steel pipes, being raided. Meanwhile, another source said, it seems that HRC is the main target.

“Customs has the right to audit companies, but it is seldom that the customs officers would conduct an industry-wide raid. It’s the first time in such a big scale,” the source said.

The source added that there is nothing wrong for Customs to carry audits and take away documents to conduct investigations as Malaysia imports a substantial amount of steel, and the officers may want to check things like whether industry players are paying the goods and services tax, and declaring imported goods.

“This is quite a shock to [industry] players; it is intimidating. Such raids are normally conducted because of complaints about certain undeclared shipments, but even for smuggling, officers will narrow down to one or two companies,” said another source.

According to him, companies that have different subsidiaries were raided simultaneously this time.

When contacted, Malaysian Iron & Steel Industry Federation president Datuk Soh Thian Lai declined to comment.

However, a source revealed that the association is trying to find out the rationale for the massive raid.

Just last month, the local downstream steel players were relieved that the government decided not to impose safeguard duties, which had been requested by Megasteel Sdn Bhd, the country’s biggest HRC producer owned by tycoon Tan Sri William Cheng.

The local steel industry has been in conundrum for a long while. The upstream players are trying to seek safeguard measures imposed by the government to defend home turf. However, downstream players want to have a more liberalised operating environment, which offers more leeway to import raw materials, such as HRC.