Indonesian import regulations are often changing, so it is not uncommon foreign companies find products stuck in Indonesian customs. In this article, we shed light on what you need to do when your products get stuck in customs and how to prevent it in the first place.
Main reasons why goods are kept in customs
One of the main reasons why goods get stuck in the customs is because your consignee in Indonesia does not have an import license or the necessary supporting documents. Some products require further papers in addition to licenses as well. Some forwarders do not inform their client and so once the goods have arrived in Indonesia they get stuck.
Another reason is a red channel inspection, or pemeriksaan jalur merah (PJM), which is performed selectively. This means that in addition to document verification, your shipment will be inspected physically as well.
In Indonesia, it is common practice that end-to-end import/ export providers use door to door services to avoid paying duty and taxes to the customs office.
However, the government issued a new regulation in July 2017 that practically shuts down the service in Indonesia. As a result many shipments that used that method have been stuck in customs because of incomplete documentation or taxes.
What you need to prepare before shipping
Before shipping your products to Indonesia you need to decide whether you want to do it through your own import company or by using a third party importer of record service.
If you decide to set up an import company you must acquire an Importer Identification Number (API) from the Indonesian Ministry of Trade. This is a license that will allow you to start importing.
However, prior to applying for an API, you need to decide whether you are going to become a general importer (API-U) or you want to import machinery and raw materials for your own production (API-P).
The total time of incorporating a foreign-owned company is at least six weeks, meaning that you cannot start importing to Indonesia right away.
Importer of record
You can also import to Indonesia without setting up a legal entity. An importer of record service, also known as undername import, enables you to import to Indonesia immediately without acquiring any import licenses or being liable for any import taxes.
The idea of an importer of record service is quite simple – you outsource the service to a third party service provider and use the import licenses and expertise of an already existing company. Besides being faster, an importer of record service has many other benefits as well – from smooth and seamless customs clearance to full service in which everything regarding your import will be taken care of by the service provider.
What other documents do I have to prepare?
A packing list is a document prepared by the seller that indicates the product details, the volume of the shipment either in Kg or CBM, and allows to check whether the shipment has been packed correctly or not.
A proforma invoice or a commercial invoice are documents that provide the total value of the shipment usually in US dollar hence would have a sufficient information in determining the import duties and taxes, and the eligibility of the shipment.
Bill of lading or air waybill are documents acknowledging the transport of the shipment. Bill of Lading (BL) if the shipment arrived via sea freight. Airway Bill (AWB) if the shipment arrived via air freight.
Procedures are conducted at the customs
The PIB (Pemberitahuan Impor Barang) –
Import Declaration Form
Imported goods must be declared to the customs authority. When the shipment has been processed, an Import Declaration Form (PIB) will be released. The PIB includes import duties (which varies based on the HS Code of the goods being imported), value-added tax (fixed at 10 percent), and income tax article 22 (fixed at 2.5 percent).
This form is issued to declare the goods, with or without the import licenses. Thus, even if you pay the PIB, it does not automatically mean that your shipment will be released.
The PJM (Pemeriksaan Jalur Merah) –
Red Channel Inspection
Upon arrival, imported goods are processed in three channels: • Green channel – only document verification, the goods are cleared
• Yellow channel – additional documentation is required before the release of goods
• Red channel – physical inspection of goods, every shipment needs to be inspected one by one
Gods can get stuck in the red channel when there are changes in taxes, regulations, HS codes and so on. In that case, a Notice of the Red Channel will be released.
What to do when products are stuck in customs
The customs office will give three possible solutions to getting goods out of customs.
One of the options is to pay the due amount of PIB (Import Duty, VAT, and Income Tax or article 22) and a readdress consignee charges. By doing this you declare to readdress the shipment consignee from the previous to the current one who has the proper import licenses/permits for the imported goods. You will get your shipment out of customs, but it can be quite expensive.
Alternatively, the customs office may put your goods up for auction. Your items will be put up for a bid and sold to the highest bidder.
The third option is that the customs office may require you to re-import your shipment. If you can’t import the goods that are stuck in the customs, you need to export them out of Indonesia and acquire the relevant documents/licenses before importing them to Indonesia again.
This is the case, of course, if your products do not fall under forbidden goods that are prohibited of import to Indonesia. These products include, for example, politically sensitive materials, guns and firearms (which need a special permit), narcotics and drugs. According to Indonesian customs, the attempt to import these products can result in heavy penalties and even imprisonment.
In general, it takes approximately between four to six working days to get goods out of Indonesian customs.
Featured Image by Emerhub