One who wants to start a business in Indonesia and import goods into the country needs an import business license. Without one, you will not be able to get through the customs clearance. Regardless of the size of your shipments, you will have to apply for this 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 what sort of license suits your business and how you should go about getting one.
In this article, we will walk you through 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%. With the help of this consistent economic growth, and 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 37% of GDP. Indonesia is also known for its large amounts of goods imported and then have them re-exported to the neighboring countries.
Read also: Opening a Trading Company in Indonesia
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 by appointing an agent, distributor, or importer.
Also, the Indonesian Government has launched a series of reforms to remove unnecessary requirements for several policies to further spur the economic growth in Indonesia.
The is good news for most expats including importers. More than 31% of licensing processes and irrelevant examination procedures were canceled at the Ministry of Trade (MOT). This applies to more than 15 government entities and licensing ministries.
In general, an import business license 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.
Related article: Export Import License that Your Company Should Have
Following the Indonesian Minister of Trade (MoT regulations), an Import Identification Number (API) is mandatory for companies wishing to import goods to Indonesia.
The API serves as a record in the database of importers and their import activities. All importers in Indonesia require an API, depending 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). The MoT issued two new import license regulations, with significant changes under MOT Reg 70/2015 – effective from January 1, 2016.
As its name applies, this import business license allows a trading company to import goods 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.
API-P gives industrial companies the right to import goods that are only for their own internal use. The imported goods under API-P are raw materials, capital goods, and supporting materials for the support of production and operational activities.
Under the Trade Regulation, imported industrial goods or finished goods under API-P are strictly prohibited for direct sale or third party transfer. 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 their own purposes for a minimum of 2 years, after the date of the Import Declaration Form. or specific industrial goods used for marketing testing or serve as complementary goods to develop the business in Indonesia.
As mentioned earlier, the Ministry of Trade regulated Indonesian trade, which administers trade activities including registration and market development.
Other players who have important roles in import and trade regulations include the 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, here is the process timeline breakdown.
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
To encourage more foreign investments in Indonesia, the government simplified the import license. Foreign investors can now apply for an import license online, this means quick, simple, and hassle-free.
Apply for an Indonesian import license through the newly implemented Online Single Submission (OSS) system.
This makes it unnecessary to obtain an API and a NIK (Customs Registration), since a Business Identity Number (NIB) serves as the basic import license.
With this new system, all business entities will need to register themselves through it. After completion of registration at the OSS, each business will get a Business Identity Number NIB (Nomor Induk Berusaha).
The NIB will not expire as long as the company is in operation. Consequently, the NIB number simplifies processes. It replaces the Company Registration Certificate, Importer Identification Number (for import license), and Customs Registration NIK (Nomor Induk Kepabeanan).
In other words, companies that engage in import activities do not have to acquire an API and NIK.
However, importers need to make sure that they still comply with technical import requirements with relevant authorities.
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, you will have to figure out which ministries process relevant certificates.
The following goods are completely banned in Indonesia for import, heavy sanctions apply to whoever breaks the law.
The import tariff differs in Indonesia, ranging from 0 to40%, depends on the product category with HS code. The declaration of imported goods (PIB), includes 10% of value-added tax (VAT) and 2.5% of income tax.
Read also: Income Taxation System in Indonesia
Don’t get put off by the import license process. 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 to help reduce costs and waiting time. We also ensure that your products get through customs and arrive in Indonesia safely.
Not to mention, our market research analysis service helps decide which goods to import for successful market entry in Indonesia. Contact us now to discuss how we can help you.