Regulatory Changes in Indonesian Import Regulation
Indonesia has introduced Import Regulation 07/2024, aiming to simplify the import process while addressing concerns raised by local businesses. This new regulation replaces the previous Ministry of Trade’s Regulation 36/2023, which was criticized for its overly complex requirements. Regulation 07/2024 provides clear guidelines on goods shipped by Indonesian migrant workers and details prohibitions and restrictions on the importation of goods and luggage brought by passengers from abroad. Key changes include the exclusion of certain commodities from the import category, such as fortifier premixes, auxiliary materials for wheat flour, industrial raw materials, and lubricants. However, restrictions remain on importing computers, cell phones, and other electronic devices, particularly for passengers arriving from abroad.
The primary differences between Regulation 07/2024 and 36/2023 include a significant reduction in documentation requirements and the introduction of a more user-friendly import licensing system. Under Ministry of Trade Regulation 36/2023, importers faced a complex web of paperwork and procedural steps, often leading to delays and increased costs. Regulation 07/2024 simplifies this by consolidating the necessary documents and creating a more streamlined process for obtaining import licenses.
Another noteworthy change is the introduction of more precise guidelines for the classification of goods. This helps to reduce confusion that often arose under the previous regulation by providing importers with clear requirements for various product types. Additionally, the new regulation includes measures to improve accountability and transparency in the import process, which is expected to boost confidence among both domestic and foreign companies.
8 Goods Included in the Import Restriction List
Before entering the Indonesian market, ensure your product is not included in the restriction list below. If you’re unsure about your product category, consult with us for guidance.
- Dangerous and Toxic Materials: Explosives, hazardous chemicals, radioactive materials, and asbestos
- Narcotics, Psychotropic Chemicals, and Precursors: Illegal drugs, addictive substances, and their manufacturing components
- Weapons and Ammunition: Firearms, military-grade weapons, ammunition, and related accessories
- Pornographic Materials
- Used Goods: Certain second-hand items such as clothing, tires, and electrical equipment
- Ozone-Depleting Substances: Chemicals like CFCs and HCFCs that harm the ozone layer
- Specific Foods and Drugs
- Cultural Heritage Goods
What You Need To Know Before Distributing Your Product in Indonesia
To obtain permission to distribute or market your product in Indonesia, a distribution permit must be acquired by the importer along with an import license. Foreign business owners seeking to expand their market in Indonesia must obtain this license to pass through customs clearance. Here are a general step-by-step procedures before importing your goods:
- Determine your product: Different import licenses might be needed depending on the item you are importing, this usually determined by the HS Code of the item. Currently, there are three import licenses: API-U (General Import License), API-P (Producer Import License), and API-T (Limited Import License). If you are importing plants, seeds, fish, or poultry products, a quarantine and quota permit is also required in addition to the import license.
- Import license holder: Import license can only be obtained by local legal entity, either having a dedicated distributor or setting up a legal entity.
- Talk to a Forwarder: Engage a forwarder and provide details about the recipient in Indonesia.
- Verify Licenses: Ensure that the recipient owns the correct license for your products.
- Understand the Tariffs: Tariffs here are imposed by the Indonesian government based on the Customs Value of the imported items, which includes cost, insurance, and freight. HS Code will be used to classify goods for customs purposes.
- Tax payment: An 11% VAT applies to most imported goods, calculated based on the value of the goods and the import duty. For imported luxury goods exceeding a certain value might require an additional 10% luxury tax.
Understanding Taxable Goods
Value-Added Tax (VAT) applies to the provision of services and the transfer of taxable goods in Indonesia. Businesses with annual revenue exceeding 4.8 billion rupiah (USD 321,677) are required to register for VAT, though businesses with lower revenue may voluntarily register. The nation is overhauling its tax structure to improve revenue and collection. Currently, the VAT rate for most manufacturers, retailers, wholesalers, and importers is 11%; this rate will rise to 12% by 2025. There is no VAT on the export of services or tangible and intangible goods.
Among the taxable goods and services are:
- Delivery of taxable services
- Import of goods into a customs area
- Consumption of taxable goods outside the customs area but within the customs area
- Export of taxable goods by a VAT-registered entity
How BI International Can Help with the Import License
At BI International, we understand the complexities of the first product entry to Indonesia. Therefore, we offer a comprehensive suite of services designed to streamline your entry into Indonesia. Our systematic approach ensures a time-efficient process, allowing you to focus on what you do best – growing your business.
Conducting Regulatory Assessment to kickstart your market exploration
Understanding where the regulations fall for your product is the most important step every corporation must take to begin exploring the Indonesian market. Different products marketed in Indonesia are regulated by various ministries and must follow the procedures overseen by the respective governing bodies. For example, any consumable products such as food and beverages, medicines, supplements, and cosmetics are under the supervision of BPOM (Badan Pengawas Obat dan Makanan) or the National Agency of Drug and Food Control. Specifically for a dairy products require approval from the Ministry of Trade and the Ministry of Agriculture.
Navigating these complexities requires a regulatory assessment to determine the necessary procedures for product entry. This assessment helps to see the feasibility of the entire registration process, including the time frame and costs involved in seamlessly registering your products.
Having B2B Matchmaking session with trusted distributor in the area
Another way to streamline your market entry into Indonesia is by partnering with a trusted distribution partner in the region who can represent your brand. To obtain your marketing and distribution license, a legal local entity is required. This option is suitable for those looking to tap into the market with lower operational costs before deciding to fully invest in the market.
Registering your product in Indonesia
The first step is to ensure that your product meets all the necessary standards set by the relevant Indonesian authorities. This typically involves submitting detailed documentation about the product’s composition, safety, and efficacy. Additionally, you’ll need to undergo testing and obtain certification from the appropriate bodies, such as BPOM for consumable products or the Ministry of Agriculture for dairy products.
In Indonesia, you need to register a legal entity in order to be able to do product registration. This also includes obtaining import license and distribution permit. Engaging with local regulatory consultants can streamline this process, ensuring that all paperwork is correctly completed and submitted in a timely manner.
Establishing business entity in Indonesia
To aim for a significant market presence, establishing your company in Indonesia is a way to realize that. The process begins with choosing the appropriate business structure, such as a limited liability company (PT) or a foreign-owned enterprise (PMA). Each structure has specific requirements and implications for your business operations, including the minimum capital investment, ownership restrictions, and compliance obligations. Engaging with a local legal advisor can help you understand these requirements and choose the best structure for your business goals.
After deciding on the business structure, you will need to complete the necessary incorporation procedures. This involves registering with the Indonesian Ministry of Law and Human Rights, obtaining a taxpayer identification number (NPWP), and registering for social security with BPJS. Additionally, you must open a local bank account and deposit the required initial capital. The entire process can take several weeks to months, depending on the complexity of your business and the efficiency of your documentation.
Opening a Representative Office
Opening a representative office in Indonesia can be a strategic move for companies looking to establish a presence without committing to full-scale operations. A representative office allows you to conduct market research, build relationships with local partners, and understand the regulatory environment without engaging in direct sales or revenue-generating activities. The first step is to obtain a license from the Indonesian Investment Coordinating Board (BKPM), which requires submitting detailed information about your company and the intended activities of the representative office.
Once the license is granted, you will need to set up the office, which includes renting office space, hiring local staff, and establishing a local bank account. The representative office must adhere to specific regulations, such as not engaging in profit-making activities and submitting regular reports to BKPM. Despite these limitations, a representative office can provide valuable insights and lay the groundwork for future expansion. It allows you to gradually build your presence in Indonesia while minimizing risk and investment.