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Tackling Indonesian Customs Clearance for eCommerce Merchants

Amanda Lim

Tackling Indonesian Customs Clearance Procedures for eCommerce Merchants

Tackling Indonesian Customs Clearance with Janio

Update 14th January 2020: Indonesia will be revising its de minimis value down to US$3 from an earlier US$ 75 on a confirmed start date of 30th January 2020 by Indonesia’s Directorate General of Customs and Excise, Ministry of Finance.1 We’ll be updating this article to reflect the upcoming changes, but if you’d like to know more about them, you can head over to our latest announcement on the de minimis update.

 

With all the eCommerce opportunities that Indonesia presents, like a projected value of US$ 83 billion by 2025, getting your products to the hands of these customers means you’ll need to understand how Indonesia’s customs clearance for goods works.

We have previously given a general overview of what happens in customs clearance in an earlier article. While the general steps for customs clearance are similar for all countries, there are some specific challenges posed when bringing your goods into Indonesia.

When the eCommerce industry was at its infancy in Indonesia, there was a lack of clear laws and transparency when it came to clearing goods for import into the country. This led to a lot of uncertainty during the early years of Indonesian eCommerce.

This changed for the better with the introduction of the eCommerce trade law (Article 65 – 66)2, and with the eCommerce tax3 enforced since June 2017, it has since made the collection of import duties and taxes standardised for B2C shipments. As an eCommerce merchant, it’s important to understand the requirements of clearing customs for your shipments, be they to your own local warehouse in the area or straight to the doorstep of your customers.

Indonesia originally had a de minimis rate of US$75 before revising this down to US$3 in 2020 and changing the duties and taxes on certain product categories. We’ll also be covering how these changes affect you later in this article.  The government of Indonesia has also been including new policies to protect local industries in the form of its BMTP Import Duty Safeguards for certain product categories and revising their prohibited import and export lists in 2021 in Pemendag 18, 19 and 20 Tahun 2021.

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Customs Clearance Procedures in Indonesia

Quantity Restrictions for Parcels Entering Indonesia

Indonesia’s Directorate General of Customs and Excise has placed limits on item quantities per shipment. Adherence to item quantity restrictions is important to avoid confiscation issues at the customs. The following table includes details on the maximum quantity that can be shipped per parcel according to the respective item category:

2022 Updates to Indonesia's B2C Parcel Import Arrangements - Max quantity per parcel and max fob value

In addition, please note the following restrictions when shipping to Indonesia:

  • Used items cannot be shipped to Indonesia
  • Shipments with total value of over USD 1,500 cannot be shipped to the consignee as a B2C shipment

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Required Documents for B2C Imports into Indonesia

If you are sending over an eCommerce shipment cross-border into Indonesia, Indonesia’s customs also requires the recipient’s local tax ID number or an alternative identification number before the shipment can pass through customs. Failure to provide any identification number can result in your shipment being confiscated or stuck in customs.

There are also times when customs officers will mark certain parcels as ‘suspicious’ and might ask for supporting documents for further inspection. For first time clients, please note that customs clearance will take a longer time in the beginning and that supporting documents are more likely to be needed.

The supporting documents required are:

  • Tax ID (NPWP)
  • Identification Document – ID Card (Kartu Tanda Penduduk)/ Driving License (SIM)
    • Identification documents can be used if the consignee does not have an NPWP
  • Proof of Purchase (POP)
  • Website Link (website where the item was bought from)
  • Personal Use form (mandatory for medicine and supplements)

If the consignee does not have a local tax ID (NPWP), other forms of identification may be used instead such as:

  • the Kartu Tanda Penduduk (KTP) number (identification card) also known as Nomor Induk Kependudukan (NIK)
  • Passport Number or Long Term Stay Pass, only for Foreigners
  • or any other numbers that can be used for identification such as a driving license.

To reiterate for shipments of medicine and supplements, you will also need to provide a filled personal use form signed by the consignee.

Please ensure that the consignee’s email address has been shared with your network partner before the shipment begins.

You can get a more detailed breakdown of the identity document requirements for direct to consumer imports into Indonesia in our Indonesian Customs August 2021 update article.

Customs Duties and Taxes and Customs Lanes

After your goods land at an international airport like Soekarno-Hatta International Airport in Jakarta (CGK), your goods are first unloaded from the plane into the customs warehouse. The customs officers stationed there will first check for prohibited or controlled goods before segmenting them further into different customs clearance channels.

In Indonesia, there are three customs lanes for shipments: the red channel, yellow channel, and green channel. The red channel is where all of the goods are taken out to be physically inspected. In the yellow channel, only 20% of goods are physically inspected, and the green channel means that the goods don’t require any physical inspection, and the customs officer will only check the customs documentation.

Once the goods are discharged from the inspection channels, the import duties and taxes will be calculated based on whether it is a B2C or a B2B shipment. If the declared value of the goods are below the de minimis rates, the goods can be released without paying for additional duties and taxes.

If the shipment value is over Indonesia’s de minimis rate of US$ 3, B2C eCommerce shipments are taxed with the following:

  • Import duties (depends on the product)
  • Value Added Tax (VAT) at 10%
  • Income Tax
    • 7.5 – 10 % for those with a valid tax ID (NPWP)
    • 20% for those without a valid tax ID

The total duties and taxes are a percentage of the shipment’s invoice value. The calculations in the illustration below factors in the higher range of 20%

Bags, Shoes and Garments are taxed at a higher rate than other goods, as summarised below:

Indonesia De Minimis 2020 - duties and taxes

To further protect local industries, the Indonesian Ministry of Trade also introduced the BMTP – Import Duty Safeguards, which levies import duties on selected product categories. The first of these announced this year affects multiple types of products in the clothing and fashion accessories categories of HS Codes. You can find more details in the infographic below or check out our detailed update on the BMTP.

Indonesia BMTP Import Duty Safeguard - Web Full

On the other hand, the import duties and taxes calculated for B2B shipments are based on the item’s Harmonised Systems Code (HS Code).

To get your goods cleared from customs, you could opt for either one of these steps:

  • Set up a local entity in Indonesia to handle customs clearance
  • Engage with a third party to clear customs in Indonesia

Even so, clearing customs in Indonesia presents its own set of challenges.

The Challenges of Clearing Customs in Indonesia

Setting up your own local entity to clear Indonesian customs is one of the ways to get your goods into your Indonesian fulfilment centre. While this method could offer cost-savings in the long run and a lot of control over the process, it comes with its own set of complications.

To clear customs in Indonesia for B2B shipments, you will have to register a company in Indonesia and apply for the specific licenses to import goods of your product type. For instance, if you are importing cosmetics and/or processed foods, you will need to register for a license with Indonesia’s National Agency of Drug and Food Control (BPOM) for that type of product.

Additionally, all new entities in Indonesia will have all imported goods physically inspected in the red channel. Your Indonesian entity has to be in operation for 5 years before getting upgraded to the yellow channel and another 3 more years before it gets upgraded to the green channel. For many eCommerce merchants, this would be too much of a hassle, and getting stuck for 5 years in the slower red channel can cost you sales if your competition is able to clear customs and subsequently delivers their goods faster than you.

On top of that, not knowing the different item categorisation and declarations in Indonesia can make paying for duties and taxes challenging. The import duties and taxes imposed on imported goods depend on the declared HS code. For a general list, you may check out this website4 that shows the rates for each item category. However, trouble would arise if you don’t know which HS code to declare your items with, since these codes can classify goods at a granular level.

For instance, green tea and black tea have different HS codes. Green tea has an import tax of 5%, but black tea is hit with a 20% import tax rate. Knowing these classifications and changes on the go is a time-consuming process that requires you to be in the know about legislative changes all the time so that you can minimise costs. However, this process will incur an opportunity cost when running your eCommerce business.

Thus, the latter option of engaging an external party would be more cost-effective for eCommerce merchants looking to dip their toes into Indonesia’s market. However, getting the right third party to clear customs is another challenge altogether.

Engaging the Right Third Party to Clear Indonesian Customs

Getting an external party to clear Indonesian customs can take a load off your shoulders in terms of needing to familiarise yourself with Indonesian customs. There are many localised companies that have a trading house to ensure your goods can clear customs smoothly, including logistics shipping partners that do cross-border shipping. However, it will benefit you to do a background check on the company’s licenses and whether they need you to meet a minimum order volume.

In Indonesia’s case, it helps to know whether or not your customs partner is in the green channel. This factor helps to reduce the chances of an item getting stuck in Indonesian customs.

Furthermore, some companies are able to expedite customs clearance by making arrangements like DDP and taking on the risk of pre-paying duties and taxes on your behalf. This localised knowledge to the country’s legislative changes on the go can help to protect your business from unexpected costs. To find out more about the difference between DDU and DDP, you can check out our previous article on these incoterms.

If you are a smaller scale eCommerce merchant, it helps to check if a company has a minimum order quantity to fulfil. One potential barrier to entry when finding a customs partner is meeting their minimum order quantity, especially if you are just starting to deliver into Indonesia.

For instance, you could find a customs broker that processes parcels at a cheaper rate than another, but the cheaper customs broker will have a higher demand in processing volume. There’s also no guarantee that the cheaper broker won’t prioritise bigger customers over your volume.

Thus, it would help to know of a customs broker that doesn’t impose a minimum order quantity, which is great if you’re testing out the Indonesian market for the first time.

The Southeast Asian customs environment is dynamic and constantly evolving. Take a deep dive into the customs clearance process and learn about the best practices with Janio’s guide to clearing Southeast Asian customs!

 

Other Tips to Clear B2C Indonesia’s Customs Effectively

If you’re working with a cross-border shipping company to send your B2C shipments, it helps to ensure that the addressee is a person’s name and not a business’s name. This is because B2B shipments typically require more licenses to import these goods as opposed to B2C shipments for a customer’s personal consumption.

If a B2C shipment was addressed to a company instead of a person, the parcel can be held up in customs until the required documentation from the recipient is presented. Not only will this cost you in time and money, but this could also anger your customers who weren’t expecting this complication.

On top of that, you could look for a shipping partner that can pair up last mile delivery in Indonesia on top of an expedited customs clearance so that you can get the most bang for your buck.

 

Now that you know the steps required to tackle Indonesian customs, you will be more prepared to expand your eCommerce business into Indonesia. If you liked what you read, you may find out more information about Indonesia on our eCommerce Guide to Shipping to Indonesia.

Janio also provides customised shipping solutions into Indonesia and other Southeast Asian countries, including expedited customs clearance. Reach out to us at contact@janio.asia to find out more!

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Interested in eCommerce in Indonesia? Find out more about Indonesian eCommerce scene here:

 

References

  1. Directorate General of Customs and Excise, Ministry of Finance
  2. Indonesia: Law No.7 of 2014 on Trade
  3. Tech In Asia: How Indonesian Customs Is Affecting Cross-border B2C E-Commerce
  4. Indonesia HS Goods Code
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