Civilizations are growing in every layer of life. This also seems to require an adaptive process in order to adjust to the changes. This is also the case with the economy. As is known, Indonesia has entered into a free trade agreement (FTA) with a number of countries.

The trade agreement allows Indonesia to benefit from the application of preferential tariffs, for example, to reduce production costs so as to increase industrial competitiveness.

Quoted from the official website of Indonesian Customs and Excise, the preferential tariff is the import duty (BM) based on an international agreement which its rate is set out in the regulation of the Finance Minister (PMK) concerning the determination of import duty tariff based on international agreements.

The amount of preferential tariff can be different from import duty which applied in general (Most Favored Nation/MFN), as contained in Article 1 paragraph 14 of the Regulation of the Finance Minister of the Republic of Indonesia No. 229/PMK 04/2017 concerning Procedure for Assessment of Import Duty Tariffs on Imported Goods Based on International Agreement.

Quoted from Article 2 paragraph 2 of the PMK, the FTAs ??followed by Indonesia are as follows.

1. ASEAN Trade in Goods Agreement (ATIGA).
2. ASEAN-China Free Trade Area (ACFTA).
3. ASEAN-Korea Free Trade Area (AKFTA).
4. Indonesia-Japan Economic Partnership Agreement (IJEPA).
5. ASEAN-India Free Trade Area (AIFTA).
6. ASEAN-Australia-New Zealand Free Trade Area (AANZFTA).
7. Indonesia-Pakistan Preferential Trade Agreement (IPPTA).
8. ASEAN-Japan Comprehensive Economic Partnership (AJCEP).

Imported Goods That Can Get Preferential Tariff

Preferential tariff can be granted to:

1. Import for home use.
2. Import for home use from the bonded storage (TPB), when it is entered to the TPB it has been approved to utilize Preferential Tariff.
3. Import for home use from Bonded Logistics Center (PLB) that has been granted the preferential tariff treatment when it is entered to the PLB; or
4. Releasing goods from Free Zone to Another Place in the Area of Customs (TLDDP), provided that:

1. The raw materials and/or auxiliary materials are from outside of customs area;
2. When it is entered to the free area, it has been approved for Preferential Tariff treatment; and
3. Done by operator in the Free Trade Zone who has complied with the requirements as an operator who can use the preferential tariff treatment.

Importers That Can Get Preferential Tariff

Preference rates can be granted to:

1. Individual importer or legal entity.
2. Bonded Storage Operator.
3. Bonded Logistic Center Operator, or
4. Operator in the free area.

Preferential Tariff Granted by Each FTA Can Be Seen in the Following PMK:

1. ASEAN Trade in Goods Agreement (ATIGA): PMK Number 25/PMK.010/2017 concerning Determination of Import Duty Tariff in ASEAN Trade in Goods Agreement.
2. ASEAN-China Free Trade Area (ACFTA): PMK Number 26/PMK.010/2017 concerning Determination of Import Duty Tariff in the ASEAN-China Free Trade Area.
3. ASEAN-Korea Free Trade Area (AKFTA): PMK Number 24/PMK.010/2017 concerning Determination of Import Duty Tariff in ASEAN-KOREA Free Trade Area.
4. Indonesia-Japan Economic Partnership Agreement (IJEPA): PMK Number 30/PMK.010/2017 concerning Determination of Import Duty Tariff in the Agreement between the Republic of Indonesia and Japan on Economic Partnership and PMK Number 31/PMK.010/2017 concerning Determination of Import Duty Tariff with User Specific Duty-Free Scheme in the Agreement of Economic Partnership between the Republic of Indonesia and Japan.
5. ASEAN-India Free Trade Area (AIFTA): PMK Number 27/PMK.010/2017 concerning Determination of Import Duty Tariff in the ASEAN-India Free Trade Area.
6. ASEAN-Australia-New Zealand Free Trade Area (AANZFTA): PMK Number 28/PMK.010/2017 concerning Determination of Import Duty Tariff in ASEAN-Australia-New Zealand Free Trade Area.
7. Indonesia-Pakistan Preferential Trade Agreement (IPPTA): PMK Number 29/PMK.010/2017 concerning Determination of Import Duty Tariff in the Preferential Trade Agreement (PTA) between the Government of the Republic of Indonesia and the Government of the Islamic Republic of Pakistan.
8. ASEAN-Japan Comprehensive Economic Partnership (AJCEP): there is no PMK on Tariff in AJCEP.

Requirements to Get Preferential Tariff for Imported Goods

In order to be given the preferential tariff, the imported goods should comply with the Rules of Origin (RoO) as evidenced by a Certificate of Origin at the time of import.

Certificate of Origin (CoO) is customs complementary documents issued by the CoO Issuing Authority which states that the goods listed in the CoO are able to get the preferential tariff.

In addition to CoO issued by Issuing Authority, rules of origin can also be proven by:

1. Invoice Declaration issued by a Certified Exporter that has been certified by Issuing Authority to implement Self-Certification scheme. With Self-Certification, Certified Exporters can issue invoices stating that the goods listed in the invoice can be given a Preferential Tariff.

2. Electronic Certificate of Origin Form D (e-Form D) which is CoO Form D which can be sent electronically between ASEAN Member States through the ASEAN Single Window (ASW) in accordance with the provisions concerning the security and confidentiality of information as stipulated in the e-ATIGA Form D Process Specification and Message Implementation Guideline.

3. Back-to-Back Certificate of Origin or Movement Certificate issued by the Member State of Second Exporter based on CoO issued by the Member State of First Exporter.

Rules of Origin is a specific rule that is stipulated based on international agreements applied by a country to determine the country of origin.

Rules of Origin that must be complied with to obtain preferential rates, namely:

1. Origin criteria.
2. Delivery criteria (consignment criteria), and
3. Procedural provisions.

Requirements for Goods to Obtain the Status of Originating/Meeting the Origin Criteria

Origin criteria that must be met in order to be given preferential tariff are:

1. Goods that are wholly obtained or produced in a Member State; or

2. Goods that are not wholly obtained or produced in a Member State, which include:

a. Goods produced in member states that only use originating materials from one or more member states;

b. Goods of which its production process uses non-originating material with the final product having a regional or bilateral content that reaches a certain value expressed in percentage; or non-originating materials that do not exceed a certain value expressed in percentage;

c. Goods of which its production process uses non-originating materials and all non-originating materials must undergo classification changes (Change in Tariff Classification/CTC) which includes Change in Chapter (CC); Change in Tariff Heading (CTH); or Change in Tariff Sub Heading (CTSH); and/or

d. Goods included in the list of Product Specific Rules (PSR) which are in accordance with the provisions stipulated in international agreements.

Goods Categorized as Wholly Obtained/Produced

1. Plants and plant products;
2. Living animals born and raised in an exporting member state;

1. Products obtained from living animals in one exporting member state;
2. Products obtained from hunting, trapping, fishing, agriculture and animal husbandry, aquaculture, gathering or capturing conducted in one exporting member state;
3. Minerals and other natural products;
4. Products obtained from sea fishing taken by vessels registered in a member state and entitled to fly its flag, and other products taken from waters, seabed, or beneath the seabed outside the territorial waters (for example, the Exclusive Economic Zone) of member states, insofar as the member state has the right to exploit the waters, the seabed and beneath the seabed in accordance with international law;
5. Products obtained from sea fishing and other marine products from the high seas by vessels registered in a member state and entitled to fly the flag of that member state;
6. Products that are processed and/or made on board factory ships that are registered in a member state and entitled to fly the fly the flag of that member state, exclusively from products as referred to in letter g;
7. Articles collected, which can no longer function according to their original function, cannot be returned to their original function or cannot be repaired and only suitable for disposal or to be used as raw materials, or for recycling purposes
8. Waste and scrap derived from production process in one exporting member state; or used goods collected in one exporting member state, provided that the goods are only suitable for raw materials extraction; and
9. Goods produced or obtained in one exporting member of the product as referred to in letter a to letter j.

If the transit/transshipment of goods is carried out solely for geographical reasons or special considerations related to transportation requirements; the goods is not traded or consumed in the destination country of transit and/or transshipment; or not undergone production process other than loading and unloading and other operations needed to keep the goods in good condition, then for the purpose of the CoO to be approved and given preferential tariff, importer should submit documents proving that imported goods have fulfilled consignment criteria to the Customs and Excise Officers.

Certificate of Origin is issued by Issuing Authority. In the case of CoO is in the form of an invoice declaration; the issuer is a Certified Exporter who has been certified by Issuing Authority.

CoO form used in each FTA that is followed by Indonesia

1. ASEAN Trade in Goods Agreement (ATIGA): Form D or e-Form D
2. ASEAN-China Free Trade Area (ACFTA): Form E
3. ASEAN-Korea Free Trade Area (AKFTA): Form AK
4. Indonesia-Japan Economic Partnership Agreement (IJEPA): Form IJEPA/JIEPA
5. ASEAN-India Free Trade Area (AIFTA): Form AI
6. ASEAN-Australia-New Zealand Free Trade Area (AANZFTA): Form AANZ
7. Indonesia-Pakistan Preferential Trade Agreement (IPPTA): Form IP
8. ASEAN-Japan Comprehensive Economic Partnership (AJCEP): Form AJ

How to Claim Preferential Tariff for Imported Goods

In order to get preferential tariff, importers shall:

1. Submit original CoO sheet or Invoice Declaration;
2. List the facility code correctly, in accordance with the scheme of the international agreement or agreement applied; and
3. List the number and date of the CoO or the Invoice Declaration on the Import Declaration (PIB) correctly.

The period of submission of the original CoO sheet or Invoice Declaration for importers is as follows:

1. Yellow or red line importer: no later than 12.00 on the next day for Customs Offices which have been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week or the next working day for Customs Offices that have not been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week, starting from the Import Declaration (PIB) to get Yellow Line Notification Letter (SPJK) or Red Line Notification Letter (SPJM).

2. Green line importer: no later than 3 (three) days for Customs Offices that have been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week or the following 3 (three) business days for Customs Offices that have not been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week), starting from the Import Declaration (PIB) to get the Customs Release Letter (SPPB).

3. Importer that has been assigned as Customs Main Partner or Authorized Economic Operator (AEO): no later than 5 (five) days for Customs Offices which have been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week) or the following 5 (five) working days for Customs Offices which have not been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week, starting from the Import Declaration to obtain the Customs Release Letter (SPPB).

4. Bonded Storage Operator/Entrepreneur: no later than 3 (three) business days starting from customs import declaration to be stockpiled at Bonded Storage to obtain Customs Release Letter (SPPB) or no later than 5 (five) business days starting from customs import declaration to be stockpiled at Bonded Storage to obtain Customs Release Letter (SPPB), in this case Bonded Storage Operator/Entrepreneur has been designated as a Main Customs Partner or Authorized Economic Operator (AEO).

5. Bonded Logistics Center Operator/Entrepreneur: no later than 3 (three) working days starting from customs import declaration to be stockpiled on Bonded Logistics Center to obtain Customs Release Letter (SPPB) or no later than 5 (five) working days starting from customs import declaration to be stockpiled on the Bonded Logistics Center to obtain Customs Release Letter (SPPB), in this case the Bonded Logistics Center Operator/Entrepreneur has been designated as a Main Customs Partner or Authorized Economic Operator (AEO).

6. Operator in Free Area: no later than 3 (three) working days starting from PPFTZ-01, the importation of goods to Free Area from outside of Customs Area to obtain a Customs Release Letter (SPPB).

For importation using the e-Form D scheme, it must include the facility code correctly as well as the number and date of e-Form D at:

1. Import Declaration (PIB)
2. Customs Import Declaration to be stockpiled at Bonded Storage;
3. Customs Import Declaration to be stockpiled at Bonded Logistics Center; or
4. PPFTZ-01 importation of goods to Free Area from outside of Customs Area.

In the event of a system failure or disturbance, the Customs and Excise Officer may request the printed or scan of e-Form D to the Importer, Bonded Storage Operator/Entrepreneur, Bonded Logistics Center Operator/Entrepreneur, or entrepreneurs in the Free Area that must be submitted no later than 12.00 of the next day for the Customs Offices which have been designated as the Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week or the next working day for Customs Offices that have not been designated as Customs Offices that provide customs services for 24 (twenty four) hours a day and 7 (seven) days a week.

Various abbreviations:

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