Indonesia: Indonesian Government Plans Various Measures To Curb Imports

Last Updated: 6 September 2018
Article by Anthony Kerr

The rising interest rates in the United States, higher oil prices and the full-blown US-China trade war have affected Indonesia's economic and investment growth.

In order to improve its trade balance, the current account balance, and strengthen the rupiah, the Indonesian government plans to impose several measures to stem the flow of imports into the country.

Additional Tax on Imported Goods

The Indonesian government is proposing a new Finance Ministry regulation to impose an additional 7.5 percent tax on certain imported goods. The additional 7.5 percent tax will likely be levied as income tax, and calculated based on the CIF value of the imported good plus duty.

On 14 August 2018, Finance Minister Sri Mulyani Indrawati announced that the government is in the process of identifying 500 goods that may be subject to the new tax. Such goods should be available (and are manufactured) locally and are not categorized as "strategic products". She said that the new tax will also apply to goods purchased via e-commerce. The ministries of finance, industry and trade, and the customs department are holding internal discussions to determine the list of products. The list will likely include goods such as paper and wood products, rubber and plastic, etc., which are already manufactured in Indonesia.

The implementation date for the additional tax has not yet been announced.

Discouraging Capital Goods Imports

The government will also discourage imports of capital goods, most of which are imported by PT. Pertamina, a state-owned oil and natural gas corporation, and Perusahaan Listrik Negara (PLN), a state-owned electricity producer. The most likely method of doing this would be by removing any direct and indirect tax exemptions (including removal of import duty exemptions) and requiring the importer to apply for import permits for all shipments. In other words, capital goods importers will not only have to pay the applicable import duties and taxes, but will also be required to go through the long and arduous process of obtaining a permit/licence to import. It is not clear whether this policy will apply only to imports by the two state-owned enterprises named above or whether it will affect all importers of capital goods.

The government hopes that this policy will encourage the use of local goods. However, it is uncertain whether there is any local production of the capital goods, and if there is, whether the locally manufactured capital goods are of the same or better quality.

Indonesia's Chamber of Commerce and Industry (Kadin Indonesia) as well as the Indonesian Employers Association (Apindo) are urging the government to think very carefully on the implementation of these measures and the effects.

While the government is not obliged to offer direct and indirect tax exemptions in relation to capital goods, imposing a non-automatic import permit requirement may be considered a non-tariff barrier if imports are unduly impacted by the permit application requirements or process. The proposed capital goods measures are reminisce of past Indonesian measures which were subject to challenge at the World Trade Organisation (WTO). But would Indonesia really be concerned? A case brought to the WTO dispute settlement body may take years to settle. Given that Indonesia's proposed capital measures are supposed to be short-term measures, the Indonesian government may be counting on the long lead-time for the dispute to make its way through the WTO system, to "buy" some time to protect its domestic industry.

For companies, the more critical concerns would be whether the locally manufactured capital good is of the same quality and whether the local manufacturer is able to meet delivery schedules. There will also be concerns about existing contracts with overseas suppliers/manufacturers. Are there exit clauses in the contracts which can address the regulatory changes? What are the costs involved in breaking contracts and in finding new domestic suppliers? Do domestic suppliers have the capacity to meet the new demands? As it currently stands, there is no indication of the criteria on which the government is evaluating goods produced locally, simply by identifying similar goods or assessing the good's quality and local manufacturing capacity.

Restricting Ports of Import

The Indonesian government is also considering limiting the ports of entry for certain imported goods. Currently there are five Indonesian ports of entry: Tanjung Priok (Jakarta), Belawan (Medan), Tanjung Emas (Semarang), Tanjung Perak (Surabaya), and Soekarno-Hatta (Makassar). Imports also enter through the international airports.

The Ministry of Industry is proposing closing several harbours to imports of certain goods. Its intention is to strengthen the supervision of the flow of imported goods, and support the domestic manufacturing industry.

While the Indonesian government has not revealed how it will determine the commodities to be imported at a particular port, the most likely mechanism will be via the Harmonised System (HS) classification. Thus, companies should review the tariff classifications of goods to make sure that they are correctly classified as this would affect their port of entry. Furthermore, while it may be advantageous for importers to have HS classification consistency applied by customs at one port, it could also mean that the port customs would have access to a greater volume of imports of one product to draw comparisons.

The restriction on the ports of entry could also create considerable logistics problems for importers. The underdeveloped infrastructure within Indonesia, when coupled with a restriction on the ports of entry for certain products, may stretch delivery schedules and hamper just-in-time (JIT) delivery. In particular, the roads leading to/from some of the ports of entry are often very congested and cargo can take days or weeks to arrive at their final destination.

Furthermore, an importer may have chosen a particular port for convenience and accessibility but, due to the port of entry restriction, may now be required to import through another port which may not be as convenient or efficient and may add to the costs. In addition, if an importer imports a range of commodities falling under different HS classifications, it may have to use different ports for different products. This would turn into a logistics nightmare for the importer.

Environmental Excise Tax on Plastic Bags

The government of Indonesia announced in its 2018 budget that it is in the process of preparing new regulations which will establish the principles for the application of an excise tax on plastic bags. While the rate or rates of excise are currently unknown, we understand that different rates will be applied based on the extent to which companies apply environmentally friendly principles in their products. In the current draft of the proposed new regulations, the excise on plastic bags will likely be levied directly on the plastic bag producers. This tax will undoubtedly be passed on to retailers and customers.

The Minister of Industry Airlangga Hartarto said that he proposes to introduce the excise tax gradually, which will provide time for Indonesian plastic bags producers to add eco-friendly bags to their production lines. We understand that the Indonesian government is ready to offer local plastic bag manufacturers fiscal incentives for the import of industrial capital goods for the production of environment-friendly plastic bags.

The government aims to collect IDR 500 billion in excise tax from the plastic bags; many opponents state that the additional revenue generated will not be significant. They also say that it will put a major burden on the manufacturing industry.

Fajar Budiyono, secretary-general of the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas), has come out against the excise tax. He said that it will not be a solution to environmental pollution. He also said that the additional income for the state will not be significant, while it puts a major burden on the manufacturing industry.

This is not the first time that the plastics industry is targeted for an excise tax. In 2016, the Indonesian government announced a plan to impose an excise tax of at least IDR 200 (approximately USD 0.01369) on plastic bags. This would have been charged directly by supermarkets and shops each time a customer requested for a plastic bag. The reasoning then was that this would lead to a reduction in the use of plastic products, thereby protecting the environment while at the same time contributing to tax revenues. That scheme is now only implemented by a few shops.

While the environmental focus of the Indonesian government is very laudable, it would be unrealistic to expect the industry to be able to rapidly switch to bio-plastics production.

It is estimated that currently, local production of eco-plastic bags can only meet one percent of Indonesia's total plastic bags demand. This means that the conversion to local manufacture of ecofriendly plastic bags will require a considerable amount of time. If local manufacturers are unable to convert their operations to bio-plastics, they would be hit by the excise tax. In such a scenario, they may then begin to import bio-plastics, which would defeat the intent of the policy to encourage local production.

Visit us at

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2018. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions