Client Newsflash

Enactment Of New Trade Law

The House of Representatives (Dewan Perwakilan Rakyat – “DPR”) passed the long-awaited Bill on Trade on February 11, 2014. For the previous 80 years, Indonesia had relied on the Bedrijfsreglementerings Ordonnantie 1934 from the Dutch colonial period, along with a set of ministerial implementing regulations.
Following are highlights of the key provisions.

IMPORT AND EXPORT

The Trade Law reaffirms the import and export requirements previously scattered across various regulations, including the requirements to obtain Importer Identification Number (Angka Pengenal Importir – API) and Registered Exporter (Exportir Terdaftar – ET) status.

Any goods may be imported or exported unless specifically prohibited, restricted, or stipulated otherwise by law. The Government can restrict import or export of goods to (a) protect national safety or public interest, including social, cultural, and moral welfare; (b) protect intellectual property rights; or (c) protect the health and safety of humans, animals, fish, plants and the environment.

The Government may limit export in order to (see Art. 54):

a. ensure fulfillment of domestic needs
b. ensure availability of raw materials for domestic processing industries
c. protect sustainability of natural resources
d. increase economic value of raw materials and natural resources
e. anticipate price fluctuations of export commodities on the international market
f. maintain domestic price stability of certain commodities

As for imports, the Government may limit importation of particular goods to expedite the growth of, establish, and protect domestic industries or to maintain the balance of payments and balance of trade. In general, importers can only import new goods, except for certain used capital goods under specific circumstances and with permission from the Minister of Trade.

STANDARDIZATION

All goods traded on the domestic market must bear labels in Indonesian language and must satisfy Indonesian National Standards (Standar Nasional Indonesia“SNI”) requirements (or other mandatory technical requirements) by affixing the SNI sign or a conformity sign/certificate recognized by the Government.

Standardization also applies to services, including business services; distribution; communications; education; environmental services; financial services; construction and technical services; health and social services; tourism, recreation, cultural, and sports services; transportation; and other services. Service providers must comply with SNI requirements.

E-COMMERCE

Electronic trading transactions must observe and comply with the Electronic Information and Transaction Law, and enterprises that trade goods or services by way of e-commerce must provide complete and accurate information on the traded goods/services, comprising at least the enterprise’s identity and legality as producer or distributor; technical specifications of goods; technical specifications or qualifications of services; price and terms of payment; and terms of delivery. Enterprises that fail to provide complete and accurate information may have their trading license revoked.

INTERNATIONAL TRADE AGREEMENTS

Under Law No. 24 of 2000 on International Agreements, the Minister of Foreign Affairs must consult with the DPR for preparation and ratification of international agreements impacting the public interest. Article 10 of Law 24/2000 stipulates that ratification of an international agreement must be done through a law (Undang-undang) passed by the DPR if the agreement relates to (a) politics, peace, defense, or national security; (b) change or stipulation of the territory of the Republic of Indonesia; (c) state sovereignty; (d) human rights and environment; (e) a new principle of law (kaidah hukum baru); or (f) foreign loans or grants. Law 24/2000 does not specifically mention international trade agreements.

The Trade Law creates a significant role for the DPR, which now has rights of consultation and approval over trade agreements that impact the national interest and must refuse to ratify agreements that put the national interest at risk. If the agreement causes a “systemic impact” on the citizens’ livelihood, relates to the State’s financial burden, or requires amendments to or enactment of laws, then the agreement must be ratified through a Law (which requires approval by the DPR and signature by the President). In the absence of such systemic impact, ratification is permitted by means of a Presidential Regulation. This protocol is consistent with Law 24/2000.

The Trade Law does not define or elaborate on systemic impact or national interest risk. It is also unclear from the wording of the relevant article whether the consultation with the DPR is mandatory or optional and whether it is required for all, or just some, international trade agreements.

NATIONAL TRADE COMMITTEE

The Trade Law establishes a National Trade Committee (Komite Perdagangan Nasional“KPN”), which will be established by the President and headed by the Minister of Trade. Membership of the KPN comprises elements from the Government; institutions responsible for investigating antidumping and reward measures; institutions responsible for investigating trade security measures; institutions responsible for providing recommendations on consumer protection; the business community; and academicians or experts in trade.

The KPN will assist the Government by providing input on trade policy and regulations, trade funding, antidumping, reward and trade security measures, and domestic and international trade issues; monitoring trade policy in partner countries; and helping to formulate the Government’s position in international trade negotiations, among other functions.

DIRECT SELLING AND MULTI-LEVEL MARKETING

The Trade Law specifically bans pyramid scheme—also known as multi-level marketing or MLM—distribution systems, with criminal penalties for violators. There are also provisions on direct selling, which is the sale of goods directly to end users without a fixed retail location. Goods subject to exclusive distribution rights using the direct selling method can only be marketed by official sellers registered as members of direct selling companies. [Direct selling is governed under Minister of Trade (“MOT”) Regulation No. 32/M-DAG/PER/8/2008 as amended by MOT Regulation No. 47/M-DAG/PER/9/2009.]

SANCTIONS

Apart from administrative sanctions, the Trade Law provides stiff criminal sanctions for violations of certain requirements and restrictions. Maximum penalties include:

Indonesian language label requirement: five years imprisonment and/or fine up to five billion Rupiah
Pyramid scheme: ten years imprisonment and/or fine up to ten billion Rupiah
Carrying on trade activities without proper licenses: four years imprisonment and/or fine up to ten billion Rupiah
Stockpiling: five years imprisonment and/or fine up to fifty billion Rupiah
Manipulation of data or information on staple or important goods: four years imprisonment and/or fine up to ten billion Rupiah
Trading unregistered security, safety, health and environment-related goods: one year imprisonment and/or fine up to five billion Rupiah
Trading prohibited goods: five years imprisonment and/or fine up to five billion Rupiah
Importing used goods: five years imprisonment and/or fine up to five billion Rupiah
Export or import of prohibited goods: five years imprisonment and/or fine up to five billion Rupiah
Provision of services not in compliance with SNI, technical or qualification requirements: five years imprisonment and/or fine up to five billion Rupiah
Trading goods or services through e-commerce not in line with provided information: twelve years imprisonment and/or fine up to twelve billion Rupiah
Holding trade shows involving foreign participants or products without a license from MOT: three years imprisonment and/or fine up to five billion Rupiah

Full implementation of the Trade Law will require implementing instruments in the form of Government Regulations, Presidential Decrees, and Ministerial Regulations, as specified in the relevant provisions of the Law.


Disclaimer:
The foregoing material is the property of AKSET Law and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor should it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.


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