As part of the government's economic deregulation package issued on 9th September 2015, the Ministry of Trade (MOT) has issued another new regulation on imports. This new regulation removes the restrictions under the previous regulation imposed on holders of General Importer Identification Numbers (API-U) to import goods which are covered under only one section of the HS Code. Unfortunately, it also removes the provision under the previous regulation which allowed holders of Producer Importer Identification Numbers (API-P) to import certain industrial/finished goods, including those to be traded, by obtaining a Producer Importer license. Other than these two fundamental changes, the new regulation follows the provisions in the previous regulation.

The new regulation was enacted by the MOT on 28th September 2015 and is set out in Minister of Trade Regulation No. 70/M-DAG/PER/9/2015 on Importer Identification Number (Regulation 70). Regulation 70 will come into force on 1st January 2016 and will revoke Minister of Trade Regulation No. 27/M-DAG/PER/5/2012 on the Provisions of Importer Identification Number as amended several times, lastly by Minister of Trade Regulation No. 84/M-DAG/PER/12/2012 (Previous Regulation).

Major Changes and Their Implications

1. API-U Holders Ability to Import Goods Under Several Sections of the HS Code

   Similar with the Previous Regulation, API-Us are issued to companies that import goods to be traded. Before Regulation 70 was issued, API-U holders could only import goods under one section of the HS Code. If an API-U holder wanted to import goods in several sections of the HS Code, a “special relationship” had to exist between the API-U holder and its overseas supplier.

   Under Regulation 70, the restriction to import goods in only one section of the HS Code has been lifted. As such, when Regulation 70 becomes effective, API-U holders can import goods under several sections of the HS Code, and a special relationship should no longer be required. API-U holders will likely welcome this development as previously they had to fulfil the special relationship requirement which lengthened the time taken to obtain an API-U.

2. Prohibition for API-P Holders to Import Industrial/Finished Goods

   Similar with the Previous Regulation, API-Ps are issued to companies for importing goods for the importers' own use as capital goods, raw materials or support materials, and/or to support production (not to be traded). The Previous Regulation provided an exemption which allowed API-P holders to import industrial/finished goods under certain criteria (i.e., test market products and complementary products) to be traded subject to obtaining a Producer Importer (PI) license from the MOT.

   However, Regulation 70 removes this exemption, which effectively means that API-P holders can no longer import industrial/finished goods to be traded. Regulation 70 further stipulates that all PI licenses that have been issued based on the Previous Regulation will remain valid until they expire. And once Regulation 70 comes into force and PI licenses expire, all API-P holders can only import goods for their own use as capital goods, raw materials or support materials, and/or to support production, and those goods cannot be traded or transferred to other parties.

   For some people, this is not a big surprise, because earlier this year the MOT began limiting the issuance and renewal of PI licenses. There is no doubt that API-P holders will be concerned about the new regulation and how it affects their ability to import industrial/finished goods to be traded. It appears that the spirit of this provision is to enhance investment in Indonesia, where the Indonesian government expects investors to invest in and build their own facilities in Indonesia rather than continue importing finished goods.

3. What the Law Says

   Other than the 2 major implications explained above, some of the provisions of Regulation 70 are similar with those of the Previous Regulation. We set out below a summary of the provisions that are worth to take note.

   • Imports can only be done by importers who have an Importer Identification Number (API).

   • There are 2 types of API:

     1. API-U; and
     2. API-P
   • API-Us are issued to companies that import goods to be traded.
   • API-Ps are issued to companies that import goods for the importer's own use as capital goods, raw materials or support materials, and/or to support production. These goods cannot be traded or transferred to other parties unless they are imported under an import duty exemption facility and have been used for own use for at least 2 years after the date of the Import Declaration Form.
   • Importers may only have one type of API, either an API-U or an API-P.
   • APIs are valid in the entire Indonesian territory including for branch offices conducting the same type of activities.
   • APIs are valid as long as the holder continues its business activities but must be re-registered with the issuing authority every 5 years.
   • API-Us and API-Ps for all foreign capital investment companies are issued by the Investment Coordinating Board/BKPM.
   • API-Ps for business entities or contractors in the energy, oil and natural gas, mineral and other natural resource management areas, based on cooperation agreements with the Indonesian government, are issued by the Director General of Foreign Trade of the Ministry of Trade.
   • In circumstances other than those outlined above, API-Us and API-Ps are issued by the Head of the Provincial Trade Services Office.
   • Regulation 70 imposes a quarterly reporting obligation on all API holders.
   • Regulation 70 requires certain corporate changes in the API-U or API-P data to be reported by the API-U and API-P holders to the issuing authority within 30 days after the changes occur, e.g., change of members of the BOD, change of address, change of a company’s name. Thereafter, the API-U and API-P holders must apply for an amendment to the API-U and API-P by using a prescribed form.
   • Regulation 70 provides a list of circumstances in which an API will not be required, such as for importing temporarily imported goods, promotional goods, goods for research and goods for scientific development.
   • Failure to comply with the re-registration and reporting requirements can lead to the API being frozen, and repeated failure to comply can eventually lead to it being revoked.
   • APIs may be revoked for among others the following reasons: (a) the license is frozen twice; (b) the license is not re-registered when required, within 30 days of freezing; (c) reporting requirements are not complied with within 30 days of freezing; (d) incorrect information was supplied in the application.
   • A company can re-apply for an API within 1 or 2 years after it is revoked depending on the violation.
   • All APIs issued prior to the promulgation of Regulation 70 are still valid but must be adjusted by 30th June 2016.
   • PI licenses issued prior to the promulgation of Regulation 70 will remain valid until their expiry.

Actions to Consider

To comply with Regulation 70, companies should consider the following actions:

1. Adjust APIs as soon as possible once Regulation 70 comes into force on 1st January 2016, given the likely high volume of applicants (even though the deadline for adjusting APIs is 30th June 2016).
2. Given that PI licenses will remain valid only until their expiry (and thereafter the concept of PI will no longer exist), holders of PI licenses should consider increasing imports and stockpiling industrial/finished goods before their PI licenses expire and deciding on a sustainable solution to import industrial/finished goods (e.g. establishing an import company).

Conclusion

Regulation 70 is likely to be welcomed by API-U holders because under Regulation 70 API-U holders will be able to import goods under several sections of the HS Code. For API-P holders, however, Regulation 70 may not be good news because they can no longer import industrial/finished goods, including those to be traded.

Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 26th October 2015

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Indonesia Manufacturing Snapshot

Contribution to GDP: 18% (2015)
Sector Growth: 5.5% (yoy, 2015)
Number Employed in the Sector: 16 million (2016)
Highest Minimum Wage by Province: 3,350,000 IDR/month (DKI Jakarta)
Lowest Minimum Wage by Province: 1,631,245 IDR/month (West Nusa Tenggara)
Main Areas: Automotive, Electronics, Textile & Garment, Footwear, Food & Beverages, Metal Products, Chemicals.
Main Export Markets: USA, Japan, China, Turkey, South Korea, Germany, Singapore, Thailand, Philippines, Saudi Arabia, Malaysia.

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Useful Documents

Minister of Trade Regulation No. 70/M-DAG/PER/9/2015 on Importer Identification Number (Indonesian)