28 Aug 2015
NEW RULES FOR COMPANIES ACTIVE IN FREIGHT FORWARDING
On 9 April 2015, the Indonesian Minister of Transportation issued a new regulation on freight forwarding: Regulation No. 74 of 2015. The new regulation, which was amended by Regulation No. 78 of 2015, replaces the old Decree No. 10 of 1988 on Freight Forwarding as amended by Decree No. 10 of 1989. It became effective on 16 April 2015.
Compared to the old regulation, the new regulation contains more detailed provisions, inter alia on line of business, documentation, formation, licensing, foreign investment, obligations, liability insurance, adjustment and sanctions, as discussed in further detail below.
According to the new regulation, freight forwarding activities include shipment and receipt of goods via land, rail, sea, and air transportation and must be conducted by an entity specifically formed to do so.
Under the new regulation, the minumum required authorized capital of an entity engaged in freight forwarding is increased to Rp. 25 billion, of which at least 25% (i.e. Rp 6.25 billion) must be fully issued and paid-up, as evidenced by an acknowledgement of its receipt or upon an audit by a registered accountant. By comparison, under the old regulation, the minimum paid up capital was Rp. 200 million. However, the new regulation allows a company to have a lower amount of authorised, issued and paid-up capital, subject to the company obtaining a recommendation from related associations.
Different capital requirements apply to freight forwarders with foreign investment status. The Investment Coordinating Board will require foreign investors that want to be engaged in freight forwarding to invest at least US$10 million, of which at least 25% must be in the form of equity.
Note: Apart from different capital requirements, there are restrictions on foreign shareholding in an entity engaged in freight forwarding. Pursuant to the Presidential Regulation No. 39 of 2014 concerning List of Lines of Business that are Closed and Conditionally Open for Investments (the so-called Negative List), foreign share ownership in a company which line of business is freight forwarding services, is limited to 49%.
An entity engaged in freight forwarding is required to obtain a license. Contrary to the old regulation, which granted this authority to the Minister of Transportation, this license is issued under the new regulation by the Governor of the Province where the freight forwarder is domiciled. The license will be issued upon fulfillment of the administrative and technical requirements, and remains valid within the Indonesian territory as long as the freight forwarder continues to be engaged in freight forwarding.
A joint venture freight forwarder must have a license issued by the Governor where it is domiciled. A freight forwarder with foreign investment status must register with the Minister of Transportation and the BKPM, which will issue a principle license.
Upon obtaining a license, a freight forwarder must:
- comply with laws and regulations on shipping and others;
- start business not exceeding 3 (three) months upon the issuance of its license;
- submit reports on business (annually), shipment and receipt of goods (monthly), changes in data of its license, and opening of new branch offices;
To reduce any risk of liability and to guarantee the harmed parties, a freight forwarder must insure its goods and liabilities (this provision was not regulated in the old regulation).
A freight forwarder may form a branch office domestically and appoint and cooperate with agents abroad under the national and regional laws and regulations.
As a contractual transporter, a freight forwarder must issue documentation for national or international trade under the laws and regulations and the usual practices. This documentation, be it in print or electronic, is issued, managed, and organized by a freight forwarder engaged in shipment/receipt and distribution of goods.
Freight forwarders already in existence must adjust their licenses to this new regulation within 3 (three) years of the issuance of this regulation.
Administrative sanctions will be imposed in case of violation of any of the obligations through written warnings, suspension and/or revocation of a license. (by: Wishnu W. Basuki, Bani W. Kusnandar & Gustaaf Reerink)