Singapore boasts a strategic location in more ways than one. With many of its Southeast Asian neighbours being rising economic stars surrounding this island nation, Singapore makes for a great regional logistics hub to serve your expansions into other Southeast Asian countries.
When it comes to expanding to the rest of Southeast Asia, Indonesia stands out. Indonesia is home to one of the largest populations in the world and has a growing middle class.1 It’s also seen great progress in reducing poverty to below 10 per cent2 while also seeing consumption growing at an annual rate of 5 per cent in 2019. In one case, the vitamin maker Blackmores saw its sales rise 72 per cent in the 2nd quarter of 2018 since shifting its focus to Indonesia from China.3
With Indonesia’s capital city and primary economic hub, Jakarta, being just a two-hour flight away from Singapore, it helps to know how air freight can help your supply chain and when it’s best to use it.
Parcels shipped by air freight, also known as B2C shipments, tend to be shipped to private individuals and face fewer hurdles compared to bulk orders. Orders with their customs valuations below the de minimis value of the destination country tend not to need extensive customs documentation. They’ll usually need the minimum such as commercial invoices and packing lists. Unique to air freight, orders below the de minimis value are also charged fewer or no duties and taxes depending on the country’s regulations. Indonesia’s de minimis value is discussed later in this article too.
Bulk orders, on the other hand, face more regulation. The consignees of these orders are enterprises and businesses who need to be registered with local authorities. Your importing party also needs to have import licenses as well as other permits with relevant authorities at hand to clear destination customs clearance. With the size of these orders, they’re subject to duties and taxes depending on their customs valuation and the type of goods shipped.
In terms of transit time, air freight is great when you need your products shipped yesterday. With Singapore and Indonesia being quite close-by, the flights themselves (mid-mile only) just take a few hours. This is compared with sea freight which could take longer.
All this speed comes at a price, but there are times when it’s actually cheaper to ship via air freight compared to sea freight. To understand this, it helps to see how air freight rates are calculated.
For air freight, rates are charged to the order’s volumetric weight (how much space it takes up) or its actual weight depending on which is greater. For less-than-container-load shipments, sea freight tends to be charged by volumetric weight, with a minimum chargeable volume being 1 cubic metre (cbm).
Sea freight saves you money if your order is above 2 cbm. However, you don’t get those economies of scale for items that aren’t that big like small cartons that take up between 0.5 to 0.9 cbm since you’re paying for unused space. This is where air freight can be more economical than sea freight.
Fortunately, you don’t need to work all of this out yourself. Logistics service providers like Janio can help advise you on whether air freight or sea freight is better suited to your current leg of the supply chain and also offer you both shipping modes for your orders. To find out more, reach out to us below.
When choosing between air freight and sea freight, consider the following:
Air freight is fast, but can have some limitations. Bulky or oddly-sized items, or items too dangerous to meet air freight’s restrictions on what can be shipped generally should use sea freight instead.
For instance, these products generally can’t be shipped via air freight: products containing gases, all things flammable, toxic or corrosive items like batteries, magnetic substances like speakers, perishable items and more.
The air freight process generally follows these steps:
While the logistics supply chain from Singapore to Indonesia can vary depending on your requirements, shipping via air freight from Singapore to Indonesia would usually follow these steps.
The first mile stage in international shipping refers to the first stage of the shipping supply chain, where it either leaves the merchant’s address, be it a storefront, office, or warehouse. Prior to your goods leaving your storage facility, the product has to be packaged and labelled appropriately to facilitate smooth cross border shipping.
Packages may sometimes go through bumpy rides such as turbulence. Having extra padding for fragile items, like bubble wrap and packing peanuts, is recommended to prevent your products from bouncing around or getting deformed during shipping. To learn more about the best practices in packaging your goods, we’ve covered this topic in our packaging guide.
Additionally, shipping labels and the appropriate customs documentation must be accessible for customs officers to inspect the shipment. You can check out our guide on labeling your shipments which you can also find in our resources for B2C shipping to Southeast Asia.
Once the shipment is ready to be passed to your shipping partner, you can choose to drop off your parcel at your shipping partner’s drop-off point, or have it picked up from your address. Most shipping partners would have a cut-off time for submitting orders for drop offs and pick ups so that they can optimise their route.
If your shipment is a B2C parcel, it typically has to be consolidated on a pallet at a transportation hub or at a warehouse closer to the origin airport together with other packages with the same destination country before it can be sent for customs clearance. Since B2B shipments are already consolidated, the shipment can be transported directly to the origin warehouse for customs clearance.
Some warehouses you could consider in Singapore also have transportation hub capabilities, and are able to sort your parcels and have it ready for customs clearance within the same location such as those within Singapore’s Free Trade Zone.
Free Trade Zone warehouses also have the benefit of deferring tax charges on non-dutiable goods until they enter a country’s official borders, which helps with both cash flow and also as a storage area for regional hubs in Southeast Asia.
After collection, your goods need to be cleared for export by Singapore Customs at Changi Airport. In Singapore, goods being exported are not subject to customs duties and Goods and Services Tax but all goods must be declared.4
To get your goods cleared for export, your shipment at the usually needs to have the following documents ready:
If you’re using air freight to export out of Singapore in bulk, you’ll also need to prepare the following documents and information for Singapore customs:
A UEN number and Customs Account are needed for both exporting from and importing into Singapore. A UEN is a standard identification number for businesses to interact with Singapore’s government agencies.5 The UEN can be obtained by registering with a UEN issuing agency, such as Singapore’s Accounting and Corporate Regulatory Authority (ACRA). Once you have your UEN, you can register for a Customs Account on Trade.net online portal.
You must obtain export permits if the goods are dutiable or subject to control. Goods that are exempted from needing an export permit can be found on Singapore’s Customs website. This permit can be applied for via Singapore’s Trade.net portal.6 The FOB value of your shipment must be declared in the export permit application.
After checking these documents and clearing your shipment for export, your shipment can be loaded onto an Indonesia-bound plane.
Once your item arrives in Indonesia’s airport, your shipment will head to a customs warehouse for clearance. Here, customs officers will inspect your parcel and shipping documents and determine if your product is allowed to enter Indonesia.
To clear customs for import into Indonesia, you or your shipping partner would generally need to provide the following documents:
The commercial invoice will need to be signed by the manufacturer or supplier as true and correct. As for the bill of lading, you’ll need three endorsed originals and four non-negotiable copies.
Your shipment also needs the customs import declaration, import permit and customs identification number (Nomor Identitas Kepabeanan, NIK) and importer identification number (Angka Pengenal Import, API) of the importing party.
In Indonesia, there are three types of import licenses. API-U is the general import license used for importing finished goods. API-P is the producer import license used for bringing raw or unfinished products into the country. There is also a third importer license called API-T, which is limited to a specific industry and does not permit you to import goods not related to that sector of the business. If you’re also interested in Indonesia’s customs clearance for B2C shipments, check out our updated customs clearance guide.
If your order is below Indonesia’s de minimis rate of USD 3, then there is no need to pay import duties and taxes to the customs office. If your item is below Indonesia’s de minimis rate of USD 3, then there is no need to pay additional import duties and taxes to the customs office. Currently in Indonesia, items below the de minimis just need to pay VAT at 10% of the order valuation.
The de minimis rate refers to a value threshold where fewer or no duties and taxes are charged if the shipment’s CIF value, which includes your good’s price, shipping fee, and insurance costs if any, is below that point. This only applies to goods that are delivered via air freight. Earlier in 2020, the Indonesian government revised their de minimis rates from USD 75. To find more information about this regulatory change, you can read our article here.
On the other hand, if your goods exceed the de minimis threshold, higher import duties and taxes like income tax will be levied on your shipment. You would have to pay a value-added tax (VAT) at 10%, and the import duties and income tax depend on the product category as declared by the harmonised systems code (HS code). You may find out the percentage of your import duties, VAT and income tax paid through Indonesia’s Directorate General of Customs and Excise website.7
However, with the COVID-19 pandemic around, the Indonesian government provided temporary duties and tax exemptions on products that are designed to fight the virus, such as hand sanitisers and personal protective equipment. You can find out more information in our article on this temporary regulation.
If you’re shipping a B2C parcel, you can choose to either pay for the import duties and taxes yourself or let your customers pay for the import duties and taxes. This is determined by the incoterms Delivered Duties Unpaid (DDU) and Delivered Duties Paid (DDP). While we strongly encourage you to opt for DDP to keep your shipping experience smooth for your B2C customer, it helps to familiarise with what these arrangements mean.
Once your shipment has cleared customs, it will enter the distribution stage of the shipping journey. If the consignee’s address is within the Greater Jakarta region, your B2B shipments can be delivered directly to its destination.
However, B2C parcels need to be at a transport hub to sort them out before the last mile journey can begin. However, if the address is beyond an address that can be reached by vans or trucks, an additional domestic flight will be needed before your shipments can be sorted or sent to last mile delivery.
The last mile delivery stage is where your parcel will be sent from the destination warehouse to your consignee’s address. In Indonesia, this stage of the delivery is done via vans or motorcycles. During the last mile delivery stage, your logistics service provider will ensure that your shipment is received by your consignee.
Air freight works best when you need your goods delivered yesterday, and works even better when you have logistics service providers who can tell you when and where it’s best used in your supply chain. Contact us below to find out more about how we can help you or if you’d like an air freight quotation to ship to and throughout Southeast Asia.
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