Indonesia Omnibus Law Update – Amendments to the Trade Law

Indonesia's groundbreaking Omnibus Law (Law No. 11 of 2020 on Job Creation) amends a significant number of existing laws, one of which is Law No. 7 of 2014 on Trade (the "Trade Law"). Many of the amended provisions of the Trade Law are further regulated under a recently issued implementing regulation, Government Regulation No. 29 of 2021 regarding Implementation of the Trade Sector ("Trade GR").

Key changes to the Trade Law include the following:

Trade Law Implementing Regulations

Provisions under the Trade Law which were previously subject to further ministerial regulation are amended to be further regulated by a Government Regulation (i.e., the Trade GR). At first glance, this approach appears to be the Government realizing its effort to streamline the scattered regulatory framework and simplify licensing procedures to improve the ease of doing business in Indonesia.

Apparently, however, many of the provisions under the Trade GR are still subject to further ministerial regulation. In light of this, we would expect more amendments to the existing ministerial regulations concerning trade or the issuance of new ministerial regulations, as mandated by the Trade GR.

Provisions on Distribution of Goods

Previously, the distribution of goods was subject to further regulation by the Minister of Trade ("MOT"), currently by MOT Regulation No. 22/M-DAG/PER/3/2016 regarding General Requirements for the Distribution of Goods, as amended by MOT Regulation No. 66 of 2019 ("MOT Distribution Regulation"). The Omnibus Law amends this so that the distribution of goods is to be regulated by a Government Regulation.

The Trade GR does indeed regulate the distribution of goods.

Overall, the changes in distribution requirements are not significant, but we do note a stark difference between the provisions in the MOT Distribution Regulation and the Trade GR. In outlining the distribution chain, the Trade GR does not make reference to sub-distributors and sub-agents, which are mentioned in the Trade Law and the MOT Distribution Regulation. This indicates that the current regulatory framework no longer recognizes sub-distributors and sub-agents as part of the distribution chain. Additionally, the Trade GR stipulates that a retailer is not allowed to import goods.

The Trade GR, in its transitional provision, provides that the Trade Law implementing regulations in effect prior to the promulgation of the Omnibus Law shall remain valid so long as they do not contravene the provisions under the Trade GR. However, as discussed above, considering that the Trade GR introduce changes to the requirements for the distribution of goods, it is expected that the MOT Distribution Regulation, and other MOT regulations that touch on the matter of distribution (such as the MOT regulation on the registration of distributors and agents), will be amended to conform with the changes under the Trade GR.

Imports and Exports

The Trade Law as amended by the Omnibus Law provides that the importation and exportation of goods may only be conducted by importers and exporters that have obtained the required licenses from the Central Government. As set forth under the Trade GR, the required licenses to export goods are the Business Identification Number (Nomor Induk Berusaha or "NIB"), exporter registration and/or export approval. The required licenses for importing goods are the NIB, which serves as the Importer Identification Number, or Angka Pengenal Importir, importer registration, producer importer and/or import approval.

Importers and exporters are not required to obtain the above licenses for imports that are not for business purposes. This provision is provided in the Trade Law as amended by the Omnibus Law and is echoed in the Trade GR.

Unfortunately, the Trade Law as amended by the Omnibus Law does not elaborate on what is meant by imports that are not for business purposes. It is therefore unclear whether this exemption is solely for the importation of goods for personal use, or if it applies to importation activities for any other purposes. The Trade GR stipulates that this matter will be further regulated by a ministerial regulation, which hopefully will shed more light on the procedures and/or conditions to qualify for this exemption.

There are several other interesting provisions under the Omnibus Law and the Trade GR:

• The Omnibus Law deletes the provision in the Trade Law that required a certain license to be obtained for temporary imports and exports.;

• In connection with the above, the Omnibus Law also deletes the provision under the Trade Law that allowed the MOT to propose a reduction or increase of import duty for temporary imports; and

• The Trade GR gives the MOT the authority to stipulate exporters and importers with good reputation. Parties stipulated as such may be granted ease of business licensing at the relevant ministries or non-ministerial governmental institutions. The criteria to qualify as an exporter or importer of good reputation are to be further regulated in a ministerial regulation.

Administrative Sanctions

The Trade Law as amended by the Omnibus Law lists the types of administrative sanctions that may be imposed for violations of certain provisions of the Trade Law. These administrative sanctions are warning letters, the recall of distributed products, temporary suspension of business activity, closure of warehouse, fines and/or revocation of business license.

The imposition of the above administrative sanctions is regulated in more detail under the Trade GR.

Criminal Sanctions

The Omnibus Law amends certain provisions in the Trade Law on the imposition of criminal sanctions. For example, the penalty for violation of the obligation to affix an Indonesian-language label on goods is increased from IDR 5 billion to IDR 10 billion.

It also introduces an exception to the imposition of criminal sanctions, namely if the violation is conducted by business actors and/or for business activities with low or moderate risk level, in which case administrative sanctions will be imposed. This exception is provided for violation of the obligation to affix an Indonesian-language label on goods and for trading business activities conducted without appropriate business licenses. Unfortunately, however, the Omnibus Law does not elaborate on the criteria for business actors and business activities to be regarded as having low or moderate risk. It thus remains to be seen how the MOT will interpret this.

Conclusion

Overall, one may view that the amendments to the Trade Law under the Omnibus Law are not as sweeping as changes in some other sectors. Nevertheless, some changes are introduced and more implementing regulations are expected to be issued to regulate in greater detail those changes.

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