Corporate & Securities Jakarta Client Alert February 2016 New Regulation on Import of Used Capital Goods: Health Appliances Provider Companies Will No Longer be Able to Import Used Capital Goods Introduction As a general rule, Law No. 7 of 2014 on Trade ("Trade Law") provides that an importer can only import goods that are in a new condition. There is, however, an exemption to this general rule under which used capital goods can be imported by certain companies under a specific approval from the Minister of Trade. On 29 December 2015, the Minister of Trade ("MOT") issued a new regulation on the import of used capital goods, i.e., Minister of Trade Regulation No. 127/M-DAG/PER/12/2015 on Import Provisions for Used Capital Goods ("Regulation 127"). Regulation 127 replaces Minister of Trade Regulation No. 75/M-DAG/PER/12/2013 on the same matter ("Previous Regulation"), and came into force on 1 February 2016. Regulation 127 will remain valid until 31 December 2018. Key Changes at a Glance I. Health Appliances Provider Companies Will No Longer be Able to Import Used Capital Goods Under the Previous Regulation, only certain companies were permitted to import Used Capital Goods, i.e., Direct User Companies, Reconditioning Companies, Remanufacturing Companies and Health Appliances Provider Companies. Under Regulation 127, however, Health Appliances Provider Companies are removed from that list and can no longer import Used Capital Goods. II. Imported Used Capital Goods Must Meet Certain Age Limitations Under the Previous Regulation, the age limitation for the import of certain Used Capital Goods only applied for Used Capital Goods under HS Codes 84, 85 (motors and electric generators), 88 (hot air balloons, glides), 8901 (ships for transporting goods and people), 8902 (ships for catching and processing fish), 8903 (yachts and canoes), 8904 (towing ships), and 8905 (other ships including war ships), i.e., they must be a maximum of 20 years old. Corporate & Securities 2 New Regulation on Import of Used Capital Goods: Health Appliances Provider Companies Will No Longer be Able to Import Used Capital Goods February 2016 Regulation 127 now requires almost all types of Used Capital Goods that can be imported by Direct User Companies, Reconditioning Companies and Remanufacturing Companies to meet certain age limitations ranging from a maximum of 15 years old to a maximum of 30 years old. III. New Requirements for Obtaining an Import Approval The requirements for obtaining an Import Approval are to some extent different than those under the Previous Regulation. Although one or two documents are no longer required when applying for an Import Approval (e.g., a Taxpayer Identification Number (NPWP)), new requirements are also introduced such as the requirement to submit an import plan which covers a description of the goods, a 10 digit HS Code, the amount and unit of the goods, the loading country and the port of destination. The Director of Import will issue Import Approvals within 5 working days from receipt of a complete application and Import Approvals are valid for a maximum of 1 year from their issue date. IV. Term of an Extended Import Approval The Previous Regulation did not clearly mention the term of an extended Import Approval. It only stated that Import Approvals are valid for a maximum of 12 months from their issue date and may be extended once. Regulation 127 now makes it clear that an extended Import Approval is valid for up to 60 days and can only be extended once. Further, Regulation 127 provides that an application to extend an Import Approval must be submitted at least 30 days prior to the expiry of the Import Approval. V. Quarterly Report Under the Previous Regulation, companies which had obtained Import Approvals of Used Capital Goods had to submit a realization report in writing to the Director of Import of the Ministry of Trade each month, at the latest on the 15th day of the following month. Under Regulation 127, the obligation to submit a monthly report is now replaced with quarterly written reports, at the latest on the 15th day of the first month of the next quarter. The report must be submitted through http://inatrade.kemendag.go.id with a copy to the related technical agency. VI. Importation of Used Capital Goods Not Included in the List in the Attachment Under the Previous Regulation, for the purpose of export development, increase of competitiveness, business efficiency, investment, industry relocation activities, infrastructure development, and/or for export purposes, Used Capital Goods not included in the attachment could be granted an Import Approval by the Director General of Foreign Trade of the Ministry of Trade. Moreover, Used Capital Goods not included in the attachment which are imported in a limited amount may be considered to be granted an Import Approval by the Director General of Foreign Trade of the Ministry of Trade on a case-by-case basis after obtaining a recommendation from the competent authority in accordance with the prevailing laws and regulations. Corporate & Securities 3 New Regulation on Import of Used Capital Goods: Health Appliances Provider Companies Will No Longer be Able to Import Used Capital Goods February 2016 Under Regulation 127, the provisions on the ability to import Used Capital Goods not included in the attachment have been removed. Consequently, it seems that it is no longer possible to import Used Capital Goods not included in the attachment. Actions to Consider 1. Direct User Companies, Reconditioning Companies and Remanufacturing Companies must make sure that the Used Capital Goods they intend to import meet the required age limitation. 2. Given that Health Appliances Provider Companies will no longer be able to import Used Capital Goods, these companies should consider increasing imports and stockpiling Used Capital Goods before their Import Approvals expire. Existing Import Approvals will remain valid until their expiry. 3. Direct User Companies, Reconditioning Companies and Remanufacturing Companies whose Import Approvals for Used Capital Goods have expired may consider applying for an extension. Note that Regulation 127 provides that an application to extend an Import Approval must be submitted at least 30 days prior to the expiry of the Import Approval. Conclusion It is still unclear why Health Appliances Provider Companies will no longer be able to import Used Capital Goods. It appears, however, that the government is trying to restrict the importation of Used Capital Goods into Indonesia by strengthening the requirements, i.e., prohibiting Health Appliances Provider Companies from importing Used Capital Goods; imposing age limitations for almost all types of Used Capital Goods; and eliminating the possibility to import Used Capital Goods not included in the list of attachments. Even though Regulation 127 provides no sanctions for importing Used Capital Goods without Import Approval, under the Trade Law, importers importing goods not in a new condition are subject to imprisonment for up to 5 years and/or a fine of up to IDR5 billion. *** www.hhp.co.id For further information please contact Mochamad Fachri Partner +62 21 2960 8547 firstname.lastname@example.org Riza Buditomo Associate Partner +62 21 2960 8569 email@example.com Gading Bhimaskara Associate +62 21 2960 8648 firstname.lastname@example.org Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. Jenderal Sudirman Kav. 52-53 Jakarta 12190 Indonesia Tel: +62 21 2960 8888 Fax: +62 21 2960 8999 ©2016 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.