One of the most important things that anyone who wants to start a business in Indonesia and import goods into the country needs is the import business license.
Without an import business license, you will not be able to get through the customs clearance. Regardless of the how small, or how big your shipments are, you will have to apply for this special license before importing goods to Indonesia.
You really do not want to wait until the last minute to know all about the import license requirements. Plus, you have to know in advance of what business import license suits your business and how you should go about getting one.
Therefore in this article, we will tell you everything you need to know about applying for an import business license in Indonesia.
As of 2017, Indonesia is the 8th largest economy in the world based on the purchasing power parity. Annually for the last decade, it is growing at an average of 5%. And with the help of this consistent economic growth, and the generous natural resources such as natural gas, crude oil, fuels, and foodstuffs, Indonesia has pulled itself into the upper middle-income status.
Trading plays a crucial role in economic growth in Indonesia, with the combined value of exports and imports equals to 37% of GDP. Indonesia is also known for its large amounts of goods imported and then have them re-exported to the neighbouring countries.
Therefore, if you would like to start a business in Indonesia, trading from importing can be a very good option. Foreign companies can do this through appointing an agent, distributor or importer.
It is also worth noting that with the effort to further spur the economic growth in Indonesia, the Indonesian Government has a launched a series of reforms to remove unnecessary requirements for several policies.
The result is definitely good news for most expats including importers – more than 31% of licensing processes and irrelevant examination procedures were cancelled at the Ministry of Trade (MOT), applying to more than 15 government entities and licensing ministries.
What is Import Business License in Indonesia?
In general, an import business license in Indonesia is used to keep control of import allowance, and also the imported items, to Indonesia. This special license is a non-tariff barrier for Indonesia to protect the local economy and producers, by setting restrictions on the number of goods imported.
Many importers in Indonesia represent multiple foreign manufacturers and product companies. Often, overseas companies will form close relations with Indonesian importers that allow two entities to operate as one, through the import business license.
Different Types of Import Business License in Indonesia
Following the regulations from Indonesian Minister of Trade (MoT), an Import Identification Number (API) is mandatory for companies wishing to import goods to Indonesia.
All import activities are prohibited without the API, as API serves as a record in the database of importers and their import activities. All importers in Indonesia are required to hold an API, and the types of API depend on the intended use of the imported items.
There are two major types of API: General Import License (API-U) or a Producer Import License (API-P). You should also note that effective from January 1, 2016, the MoT issued two new import license regulations, and significant changes were done under MOT Reg 70/2015.
General Import License API-U (Angka Pengenal Impor Umum)
As its name applies, this import business license allows a trading company to import goods that are used for general trading purposes in Indonesia.
Previously, companies with API-U can only import one particular group of goods specified under the Trade Regulation (a section in Appendix 1). However, now with the amendments, API-U holders can import items under several other sections with the HS code.
In addition to that, importers with API-U do not need to have a special relationship with overseas suppliers like before anymore. This special relationship was formerly required and established through several agreements such as supplier agreement, agency or distributor agreement, shared control over economic activities, etc.
Producer Import License API-P (Angka Pengenal Impor Produsen)
API-P gives industrial companies the right to import goods that are only to be utilized for their own internal use. The imported goods under API-P are raw materials, capital goods and supporting materials, to be further processed or used for the support of production and operational activities.
Under the Trade Regulation, imported industrial goods or finished goods under API-P are strictly prohibited to be sold directly or transferred to third parties. There are two exceptions, though. These imported goods can only be transferred to other parties under an import duty exemption facility. Furthermore, companies have to show evidence of its use for own purposes for a minimum of 2 years, after the date of the Import Declaration Form; or specific industrial goods that will only be used for marketing testing or serving as complementary goods, for the purpose of developing the business in Indonesia.
Process Requirements for Import Business License in Indonesia
As mentioned earlier, the authority in charge of regulating the importing in Indonesia is the Ministry of Trade, which administers trade activities including registration and market development. Other players who have important roles in import and trade regulations include Investment Coordinating Board (BKPM), Ministry of Agriculture, and Directorate General of Customs of Excise.
As an expat, getting an import license, either API-U or API-P is complex and considerably tough. The whole process can take up to four or five months, with a huge effort of both time and money. The entry barrier can be even more complicated depending on the type of goods shipped into Indonesia. Before Cekindo eases the process for you with our service, now we are taking you through the process requirements with the timeline breakdown.
Step 1: Incorporation of PT or PT PMA in Indonesia (6 weeks)
Step 2: Obtaining IUT permanent business license (only for API-U) (1 – 2 weeks)
Step 3: Obtaining import license API-U or API-P (1 week)
Step 4: Getting NIK/SRP customs identification number (4 weeks)
Step 5: Acquiring a recommendation from DEPTAN Ministry of Agriculture (only for a particular category such as food or children’s items)(4 weeks)
Step 6: Approval by other authorities depending on your product category (e.g. National Agency of Drug and Food Control for food products) (3 weeks)
Step 7: Approved by MoT Ministry of Trade
Import Restriction in Indonesia
A special importer identification number (NPIK – Nomor Pengenal Importir Khusus) is a MUST for importing these items: rice, corn, soybean, sugar, textile and textile products, electronics and their components, toys. Without NPIK, all these items are prohibited to be imported into Indonesia.
Other than the API and NPIK, for these specific items, you will have to figure out which ministries you have to deal with to get its relevant certificate when you start a business in Indonesia as an importer.
The following goods are completely banned in Indonesia for import, heavy sanctions apply to whoever breaks the law.
- Pornographic materials
- Drugs and narcotics
- Any kind of politically sensitive materials
- Weapons including sport and hunting guns (special permit required)
- Explosives, firearms, and ammunitions (special permit required)
Import Tax and Duties in Indonesia
The import tariff differs in Indonesia, ranging from 0 to40%, depending on the product category with HS code that you import into the country. The declaration of imported goods (PIB), includes 10% of value added tax (VAT) and 2.5% of income tax.
Solution: Undername Import
Don’t get put off or defeated with all the hoops you have to get through for an import license. In Indonesia, an undername importer is extremely common to provide a complete solution for importers. This is because an undername importer equips with all the right import licenses and is ready to import goods that you would like to bring into Indonesia.
Cekindo can serve as an undername importer for you to reduce your costs and the extensive time spent to acquire an import license. We also ensure that your products get through the customs and arrive in Indonesia safely. Not to mention, our full-fledged market research analysis service helps you decide which goods you should import to make a successful market entry in Indonesia. Contact us now to discuss how we can help you.