The Indonesian Ministry of Trade (“MOT”) regulation and its impact on non-Indonesian-based online businesses.

On 26 September 2023, The MOT issues Ministerial Regulation No. 31/2013 relating to "Business Licensing, Advertising, Guidance and Supervision of Business Actors in Trade via Electronic Systems".

This was meant to replace MOT Regulation No. 50/2020.

Key takeaway

The business registration requirements of the MOT Regulation No. 50/2020 are retained. Rather, the MOT Regulation No. 31/2023 introduced the following:

  • "Social e-commerce" platform will not be permitted to carry out e-commerce-type sale transactions, in particular carrying out payment transactions for the buyer and seller.
  • Sales from foreign e-commerce merchants will need to be priced at a minimum of USD 100 or its equivalent.

Background

In 2020, the MOT passed MOT Regulation No. 50/2020 on " Business Licensing, Advertising, Guidance and Supervision of Business Actors in Trade via Electronic Systems". The key aspect of this regulation requires foreign e-commerce platforms to set up a representative office where one of the following is triggered:

The setting up/appointment of a representative office in Indonesia in the event of the following:

a. Having completed more than 1,000 (one thousand) transactions with consumers within a year; and/or

b. Having delivered more than one thousand packages to consumers within a year.

This requirement is retained in MOT Regulation No. 31/2023.

Another note-worthy aspect of MOT Regulation No. 31/2023 requires local merchants on e-commerce platforms to obtain business registrations. Merchants trading on e-commerce platforms are required to obtain a Business Identification Number (Nomor Induk Berusaha). This requirement replaces the previous requirement under MOT 50/2020 for a Company Business License on Electronic System (Surat Izin Usaha Perdagangan Sistem Elektronik/SIUPSE)

In the case of foreign merchants, they are required to submit the following to their respective e-commerce platforms:

a. Identity of the foreign Merchant in the form of name and address of the country of origin of the foreign Merchant;

b. A business license issued by an authorized institution in the country of origin which is legalized by:  

  1. The competent authority for countries participating in the Convention on the Abolition of Legalization Requirements for Foreign Public Documents; or  
  2. Representative officials of the Republic of Indonesia in the country of origin for countries not party to the Convention on the Elimination of Legalization Requirements for Foreign Public Documents.

c. Proof of compliance with required standards or technical requirements for Goods and/or Services; and

d. Bank account number used for transactions.

There is also a rather general provision requiring all platforms to submit “data and/or information” to the “non-ministerial government agency that carries out government affairs in the field of statistics in accordance with statutory provisions” – Badan Pusat Statistika. However, there is still no clear mechanism how this is to be implemented in the case of forgotten platforms.

We previously reported on the MOT Regulation No. 50/2020 when this was passed in 2020. Since then, we did not observe any clear policing for compliance of the requirement for setting up of local representative office. It is necessary to continue to monitor this to see if the government’s attitude has changed under MOT Regulation No. 31/2023. In terms of registration, the Government (through Ministry of Communication and Information or MOCI) is reported to be active in enforcing the revision requirement of "Electronic System Operator (ESO) in the private sector" which includes most websites and online services - Article 2 paragraph (1) of MOCI Regulation No. 5/2020 concerning "Electronic System Operator (ESO) in the Private Sector".

Key changes/introduction

The most note worthy aspect of the new regulation is to prohibit "Social e-commerce" platforms from carrying effecting payment transactions.

The official reason given by the government for this restriction is to "regulate for fair trade” and "protect small medium business in a fair way". However, this move has been perceived by certain quarters to be an attempt to curtail the reach of foreign social media platforms into e-commerce sphere that is still being dominated by local operators.

Minister of Communication and Informatics, Budi Arie, emphasizes its role in preventing monopolistic practices while simultaneously advancing data protection measures.

Another key introduction is the setting of minimum price of USD 100 for sales by merchants located overseas. Sales from foreign e-commerce merchants will need to be priced at a minimum of USD 100 or its equivalent. The regulation also provides that the Ministry will be compiling a list of goods that are exempt from the USD 100 minimum limit, which has yet to be released.

Note also the provision requiring PPMSE to submit data to “a non-ministerial government agency that organizes government affairs in the statistics sector in accordance with provisions of laws and regulations” – Badan Pusat Statistika. It is necessary to monitor the issuing of further regulations on the collection of data.

Conclusion

Foreign online merchants targeting the Indonesian market will therefore have to relook at their product pricing in order to avoid falling foul of the provision on minimum price setting. Popular overseas platforms may need to take heed of this because they may be under the government's radar. Such an infraction will probably be more ready “picked up” by the authorities than when a PPMSE reach the limit of 1,000 transactions for that year.