On April 1, 2021, the Minister of Trade (“MOT”) issued his Regulation No. 24 of 2021 on Agreements for Distribution of Goods by Distributors or Agents (“MOT Reg. 24/2021”), which revokes and replaces the MOT Regulation No. 11/M-DAG/PER/3/2006 dated March 29, 2006 on Provisions and Procedures for the Issuance of Registration Certificate for Agents or Distributors of Goods and/or Services (“MOT Reg. 11/2006”). MOT Reg. 24/2021, which entered into force on May 1, 2021, serves as an implementing regulation of Government Regulation No. 29 of 2021 on Implementation of the Trade Sector (“GR 29/2021”).
MOT Reg. 24/2021 does not set out major changes in the framework of distribution of goods. We set out below the key changes on MOT Reg. 24/2021.
- Restatement of Distributor Business Actors
Article 2 of MOT Reg. 24/2021 restates the types of business actors that classified as carrying out distribution activities provided under GR 29/2021, which consist of (i) distributors; (ii) sole distributors; (iii) agents; and (iv) sole agents. Although GR 29/2021 no longer includes sub-distributors and sub-agents as “distribution business actors”, MOT Reg. 24/2021 provides that distributors and sole distributors may appoint sub-distributors while agents and sole agents may appoint sub-agents.
- Appointment of PMDN Trading Companies as Agents/Distributors of PMA Companies
MOT Reg. 24/2021 clarifies the requirement of foreign investment PMA trading companies to appoint domestic investment (PMDN) trading companies as distributors, sole distributors, agents, or sole agents. Previously, such requirement may be broadly interpretated since MOT Reg. 11/2006 did not provide any elucidation on what constitutes “national trading companies”.
- Simplification of Procedures for Registration Certificate Obtainment
Previously, MOT Reg. 11/2006 provided the requirements for agency or distributorship agreements to be registered to the Ministry of Trade to obtain a Registration Certificate (Surat Tanda Pendaftaran or “STP”). However, the scope of MOT Reg. 24/2021 only includes provisions regarding the agency or distributorship agreements and does not include procedures for their registration.
Nevertheless, currently STP is still required for agents or distributors, and that companies shall refer to the MOT Regulation No. 8 of 2020 dated February 10, 2020 on Electronically Integrated Business Licensing Services in the Trade Industry as amended by MOT Regulation No. 64 of 2020 dated July 9, 2020 regarding the procedures to obtain an STP.
- Termination of Agreement
MOT Reg. 11/2006 recognized termination of an agency or distributorship agreement due to the transfer of agency/distributorship rights Now, under the MOT Reg. 24/2021, an agency or distributorship agreement may be terminated earlier than the expiration of the agreement in the case of: (i) dissolution of the company; (ii) cessation of business operations; (iii) bankruptcy; and (iv) by mutual agreement of both parties. This means that a principal shall first terminate an agency or distributorship agreement before appointing a new agent or distributor.
If the previous agreement is terminated before the expiration of the STP, the new agent or distributor may only register its agreement and obtain the STP after the clean break of the terminated agreement. If a clean break is not settled within three months as of the termination of agreement, the STP of the previous agent or distributor shall be deemed invalid and the principal may appoint the new agent or distributor.
- Separate Provisions for Health Products and Medicines
Companies distributing health products and medicines are now exempted from the provisions of MOT Reg. 24/2021. Distribution of health products or medicines shall be carried out based on the relevant laws and regulations in the health sector.