COVID-19: Indonesian Government Finally Paying Close Attention to Development of E-Commerce
The COVID-19 outbreak has continued to impact digital media consumption worldwide. Internet platforms, such as e-commerce, now play a pivotal role in our daily lives. On the bright side of current situations, e-commerce is growing all over the world, including in Indonesia. This is because behavioral shifts amongst Indonesians to choose online platforms as their safest place to conduct their daily activities, such as shopping, working or just meeting with some friends.
To anticipate rapid growth of e-commerce business and provide room for the continuous development of electronic-based trading activities in Indonesia, the Ministry of Trade recently enacted Minister of Trade Regulation No. 50 of 2020 on Terms of Business Licensing, Advertising, Coaching, and Supervising Business Actors in Trade through the Electronic System (MoT Regulation 50) as the implementing regulation of Government Regulation No. 80 of 2019 on Trade through the Electronic System (GR 80).
MoT Regulation 50 intends to entail the further development and growth of e-commerce (i.e. marketplace and e-retail). MoT Regulation 50 also classifies business actors into three groups:
- Merchants, domestic and/or foreign business actors that engage in e-commerce, either through their own electronic systems or facilities provided by e-commerce service providers or another electronic system that provides e-commerce facilities.
- E-commerce service providers (ESP), domestic and/or foreign business actors that provide electronic communications facilities that are used to enable e-commerce transactions. Business models within this category include online retail, marketplace, online advertising platforms, price comparison websites, and daily deals.
- Intermediary service providers (ISP), domestic or foreign business actors that provide an electronic communication facility other than a telecommunication system, which functions solely as an intermediary between “sender” and “recipient”. Business models within this category include search engines, hosting services and caching services.
Each business classification above is required to obtain a license in order to conduct business through electronic system activities (Activities). However, ISP in particular, are exempted from such requirement as long as they are not directly involved in an e-commerce contractual relationship with the parties involved or they are not direct beneficiaries of the e-commerce transaction.
License for Trade through the Electronic System
The application to obtain the business license for both domestic and foreign merchants is conducted through the Online Single Submission (OSS) systems. Specifically, for a foreign merchant, they must register their business by providing their registered number, name, and the institution where they have been registered in their countries.
Obligation to Obtain SIUPMSE (Surat Izin Usaha Perdagangan Melalui Sistem Elektronik)
For ESP and ISP that have not been exempted, they must obtain SIUPMSE issued by OSS. The application of SIUPMSE is free of charge and only become effective after the business actor has fulfilled all commitments in the OSS system, such as obtaining and/or providing:
- ESP Registration Certificate;
- web address or the name of the application;
- details of contact and/or address of the company for customer service; and
- details of the contact of Directorate General of Consumer Protection and Trade Compliance for customer service.
Introduction of KP3A PMSE (Kantor Perwakilan Perusahaan Perdagangan Asing bidang Perdagangan Melalui Sistem Elektronik)
Previously in GR 80, foreign business actors who actively make offers to or conduct e-commerce with consumers who are residents in Indonesia are considered physically present in Indonesia and carry out business on a permanent basis in Indonesia, provided that they satisfy certain criteria. The criteria are further explained in MoT Regulation 50.
In particular, for a business actor who is classified as an ESP is required to establish KP3A PMSE in Indonesia to act on their behalf if such business actor has made transactions with more than 1.000 (one thousand) consumers and/or has shipped more than packages to consumers in one-year period.
Sanctions
The business actors who violate the obligations under MoT Regulation 50 will be imposed with escalating administrative penalties ranging from written warnings and having its application and/or website black-listed to be commerce in Indonesia by the Ministry of Trade.
The writers, Muhammad Rezafajri and Ardhitia Prawira Rusyadi, are associates at Soemadipradja & Taher, the Indonesian corporate law firm. The views presented here are their own, do not constitute legal advice, and are not to be acted on as such.
Rezafajri is a senior associate in Soemadipradja & Taher, who started practicing in 2014. He obtained his Bachelor of Laws degree from Universitas Indonesia, majoring in civil law. Rezafajri is well known for his assistance for multinational and local corporations in general corporate and investment.
Ardhitia is an associate in Soemadipradja & Taher. He obtained his Bachelor of Laws degree with cum laude from Universitas Gadjah Mada in 2018, majoring in business law. Ardhitia has acted for both Indonesian and foreign clients in a variety of general corporate and commercial transactions.