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The Obligation of E-Commerce to Have a Representative Office

“Ministry of Trade issued Ministry of Trade Regulation No. 50 of 2020 to regulate merchant, electronic service provider, and intermediary services (business actors) both inside and outside Indonesia which conducts/facilitates trade via electronic means (e-commerce) (“Permendag 50/2020”) mentioned that for an overseas electronic service provider which conducted transaction/shipping, i.e. more than 1.000 transaction/shipping annually, they are required to establish a representative trade office (KP3A) in Indonesia.”

In this era of globalisation, online transaction across the globe is something common. People could sell and purchase products in one country and to/from another country. Concerning the licenses and permits, Indonesia has provided a legal basis for trading companies which utilise the internet for the transaction or more commonly known as e-commerce. Following the requirement for all business fields in Indonesia to have an Indonesia Standard Industrial Classification code (KBLI), the e-commerce business is provided with KBLI 6312, i.e. portal web/digital platform with/without commercial purpose, and KBLI 47919, i.e. retail business via media including but not limited to catalogue, model, telephone, television, internet, mass media, and such. However, this is a basis for establishing e-commerce business in Indonesia. For e-commerce companies outside of Indonesia which are doing a transaction with Indonesians, they are not tied down to Indonesian Law, that is until the issuance of Ministry of Trade Regulation No. 50 of 2020 (“Permendag 50/2020”) to regulate merchant, electronic service provider, and intermediary services (business actors) both inside and outside Indonesia which conducts/facilitates trade via electronic means (e-commerce).

Business License and Representative Office

According to Permendag 50/2020, any business actors related to e-commerce are required to have a trade business license, except for intermediary services which are not directly related to the transaction. This applies to both domestic business actors and overseas ones. Unlike domestic business actors, however, overseas business actors won’t be able to acquire the required business license in Indonesia. Hence, there is a special treatment for this matter.

For overseas merchants, they are allowed to use business license from their own country. However, they must inform said license to the domestic electronic service provider that they are in partnership with. For an overseas electronic service provider, they are required to establish a representative trade office (KP3A) in Indonesia. However, this requirement only applies if the electronic service provider conducted a sufficient amount of transaction/shipping, i.e. more than 1.000 transaction/shipping annually. The KP3A shall adhere to the standard regulations regarding KP3A, e.g. can only represent one foreign company and must acquire trade representative office license (SIUP3A).

Advertising

Other than its main business activity, business actors would also need to promote its business through ads. Overseas business actors in specific would heavily rely on electronic ads in order to reach consumer globally. However, despite not being physically issued in Indonesia, the usage of electronic ads for this purpose is still regulated by Permendag 50/2020. Electronic ads must adhere to the following requirements:

  • Must not deceive the consumer in regards to the quality, quantity, usage, price, service charge or additional tariff, delivery time, and warranty of the product;
  • Must not include any inaccurate information;
  • Must include information regarding the risk of usage of the product;
  • Must not exploit and event or a person without any consent; and
  • Must provide an opt-out option from the ads, either with a close sign, skip sign or other similar sign placed in a clear location on the ads.

Surveillance and Sanctions

Based on this Permendag 50/2020, the Ministry of Trade has the right to supervise and develop the activity of e-commerce, such as facilitating promotion for domestic product, raising the competence of domestic business actors, and of course giving administrative sanctions to business actors which violated Permendag 50/2020. The administrative sanctions that could be imposed according to Permendag 50/2020 include written warning for a maximum of 3 times, putting the business actors in a blacklist, suspension of business activity, blocking of related services, and even revocation of business license. Unfortunately, there is no further explanation regarding the technicality of the imposing of sanction in Permendag 50/2020. Thus, there still no clarity on how this regulation could apply effectively to business actors overseas.

Author: Benedictus Giovanni

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include capital market and financial services.

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