New regulations from the Indonesian Ministry of Trade and their impact on non-Indonesian local e-commerce businesses.
On September 26, 2023, the Indonesian Ministry of Trade promulgated the “Ministry of Trade Regulation No. 31 of 2023” (referred to as “Regulation No. 31”) on “Business Licensing, Advertising, Guidance and Supervision of Business Entities Transacting Through Electronic Systems” . This replaces the previous Ministry of Trade Regulation No. 50 of 2020 (“Regulation No. 50”).
This replaces the previous Ministry of Trade Regulation No. 50 of 2020 (“Regulation No. 50”).
Key takeaways
Regulation 31 retains the business registration requirements in Regulation 50 and introduces the following new provisions:
- “Social e-commerce” platforms are not allowed to conduct e-commerce type sales transactions, especially buyers and sellers are not allowed to conduct payment transactions.
- The minimum price for foreign e-commerce merchants selling goods into Indonesia is US$100 per item or its equivalent.
Background
In 2020, the Indonesian Ministry of Trade issued the ” Ministry of Trade Regulation No. 50 of 2020″ on ” Business Licensing, Advertising, Guidance and Supervision of Business Entities Transacting Through Electronic Systems “. An important provision of the regulations is that foreign e-commerce platforms that meet any of the following requirements must establish a representative office in Indonesia:
A representative office must be established in Indonesia under the following circumstances:
- Transact with at least 1,000 consumers within a year; and/or
- Deliver at least 1,000 packages to consumers within a year.
Regulation 31 retains this requirement.
Another important provision of Regulation No. 31 is that local merchants on e-commerce platforms are required to apply for business registration. Merchants trading on e-commerce platforms must obtain a Business Identification Number (NIB). This requirement replaces the previous requirement under Regulation 50 to obtain a company business license through an electronic system (SIUPSE).
For foreign merchants, they need to submit the following information to their e-commerce platform:
- The identity of the foreign merchant, including the name and address of the foreign merchant’s country of origin;
- Business license issued by an authorized agency in the country of origin, certified by the following agencies/persons:
- The competent authority of a State party to the Convention abolition of the Requirement for Authentication of Foreign Public Documents; or
- Official representative of Indonesia in the country of origin, if that country is not a party to the Convention on the Abolition of the Requirement for Legalization of Foreign Public Documents.
- Proof that goods and/or services meet specified standards or technical requirements; and
- The bank account number used for the transaction.
There is also a rather general provision in the regulations that requires all platforms to submit “data and/or information in accordance with the provisions of law to non-ministerial government agencies performing government affairs in the field of statistics” (the Central Bureau of Statistics ). However, how this mechanism will be implemented for Forgotten Platforms remains unclear.
We reported on this when Indonesia issued Regulation No. 50 in 2020. Since then, we have not seen any clear regulatory measures from Indonesia regarding the requirements for setting up a local representative office. We will continue to monitor developments in this regard to see whether the government’s attitude has changed under Regulation 31. On the registration front, the government (through the Ministry of Information and Communications) is reportedly actively enforcing revised requirements for “Private Sector Electronic Systems Operators (ESOs)”, which encompasses most websites and online services – see the Ministry of Information and Communications’ article on Regulation 2(1) of Regulation No. 5 of 2020 “Private Sector Electronic Systems Operators”.
Major changes / new regulations
One of the most noteworthy new provisions of the new regulations is the prohibition of payment transactions on “social e-commerce” platforms.
The official reasons given by the government were “fair trade regulation” and “fair protection of small and medium-sized enterprises”. However, some believe the move is an attempt to limit the entry of foreign social media platforms into an e-commerce sector still dominated by local operators.
Minister of Information and Communications Budi Arie highlighted this role in preventing monopolistic behavior and advancing data protection measures.
Another important new regulation is that the minimum selling price for overseas merchants cannot be less than $100. The minimum price for foreign e-commerce merchants selling goods into Indonesia is US$100 per item or its equivalent. The regulations also provide that the ministry will compile a list of goods that are not subject to the $100 minimum, which has not yet been published.
It is also important to note that the regulations require PPMSE to submit data “in accordance with the provisions of laws and regulations to the non-ministerial government agency responsible for government affairs in the field of statistics” ( the Central Bureau of Statistics ). We will pay close attention to further regulations regarding data collection that will be released later.
In conclusion
Therefore, foreign e-commerce merchants targeting the Indonesian market must re-examine their product pricing to avoid violating the minimum price regulations. Popular overseas e-commerce platforms may need to pay attention to this, as they may be under the surveillance of the Indonesian government. Such breaches may be more easily “detected” by authorities than when an electronic system trading operator reaches the 1,000-transaction limit for the year.
