1. Indonesia: Eastern and Muslim conservativism vs Western influence

Commercially speaking, wine distribution and consumption in Indonesia continue to be largely dominated by foreign wineries with the United States, Italy, Singapore, Australia, and France sitting on the top five of Indonesia's favourite exporting countries.1 This is because the market cannot solely rely on local wineries due to Indonesia's predominantly tropical climate and geography, which prevent the local wineries from growing their market. There are notable exceptions in Bali and Lombok, where the volcanic soil and cooler climate provide conducive environment for grape cultivation, showing promising potentials for wine production.2

E-commerce makes wine shopping more accessible to Indonesians. They can choose from a variety of wine types and origins without being overly reliant on physical wine outlets. According to the research conducted by Statista, the typical Indonesian wine consumers primarily come from the high-and-middle income groups, comprising 61.5% and 30.8%, respectively, with an average age range of 25-34. It is important to note that most wine consumers in Indonesia are female rather than male. From the total 442.75 million liters of wine consumption in Indonesia, some 340.50 million liters go to still wine consumption, 110.50 million liters go to sparkling wine consumption, and 1.75 million liters go to fortified wine consumption. The total volume of wine consumption reflects the total revenue generated by the wine producers reaching USD 12.29 billion. The business is expected to witness a steady growth in the future.3

2. Protect your wine-products: how to register your trademark in Indonesia.

Although Indonesia adopts the first-to-file principle, it would not be sufficient without registering the trademark. A trademark owner can commence the registration process at the Directorate General of Intellectual Property ("DGIP"), an authority overseeing and supervising any form of intellectual properties, including trademarks, in Indonesia. In regard to trademark registration, a wine producer should follow the specified steps below:

  1. Online application: The trademark application can be submitted electronically via https://merek.dgip.go.id/, the official website of DGIP, or through non-electronic means4.
  2. Announcement period: Subsequently, the trademark would be announced on the Ministry of Law and Human Rights ("MoLHR") website within 2 (two) months ("Announcement Period").5 This Announcement Period allows any parties conflicting with the applicant to file objections regarding the filed trademark6. The rebuttal may occur between the objecting party and the trademark applicant within the two-month period after the objection is notified to the applicant7.
  3. Substantive examination: In the event of no objections within the Announcement Period, the application will proceed to a substantive examination stage, which lasts for 150 days.8
  4. Issuance of Trademark Certificate: Assuming the application has successfully passed the substantive examination, DGIP will issue a Trademark Certificate9, which is valid for a period of 10 years and can be renewed every 10 years10.

In common practice, the entire process of a trademark registration can take approximately 1 to 1.5 years, subject to the availability of the documents/information, and the smooth process of the above-mentioned procedure.

3. Wine Labelling and advertising requirements

Labelling requirements: Generally, food and drink products have to fulfil health standards and requirements. A product must have:

  1. Product name;
  2. List of ingredients;
  3. Nett weight;
  4. Name and address of the producer or importer; and
  5. Expiry date.11

Furthermore, the Indonesian Food and Drug Authority (Badan Pengawas Obat dan Makanan or "BPOM") also requires importers or producers of wine products to display the percentage of alcohol content on the labels12. However, given the nature of wine, BPOM exempts the requirement to display the expiry dates of wine products.13

Advertising requirements: Prior to discussing the wine-advertising requirements, please be informed that alcoholic beverages can be traded or distributed in Indonesia by the business actors who hold the specific license.14 Hence, it is illegal for an individual to distribute or trade alcoholic beverages in Indonesia.

Alcoholic drinks may only be traded in specific places such as hotels, bars, restaurants, free duty stores, and other places stipulated by the local government ("Allowed Places").15

In terms of wine advertising regulations, the Ministry of Trade ("MoT") takes a tighter approach to alcohol-content advertising. This is because MoT prohibits any importer, distributor, sub-distributor, direct seller, or retailer of alcoholic beverages, including wine, from advertising their products through any form of mass media.16 Violating this strict provision may lead to administrative sanctions, such as license revocation.17

Although business actors cannot advertise their products in mass media, but the business actors are permitted to advertise their alcoholic beverage brands, within the Allowed Places.

4. Become a wine-market actor in Indonesia

Foreign investors are not allowed to establish wineries or wine industry in Indonesia, since it is closed for investment18. Alternatively, a wine producer could appoint a local importer or distributor to import or distribute their products in Indonesia.

Before appointing a local importer or distributor, it is important to ensure that the local party has obtained several licenses associated with wine trade and distribution in Indonesia. These licenses include:

  1. License for Alcoholic Drink Trading: Before commencing any import, distribution, or sale of wine products, the business actor shall obtain the License issued by the government of Indonesia.
  2. Import License: In Indonesia, any Importer of trading goods shall obtain the Business Identification Number ("NIB") that would serve as the General Import Identification Number (Angka Pengenal Importir Umum or "API-U")19. The application to obtain NIB and API-U can be made through the Online Single Submission System ("OSS System") upon the completion of the company establishment.
    This requirement also applies to any wine importer in Indonesia. In addition to obtaining API-U, the company shall obtain the Import Approval issued by MoT. To apply for these licenses (API-U and Import Approval), the prospective wine importer shall submit the required documents, including the License, through http://inatrade.kemendag.go.id.
  3. Registration Certificate as Distributor: It is important to note that any distributor in Indonesia needs to obtain a Registration Certificate (Surat Tanda Pendaftaran or "STP") before acting as a distributor.20 A distributor may submit an application for an STP to MoT after the distribution agreement is executed and legalized (see point 6 below).

Once the above-mentioned requirements have been fulfilled by the local distributor, the foreign producer may enter into the distribution agreement with the local distributor.

5. Customs clearance, Duties, and Taxation

  1. Duties: The wine importer will be charged with import tariffs on the imported wines. Such tariffs may vary depending on the HS Code, which represents the type of the imported wine. Given the government's restrictive approach to wine distribution in Indonesia, it is not surprising that the import tariffs imposed on wine products can be as high as 90%.21
  2. Value Added Tax ("VAT") and Income Tax: The government imposes VAT and Income Tax on business actors at 11% and 7.5% rates, respectively. For the ease of reference, a business actor may access https://insw.go.id/intr, the website managed by the Ministry of Finance, to obtain all necessary information related to import tariffs based on the HS Code of imported goods.
  3. Customs Clearance: In addition to the duties and taxes, a wine importer is required to declare their imported goods by submitting an Import Declaration (Pemberitahuan Impor Barang or "PIB")22. PIB is necessary to release the imported goods from the ports prior to the sale and distribution in Indonesia. During this phase, the wine distributor must complete various customs clearance procedures, including documentation and physical inspection of the imported goods.
  4. Excise: In Indonesia, alcoholic drinks, including wine, are classified as Excisable Goods. The imposition of excise rates on drinks containing alcohol is regulated by the Minister of Finance. The wine-imported products are subject to the following excise tariffs:
    1. Category A: Any domestic or imported drink with up to 5% alcohol content is subject to an excise tariff of IDR15,000.
    2. Category B: Any domestically produced drink with 5 to 20% alcohol content is subject to an excise tariff of IDR33,000, while any imported product in that category is subject to an excise tariff of IDR44,000.
    3. Category C: Any domestic and imported drinks with more than 20% alcohol content is subject to an excise tariff of IDR80,000 and IDR139,000, respectively.23

6. Contracts for distributing wines in Indonesia

A foreign producer who intends to distribute its wine product through its local distributor in Indonesia may enter into a contract with the appointed distributor. A contract or agreement must be arranged with full consideration of the Indonesian Civil Code ("ICC") as the legal basis for preparing contracts or agreements in Indonesia.

Please be informed that Indonesian law generally recognizes the principle of freedom of contract. Under Article 1338 of ICC, All valid agreements apply to the individuals who have concluded them as law. A valid agreement must satisfy the following conditions:

  1. There must be consent of the individuals who are bound thereby;
  2. There must be the capacity to enter into the obligation;
  3. There must be a specific subject matter; and
  4. There must be a permitted cause.24

("Valid Agreement")

Accordingly, any agreement prepared in Indonesia has to fulfil the requirement of Valid Agreement to prevail in Indonesia. It is important to note that any agreement involving an Indonesian party or object shall be made in Bahasa Indonesia language25. If one of the parties to the agreement is a foreign party, the agreement can be arranged in a bilingual form - and the parties can choose that the foreign language version shall prevail in the event of discrepancies between the two language versions.

MoT regulates the minimum provisions that must be indicated by the parties in preparing the distribution agreement: 26

  1. Name and address of the parties;
  2. Intent and purpose;
  3. Status of agency or distributorship;
  4. Type of traded goods;
  5. Marketing regions;
  6. Rights and obligations of each party;
  7. Authorization;
  8. Time of validity;
  9. Procedure of termination of the agreement;
  10. Procedure of dispute resolution;
  11. Governing law; and
  12. Grace period for resolution.

Since wine products are originated outside Indonesia, the distribution agreement should be legalized by a public notary and apostilled or legalized by the competent authority of the origin country

Footnotes

1. Inkwood Research https://inkwoodresearch.com/reports/indonesia-wine-market/

2. Statista, Wine - Indonesia https://www.statista.com/outlook/cmo/alcoholic-drinks/wine/indonesia

3. Ibid.

4. Article 4 (1) of Law No. 20 of 2016 on Marks and Geographical Indications as lastly amended by Law No. 6 of 2023 on the enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation as Laws ("Law 20/2016").

5. Article 14 of Law 20/2016.

6.

7. Article 17 (2) of Law 20/2016.

8. Article 23 of Law 20/2016.

9. Article 24 (1) of Law 20/2016.

10. Article 35 of Law 20/2016.

11. Article 111 (1) of Law No. 36 of 2009 on Health as lastly amended by Law No. 6 of 2023 on the enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation as Laws ("Health Law")

12. Article 5 of Head of BPOM Regulation No. HK. 03.1.23.06.10.5166 of 2010 on Including Information on the Origin of Certain Ingredients, Alcohol Content, and Expiration Limits on the Marking/Label of Medicine, Traditional Medicine, Food Supplements, and Food ("BPOM Reg. 03/2010")

13. Article 8 (2) of BPOM Reg. 03/2010)

14. Article 4 of President Regulation No. 74 of 2013 on Control and Supervision of Alcoholic Drinks ("PR 74/2013")

15. Article 7 of PR 74/2013.

16. Article 30 of the Ministry of Trade ("MoT") Regulation No. 20/M-DAG/PER/4/2014 on Control and Supervision of the Procurement, Circulation, and Sale of Alcoholic Beverages as partially revoked by MoT Regulation No. 20 of 2021 ("MoT Reg. 20/2014")

17. Article 48 of MoT Reg. 20/2014

18. Article 2 (2) of Presidential Regulation No. 10 of 2021 on Investment Business Sector as lastly amended by Presidential Regulation No. 49 of 2021 ("PR 10/2021")

19. Article 3 (4) of MoT Regulation No. 20 of 2021 on Import Policy and Regulation as partially amended by MoT Regulation No. 25 of 2022 ("MoT Reg. 20/2021")

20. Article 1 (13) of MoT Regulation No. 24 of 2021 on Engagement for Goods Distribution by a Distributor or an Agent ("MoTR 24/2021")

21. HS Code 22041000

22. Article 5 of the Minister of Finance Regulation No. P-22/BC/2009 on Import Customs Declaration

23. Appendix of Minister of Finance Regulation 158/PMK.010/2018 on Excise Tariffs for Ethyl Alcohol, Drinks Containing Ethyl Alcohol, and Concentrates Containing Ethyl Alcohol

24. Article 1320 of ICC

25. Article 31 (1) of Law No. 24 of 2009 on Flag, Language, State Symbol, and National Anthem ("Law 24/2009").

26. Article 6 (3) of MoTR 24/2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.