Unlike Singapore and Vietnam, which have had free trade agreements with the European Union since 2019 and 2020 respectively, greatly facilitating trade between EU members and these countries, Indonesia is still waiting for negotiations to conclude to be part of such an agreement. Therefore, Spanish companies exporting to Indonesia must comply with Indonesian regulations, consisting of various directives from the Ministries of Trade and Finance. Depending on the specific sector, such as food and beverages (‘Halal’), textiles and footwear, or electronics, these regulations may require, for example, pre-shipment inspection or subject all products to certain tariffs and taxes.
Although exporting to Indonesia offers great potential, evidenced by its vast territorial expanse of 1.919 million square kilometers, a population of over 267 million, being the largest economy in Southeast Asia and the fourth largest in Asia, as well as a growing middle class with increased purchasing power, bilateral economic relations between Spain and Indonesia are still below expectations in terms of exports and investments. Spanish exports averaged around 500 million euros annually between 2015 and 2020, while imports did not exceed an average of 2 billion euros per year, resulting in a significant trade deficit for Spain.
Understanding the regulatory framework for exporting to Indonesia is essential, especially regarding food and beverages, due to Indonesia’s stringent regulations that cannot be overlooked. Sometimes these regulations restrict the importation of certain goods, as seen with Ministerial Regulation 59/2020, which requires an import permit for complementary goods, goods for market testing, or goods used for after-sales services in specific sectors. To obtain this permit, a commercial identification number is needed, which can be acquired through the OSS platform (One Single Submission) under the BKPM (Indonesia Investment Coordinating Board).
It is worth noting that Law 11/2020 (commonly known as the “Omnibus Law” due to the range of matters it regulates), particularly the implementing regulations like Decree 29/2021 assigning all export and import competencies to the Ministry of Trade, represents the latest and most serious effort to streamline these processes. Before starting any process, especially exporting to Indonesia, it is advisable to be familiar with the Indonesian tariff code to classify different products and identify those requiring specific licenses or registrations. Additionally, understanding the necessary documents such as commercial invoices, bill of lading (three original copies and four non-negotiable copies), insurance certificate, certificate of origin, product content list, commercial identification number, import permit, and customs declaration is crucial.
In addition to the above, consideration should be given to applicable tariffs and taxes. The implementation of Ministerial Regulation 199/2019 on January 30, 2020 reduced tariffs from 10% to 7.5% on all taxable products, with an additional 10% value-added tax, totaling 17.5%. Without simplified treaties like those between Australia and New Zealand with ASEAN, South Korea with ASEAN, India with ASEAN, or China with ASEAN that greatly streamline export procedures to Indonesia, these are the general guidelines to consider. Collaborating with a local partner, importer, or distributor can further facilitate market entry for goods into the local market.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
