Indonesia De Minimis 2020: What the changes mean for eCommerce importers

Why is there a change?

The Directorate General has stated that the reasons for implementing this change include preventing the market from being flooded with mass-made or counterfeit products from overseas markets and also to level the playing field for local manufacturers who import materials or goods in bulk and thus have to pay duties and taxes regardless of the import value. Indonesia has experienced a massive 814% increase in imported parcels, from 6.1 million packages to 49.69 million packages in 2019, that are classified under eCommerce activity. Indonesian craftsmen and manufacturers of bags, shoes and garment products have especially been affected in recent years from the surge in cross-border imports of these items, resulting in many being driven out of business. With the new de minimis threshold in place, all importers, be it eCommerce sellers or local manufacturers, will be subject to more equitable importing rules.

Changes to the de minimis threshold in Indonesia

While the changes to the de minimis threshold will affect virtually all eCommerce sellers importing via B2C consignments, there is some silver lining in the form of reductions in the total applicable duties and taxes for B2C imports of items outside the product categories of garments, bags and shoes.

Prior to the changes, items that exceeded USD75 were liable for a flat duties and tax rate that amounted to approximately 40% of CIF (Costs, insurance and freight expenses). For sellers with shipments whose CIF value was previously below the threshold, the changes to the rules will result in an overall increase in costs for the seller.

On the other hand, for shipments excluding bags, shoes and garments, that have CIF value exceeding USD75 and hence were already subjected to the 40% duties and tax can now enjoy a lower total cost as the duties and taxes are reduced to approximately 20% of CIF value. For higher value products such as health, beauty, pantry and food items, there is now a greater profit opportunity in the market.

Do note that for items that fall under the categories of bags, shoes and garments, the import duties charged will depend on the exact sub-category and HS code of the imported items. For shipments that include a variety of products in one order, the calculation of duties and taxes will be conducted on a line-item basis. Here are some additional details on different product category definitions:

Garments: Any form of textile that is wearable – Doesn’t include fashion accessories, i.e. cap, hat, earrings

Cotton, polyester, and silk wearables are considered textile garments

Shoes: anything that is fully covered shoe wear, but doesn’t include slippers and sandals (slippers and sandals fall under other categories

What are the alternatives to B2C shipping?

B2C shipping is still a viable option, but for shippers looking for alternatives to importing via B2C, products can instead be imported in bulk on a B2B basis. Methods to do this include regular B2B import or through a trading house. A trading house would be able to import on behalf of the seller, though the cost of the service would tend to be higher, whereas a B2B import would require the seller to have both a local business license as well as an importing license, and should your product falls under Indonesia’s controlled products³ categories, such as health and beauty products, you will need a BPOM license.

Both methods would also require local distribution, storage or fulfilment. Companies such as Janio, with both a regional presence as well as strong local expertise, would be able to provide such comprehensive solutions.

To find out more about how to import your products with the new changes, reach out to us for a free consultation today.