On May 1, 2012, the Minister of Trade (“MOT”) issued MOT Regulation No. 27/M-DAG/PER/5/2012 regarding Importer Identification Numbers (“API”) (“MOT Reg 27”). For a full English translation of MOT Reg 27, click here. For MOT Reg 27 in Bahasa Indonesian, click here.
This regulation revokes the previous MOT Regulations i.e. (i) Minister of Industry and Trade Decree No. 134/MPP/Kep/6/1996 regarding Import Activities and the Domestic Trade of Complementary Goods by Foreign Companies in the Field of Production and (ii) MOT Regulation No. 45/M-DAG/PER/9/2009 regarding API, as lastly amended by MOT regulation No. 20/M-DAG/PER/7/2011 (the “Previous MOT Regulations”).
In general, the rules on API under MOT Reg 27 are similar with the Previous MOT Regulations which are as follows: importation can only be conducted by an importer who has an API, namely (i) a General Importer Identification Number (“API-U”) or (ii) a Producer Importer Identification Number (“API-P”). An importer is only allowed to have one type of API, either API-U or API-P.
API-U and API-P Requirements
While MOT Reg 27 has made other changes to the regulatory regime, the provision on API-U is the most significant change. Similar with the Previous MOT Regulations, MOT Reg 27 also provides that an API-U is granted to companies importing certain products for trading purposes.
However, unlike the Previous MOT Regulations, the MOT Reg 27 limits the imported goods that can be imported by API-U holders. An API-U shall only be used to import one group or type of goods covered in one section of the Goods Classifications System (Sistem Klasifikasi Barang) as attached to the MOT Reg No. 27. There are twenty one sections under the Goods Classification System.
For an API-P, its use remains the same with the Previous MOT Regulations. MOT Reg 27 provides also that an API-P shall only be granted to companies that import goods for its own use as capital goods, raw materials, supporting materials, and/or for supporting production process and are prohibited to be traded or transferred to other parties.
Importation of “Certain Industrial Goods”
The API-P holder is allowed to import finished goods which were governed under MOT Regulation No. 39/M-DAG/PER/10/2010 regarding Provisions on the Finished Goods Importation by Producers (“MOT Reg 39”). MOT Reg 39 has been revoked by Supreme Court Decision No. 19/P/HUM/2011 and officially by MOT Regulation No. 24/M-DAG/PER/4/2012 (April 30, 2012).
The provisions governing the API-P holder which is allowed to import finished goods are now included in MOT Reg 27. MOT Reg 27 also covers the importation of “certain industrial goods” by producers which was governed under MOT Reg 39.
Unlike MOT Reg. 39, MOT Reg 27 stipulates more restrictions for the importation of “finished goods” by producers. Companies holding an API-P may import “certain industrial goods” to the extent that such goods are required to develop their business and investment. The imported industrial goods may not be used in the production process but shall only be used for the purpose of market testing or if the imported goods are complementary to those it produces. Such imported industrial goods may be traded and/or transferred to other parties.
The MOT is now using the term “certain industrial goods” instead of using the term “finished goods” that was referenced in MOT Reg 39. The importation of “certain industrial goods” mentioned above shall only be conducted by companies holding an API-P which has been stipulated as Importer Producer (Importir Produsen).
MOT Reg. 27 further provides that “certain industrial goods” considered as complementary shall be produced by a company who has a special relationship with the APIP holder. Special relationship is defined under MOT Reg. 27 if a party has the ability to control the other party.
Will MOT Reg 27 be applied retroactively?
The existing API-P or API-U issued before MOT Reg 27 is still valid until the end of 2012. MOT Reg 27 requires that the API-P or API-U issued prior the issuance of MOT Reg 27 must be adjusted with the provisions under MOT Reg 27 by December 31, 2012.
Uncertainties Created by MOT Reg 27
Based on our initial analysis, we have identified a number of uncertainties created by MOT Reg 27.
1. One API-U can be used to import trading goods within only one group or type of goods covered in one section of the Goods Classifications System. However, there is a lack of clarity toward API-U holders currently engaging in a variety of import activities where the goods are included in more than one section.
2. The definition of “special relationship” and the requirement that certain industrial goods that are imported as complementary goods must be produced by a company overseas which has a special relationship with the company holding the API-P. There is a lack of clarity of the implications for a company if the finished goods imported to Indonesia are not manufactured by a company within the same group (i.e. an affiliated company)
3. It is not clear what “certain industrial goods” are as classified as complementary goods under MOT Reg 27. For example, if the API-P holder imports spare parts as part of an after-sales service to their customers, would such spare parts be classified as complementary goods and therefore a company holding an API-P could import such spare parts?
It remains to be seen how the implementation of the MOT Reg 27 will unfold. As the regulation has caused some uncertainty within the industry, we expect the MOT can respond to some of the open issues immediately in order to provide legal certainty for trading and manufacturing activities in Indonesia.