E-commerce has played an important role in the Indonesian economy in recent years. With the rise of internet users in Indonesia, it helps pave the way for digital-related businesses, from online retails, marketplaces to social-commerce platforms.
On 26 September 2023, the Ministry of Trade of Indonesia promulgated Regulation No. 31 of 2023 (“Reg 31/2023”) to regulate various aspects of e-commerce, including business licensing and supervision of business actors. If your business relates to e-commerce, the provisions of Reg 31/2023 may affect your business moving forward, as discussed below.
- Social-commerce businesses
Reg 31/2023 now recognizes social-commerce businesses (e.g., Tiktok Shop) as E-Commerce Electronic System Providers (locally also known by its abbreviation “PPMSE”), along with other business models, such as marketplaces, and online retails that trade on online platforms created, managed, and/or owned by the respective online retailers. This means social-commerce actors must make sure they comply with the provisions of Reg 31/2023, including limitation on the scope of activities that can be conducted on the platforms and prohibition to facilitate payment transactions on the platforms.
- Extended responsibilities of PPMSE
PPMSE, particularly those that are exclusively as electronic system providers, are required to actively help merchants trading on their platforms to (a) comply with business licensing requirements and product standards, (b) prevent unhealthy competition on their platforms, and (c) protect personal data of their platform users.Minimum Price Requirement
One of the substantial changes introduced by Reg 31/2023 is a new minimum price of at least USD100 (or its equivalent in other currencies) (“Minimum Price”) on a Freight-on-Board (FOB)-basis per unit of goods directly sold (on electronic platforms) to Indonesia-based consumers.
Reg 31/2023 requires every PPMSE to adhere to the Minimum Price and, if the PPMSE is exclusively an electronic system provider, it must apply the Minimum Price on its platform and to merchants on that platform. It was reported that this Minimum Price requirement is intended to protect local merchants.
For failure to comply with this requirement, an electronic system provider can be subject to administrative sanctions such as temporary service blockage.
In addition, the Minister of Finance of Indonesia recently issued Regulation No. 96 of 2023, as amended by Minister of Finance’s Regulation No. 111 of 2023, requiring local PPMSE and representative offices of foreign PPMSE that act as online retail merchants and marketplaces importing more than 1,000 shipments of goods within one calendar year to partner with the Directorate General of Customs and Excise of Indonesia. The expected partnership includes exchange of e-catalogue and e-invoice data of the imported goods or other forms of partnership that help improve the Directorate General’s services and supervision. PPMSE with more than 1,000 shipments within one calendar year must comply with the above at the latest 17 February 2024 or otherwise may lead to temporary termination of customs services for future imports by said PPMSE.
- Mandatory requirement to appoint a representative office in Indonesia
Upon reaching a certain threshold a foreign PPMSE must appoint a representative office in Indonesia. The threshold includes either: (i) number of transactions with at least 1,000 consumers within one year, OR (ii) number of package deliveries of at least 1,000 within one year, OR (iii) if traffic or access to the electronic system comprises at least 1% of the total Indonesia-based internet users within one year.
The new third threshold appears to target online platforms such as social-commerce platforms or marketplaces that may not necessarily support conclusion of transactions or help with package deliveries, as well as online retails that do not meet the transaction or package delivery criteria (as discussed in the above paragraph).
If you would like to know more about this newsletter or other provisions of Reg 31/2023, please contact us at the following details: firstname.lastname@example.org.