On 19 November 2020, the Minister of Trade Regulation No. 50 of 2020 on Provisions on Business Licensing, Advertising, Guidance and Supervision of Businesses in Trade through Electronic Systems (E-commerce) (Regulation 50/2020) will become effective, meaning that the impacted parties in e-commerce activity, both domestic and foreign, may need to comply with the new licensing obligations and provisions set under the regulation before its effective date.
Regulation 50/2020 is the implementation of Government Regulation No.80 of 2019 on E-Commerce. Since before its enactment on 19 Mei 2020, the discussion around the upcoming implementing regulation on E-commerce has indicated a more stringent control over E-commerce activities – as Indonesian Government’s attempt to optimise the perks of E-commerce growth.
Who are impacted?
Regulation 50/2020 has an extensive reach on e-commerce business actors that includes supervision of foreign e-commerce business actors. Unlike Regulation 50/2020, Indonesia’s previous e-commerce regulatory framework, did not specifically address concern about foreign business actors.
The three main categories of business actors, both domestic and foreign, set under Regulation 50/2020 are:
- Merchant: a business actor conducting commercial transactions, directly or indirectly, using electronic system. In terms of domestic merchants, this category also covers merchants who conduct commercial transactions through social media, such as Facebook business or Instagram.
- E-commerce Provider: a business actor that provides electronic services and/or communication facilities to facilitate E-commerce transactions. This category includes, among others, independent e-commerce platforms owned by merchants or retailers, marketplaces or other medium facilitating online bid/offer of goods, or connecting sellers and buyers, as well as social media which facilitates online transactions, such as Facebook group.
- Intermediary Service Provider (ISP): a business actor that provides electronic communication facilities other than telecommunications providers, functioning only as intermediaries of electronic communication between senders and recipients. Companies engaging in information or data hosting, caching, or search engine business may fall into this category.
Regulation 50/2020 introduces the following new licensing obligations and provisions as its key features:
- Surat Izin Usaha Perdagangan Melalui Sistem Electronic (SIUPMSE)/ E-commerce business license.
In addition to principal business license that depends on the sector a business actor engages in, SIUPMSE must be obtained by domestic merchants, domestic e-commerce providers, and ISP. For example, a general trade business actor must have Surat Izin Usaha Perdagangan (SIUP)/ General Trade Business License, and SIUPMSE if it also engages in an online trade activity.ISP is exempted from acquiring SIUPMSE, if (i) the ISP is not a direct beneficiary of e-Commerce transactions; or (ii) the ISP is not directly involved in a contractual relationship between parties to e-Commerce transactions.
- Obligation to appoint trade representative office for foreign E-commerce Provider
A Foreign E-commerce Provider that, within one year period, has (i) concluded more than 1,000 transactions with consumers; and/or (ii) delivered more than 1,000 packages to consumers, must appoint or establish its trade representative office. The representative office is obliged to obtain a Business License for the Representatives of Foreign Trade Companies (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A).
- Registration of Foreign Merchant
Foreign Merchants are required to provide and register a valid business license number, name and issuing authority from its country of origin at Domestic E-commerce Provider which provides electronic communication facilities for such a Foreign Merchant.
- E-Advertising and Promotion of Local Goods and Services
Other noteworthy features of Regulation 50/2020 are the e-advertising that provides a more detailed and consumer-protection oriented provision on advertisements published through electronic system. The regulation also requires e-commerce business actors to prioritise and support local goods and services to increase their competitiveness in e-commerce ecosystem.
Any existing business license of domestic e-commerce business actors obtained before Regulation 50/2020 shall be deemed valid as long as it is not expired or revoked, and it is registered on Online Single Submission system.
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This alert is for general information only and is not a substitute for legal advice.