29 Jul 2020
New Rules on Importation of Complementary, Market Testing and After Sales Service Goods Fill Legal Void but Restrict Eligible Sectors

The Minister of Trade (“MOT”) recently issued Regulation No. 59 of 2020 (the “New Regulation”)[1] to amend MOT Regulation No. 118/M-DAG/PER/12/2015 on the Importation of Complementary Goods and Goods for Use in Market Testing or After-sales Service (the “Original Regulation”).[2]

On the upside, the New Regulation (effective 29 June 2020) clarifies an issue that had been causing confusion, namely, whether complementary goods and goods for use in market testing or after-sales service (“Prescribed Goods”) could actually be legally imported by a holder of a Producer Import License (Angka Pengenal Importir Produsen / “API-P”), such as a manufacturing company, following the removal of one of the legal bases for this as a result of the recent revocation of a minister of industry regulation.

On the downside, however, the New Regulation restricts the importation of Prescribed Goods to designated industrial sectors/sub-sectors and classes of goods. By contrast, the Original Regulation contained no such restrictions.

So as to provide a better understanding of the changes brought about by the New Regulation, we will need to first discuss the situation under the Original Regulation.

What are Prescribed Goods?

The Original Regulation identifies three types of Prescribed Goods: Complementary Goods; Goods for Use in Market Testing; and Goods for Use in After-sales Service:

1. Complementary Goods are manufactured goods that are imported by the holder of an API-P for the purpose of complementing its product line where such goods originate from and are produced by an overseas company that has a special relationship with the API-P holder.
2. Goods for Use in Market Testing are manufactured goods that are imported and cannot be produced by the API-P holder and which are used for the purpose of assessing market response and for business development over a particular time period.
3. Goods for Use in After-sales Service are manufactured goods that are imported by an API-P holder for the purpose of ensuring the availability of spare parts, replacement products and product replacements in respect of a principal product.

Legal Void

Under the Original Regulation, an API-P was permitted to import Prescribed Goods required for the development of its business and investments. Such goods could be sold and/or transferred to third parties but were not permitted to be used in the API-P’s production process.

In order to import Prescribed Goods, an API-P needed to separately obtain (a) an Importation Recommendation from the Minister of Industry (“MOI”) and (b) an Importation Approval from MOT, with the MOI recommendation being a necessary prerequisite for the MOT approval.

However, the revocation of Minister of Industry Regulation No. 19/M-IND/PER/3/2016 (on Procedures for the Issuance of Recommendations for the Importation of Complementary Goods, and Goods for Use in Market Testing or After-sales Service) (“MOI Reg. 19”) on 18 October 2019 removed the legal basis for the MOI to issue Importation Recommendations to API-P holders, which in turn meant that there was no longer a legal basis for the MOT to issue Importation Approvals. According to senior MOT officials with whom we talked, the issuance of Importation Approvals was suspended following the revocation of MOI Reg. 19.

This had significant practical implications: an API-P holder (manufacturing company) that wished to import Prescribed Goods would effectively need to use a third party importer or even establish a separate company with a General Import License (Angka Pengenal Importir Umum / “API-U”) in order to do so.

The New Regulation remedies this unfortunate situation by requiring only “considerations” (rather than a formal recommendation) to be provided by the MOI. The process of obtaining such considerations is automatically set in motion when the holder of a Business Registration Number (Nomor Induk Berusaha / “NIB”, which now doubles up as an API-P) submits its application for Importation Approval to the MOT via the MOT’s web portal, which is directly linked to the MOI system. By contrast, under the Original Regulation, the application for an Importation Recommendation had to be submitted separately to MOI in accordance with the procedures set out in the now revoked MOI Reg. 19. Thus, the streamlined procedure under the New Regulation serves as a concrete manifestation of the government’s commitment to reducing bureaucracy.

Case of one step forward, one back?

Under the New Regulation, only API-P holders operating in a limited number of industrial sectors/sub-sectors may import Prescribed Goods. Further, only certain classes of Prescribed Goods may be imported (full lists of eligible sectors and classes of Prescribed Good are provided in Annexes I, II and III of the New Regulation). By contrast, MOI Reg. 19 permitted the importation of Prescribed Goods across essentially all sub-sectors of each of the industry sectors regulated by the Ministry of Industry.

Another difference is that MOI Reg. 19 stipulated the specific quantities of Prescribed Goods that could be imported. These were expressed as percentages of total realized production over the previous 2 years (the percentages ranged from 3% to 20%). Conversely, the New Regulation does not impose restrictions in percentage terms. While at first sight this may seem like a good thing, it may not necessarily turn out to be so as it could be availed of by the MOT to apply its inherent discretion so as to set unwritten limits in line with government policy from time to time, thus potentially undermining legal certainty.

Contact Us

Should you have any queries or require legal advice on how you can best protect your interests during this time of uncertainty, please contact any of the persons below, call us on +6221-2505125, or email us at info@abnrlaw.com.

Mr. Emir Nurmansyah (enurmansyah@abnrlaw.com)

Mr. Nafis Adwani (nadwani@abnrlaw.com)

Mr. Agus Ahadi Deradjat (aderadjat@abnrlaw.com)

[1] Peraturan Menteri Perdagangan Nomor 59 Tahun 2020 Tentang Perubahan Atas Peraturan Menteri Perdagangan Nomor 118/M-Dag/Per/ 12/2015 Tentang Ketentuan Impor Barang Komplementer, Barang Untuk Keperluan Tes Pasar, Dan Pelayanan Purna Jual

[2] Peraturan Menteri Perdagangan Nomor 118/M-Dag/Per/ 12/2015 Tentang Ketentuan Impor Barang Komplementer, Barang Untuk Keperluan Tes Pasar, Dan Pelayanan Purna Jual

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