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A New Regulatory Framework for Indonesia’s E-Commerce Sector: Licensing Requirement and Threshold of Foreign E-commerce Business

Recognizing the rapid development of e-commerce sector in Indonesia, the Indonesian Government issued the Government Regulation No. 80 of 2019 on Trading through Electronic System (“GR 80/2019”) on November 20, 2019, with the intention to improve the governance of e-commerce sector. GR 80/2019 regulates broad aspects of the e-commerce business in Indonesia — from general requirement of e-commerce, operational aspect of the e-commerce players, contract processing, to protection of personal data. Please see our brief overview on GR 80/2019 here.

To further implement certain provisions referred in the GR 80/2019, on May 19, 2020, the Ministry of Trade (MoT) subsequently issued Regulation No. 50 of 2020 on Business Licensing, Advertisement, Development, and Supervision of Business Actors in Trading through Electronic System (“MoT 50/2020”). This regulation will become effective 6 (six) months after its promulgation date (i.e., by November 2020).

MoT 50/2020 sets forth further clarification relating to (i) the threshold of foreign e-commerce business to be deemed to have presence in Indonesia, (ii) requirement to have Indonesian representative, and (iii) general licensing requirement for e-commerce business, previously more generally regulated under GR 80/2019.

Below we highlight some notable provisions under GR 80/2019 and MoT 50/2020 (both GR 80/2019 and MoT 50/2020 hereinafter shall be jointly referred as the “E-Commerce Regulation”).

  • Broad Scope of “Trading”

Based on the E-Commerce Regulation, the term “trading” is defined broadly so as to cover both the offering of goods and services. Furthermore, Trading through Electronic System (“PMSE”) is also defined broadly as it covers any Trading activity in which the transaction is carried out through electronic system.

  • E-Commerce Players, according to Indonesian E-Commerce Regulatory Regime

The E-Commerce Regulation covers all players involved within an e-commerce trading ecosystem offering their goods or services to the Indonesian territory.

  1. Merchant includes any party who sells product or offers services through electronic system — unless they offer the goods and/or services temporarily and non-commercially. This term also covers merchant offering its goods/services regularly through social media platforms which provide PMSE facility.
  2. Platform providers (“PPMSE”) are e-commerce players which provide a platform to facilitate the electronic communication/transaction used in PMSE. PPMSE, in this regard, includes a broad range of platform providers with the following models (non-exhaustive list): (i) merchant’s own e-commerce platform; (ii) online marketplace; (iii) online classified advertisements; (iv) price comparison platform; (v) daily deals.
  3. Intermediary Service Provider (“PSP”) covers those who facilitate electronic communication (except telecommunication operator). PSP merely serves as an intermediary, which includes the like of search engine, hosting or caching provider.
  • “Deemed Presence” and Indonesian Representative Requirement for Foreign E-Commerce Platform Providers

GR 80/2019 introduced a “Deemed Presence” concept to regulate and supervise foreign PPMSE’s activities in Indonesia. Article 7 of GR 80/2019 stipulates that any foreign PPMSE which actively offers and/or carries out PMSE to customers within the Indonesian jurisdiction, which has met certain criteria, shall be deemed to have a physical presence in Indonesia. MoT 50/2020 then complements the foregoing provision by giving a much-needed elaboration on the criteria to determine foreign PPMSE’s “deemed presence”, which are as follows:

  1. the foreign PPMSE has concluded transactions with more than 1,000 (one thousand) customers within the Indonesian jurisdiction within a period of 1 (one) year; and/or
  2. the foreign PPMSE has delivered more than 1,000 (one thousand) packages to customers within the Indonesian jurisdiction within a period of 1 (one) year.

Any foreign PPMSE meeting such criteria, consequently, is required to appoint a representative in Indonesia. In this regard, such representative shall be in the form of a Foreign Trade Company Representative Office for PMSE, called “KP3A PMSE”.

  • Licensing Requirements

Please see below the summary of licensing requirements for each E-Commerce players as identified by the E-Commerce Regulations:

Licensing Requirement Remarks
Domestic Merchant 1.      Trading Business License (SIUP); or

2.      Sector-specific business license (if relevant).

If a Domestic Merchant only carries out business activity of retail through media or internet (online), then, its SIUP shall accommodate KBLI Business code 4791.
Foreign Merchant No licensing requirement. Obliged to submit its registered business license (issued by its country of origin) to the Domestic PPMSE where such Foreign Merchant offers its goods/services to Indonesian jurisdiction.
Domestic PPMSE PMSE Trading Business License (SIUPMSE). This license is also applicable to Domestic Merchant which carries out its PMSE through its own platform, under Article 8 paragraph (2) of MoT 50/2020.
Foreign PPMSE Trading Business License of Foreign Trade Representative Office for PMSE (SIUP3A PMSE), if the foreign PPMSE is deemed to have presence within Indonesian jurisdiction. This license is also applicable to Foreign Merchant which carries out its PMSE through its own platform since it is also considered as PPMSE business model.
PSP SIUPMSE, where a PSP is:

–         a beneficiary party to the PMSE transaction; or

–         directly involved in the contractual relation between parties conducting PMSE.

Applicable to both domestic and foreign PSP.

All license applications shall be submitted through Online Single Submission (OSS) System by attaching the required documents, as provided in MoT 50/2020.

***

June 29, 2020

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Date:
June 29, 2020
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A New Regulatory Framework for Indonesia’s E-Commerce Sector: Licensing Requirement and Threshold of Foreign E-commerce Business
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