AUGUST 2017 LEGAL ALERT. agriculture. communication and informatics

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1 LEGAL ALERT AUGUST 2017 SSEK Legal Alert is a monthly publication of SSEK, Indonesian Legal Consultants. SSEK s lawyers, advisors and associates provide a wide range of legal services to Indonesian and multinational corporations, banks, joint ventures and other organisations. SSEK Legal Alert is a monthly survey designed to keep our clients up to date with the latest legal developments in Indonesia. To subscribe, visit our website: * * * agriculture Minister of Agriculture ( MOA ) Regulation No. 13/PERMENTAN/PK.240/5/2017 dated May 12, 2017, regarding Livestock and Animal Husbandry Business Partnerships. The stated aim of this Regulation is to improve the scale, efficiency, competitiveness and market access of businesses and businesspeople in the livestock and animal husbandry sector. Three types of businesses are eligible to participate in such partnerships, i.e., livestock, animal product, and production facility and infrastructure businesses. On the other side, four types of business actors can enter into a partnership, those being breeders, livestock and animal husbandry companies, companies in other fields, and the government. This Regulation provides the criteria for each type of partnership between the various parties. It came into force on MOA Regulation No. 14/PERMENTAN/PK.350/5/2017 dated May 12, 2017, regarding Animal Medicine Classification. This Regulation classifies animal medicines according to the risk level associated with their use and the availability of the medicine. The main focus of the regulation is which types of animal medicines are permitted, along with the conditions and requirements for their use, including licensing requirements. This Regulation came into force on MOA Regulation No. 17/PERMENTAN/KR.120/5/2017 dated May 29, 2017, regarding Animal Quarantine Document. This Regulation is intended to provide the basis for the issuance of Animal Quarantine Documents. Specifically, this Regulation covers the type and form of document, and guidelines for completing, using and printing quarantine documents. It is scheduled to come into force on September 29, MOA Regulation No. 15/PERMENTAN/HR.060/5/2017 dated May 18, 2017, regarding Import and Export of Horticulture Seeds. Under this Regulation, it is required to obtain import and export approval for horticulture seeds. This Regulation sets conditions for the import and export of seeds, and stipulates the required documents and the process to obtain import and export approval. It came into force on the date of its promulgation. communication and informatics Minister of Communication and Informatics Regulation No. 12 of 2017 dated June 9, 2017, regarding the Use of Technology in Radio Frequency Band 450 MHz, 900 MHz, 2.1 GHz and 2.3 GHz for the Provision of Cellular Network. This Regulation provides general guidelines for cellular network providers in using radio frequency bands. Under the Regulation, providers are given the flexibility to choose the technology they use in operating their networks. The Regulation does impose certain obligations on providers, i.e., providers are prohibited from causing harmful interference; providers must comply with the spectrum emission mask as stipulated in the relevant regulations; providers must SSEK legal alert 1

2 comply with the technical requirements for telecommunication tools and/or equipment; and providers must coordinate with other radio frequency users in maintaining service quality. This Regulation came into effect on cooperatives and SMEs Minister of Cooperatives and Small and Medium Enterprises Regulation No. 06/ PER/M.KUKM/V/2017 of 2017 dated May 31, 2017, regarding the Implementation of the Know Your Customer Principle for Savings and Loan Cooperatives. The stated aim of this Regulation is to set clear guidelines for savings and loan cooperatives in implementing the Know Your Customer Principle to prevent and protect savings and loan cooperatives from any effort to evade and conceal the origin of assets obtained from criminal activities. This Regulation includes expected policies and procedures, internal controls, information and reporting systems, and management of human resources for savings and loan cooperatives. It came into force on energy and mineral resources Minister of Energy and Mineral Resources Regulation No. 40 of 2017 dated June 16, 2017, regarding Delegation of Authority for the Granting of Licenses in the Oil and Gas Sector to the Head of the Capital Investment Coordinating Board ( BKPM ). This Regulation describes the licenses in the oil and gas sector that the BKPM has the authority to issue. These include survey license, license to utilize oil and gas data, license to process oil and gas, license to store oil and gas, license to carry oil and gas, and license to trade oil and gas. Applications submitted before this Regulation was issued will be processed by the Head of the BKPM in accordance with this Regulation. This Regulation revokes the previous regulation on the same matter and came into force on Minister of Energy and Mineral Resources Regulation No. 44 of 2017 dated July 18, 2017, regarding the Amendment of Minister of Energy and Mineral Resources Regulation No. 7 of 2017 regarding Procedure for Stipulating the Benchmark Price of Metals and Coal. This Regulation amends several provisions regarding the commodities for which the Benchmark Mineral Price ( HPM ) and Benchmark Coal Price ( HPB ) apply. It also amends the provision on the variables used to determine the formula for HPM and HPB. This Regulation came into force on environment Minister of Environment and Forestry ( MOEF ) Regulation No. P.22/MENLHK/ SETJEM/SET.1/3/2017 dated May 8, 2017, regarding Procedures for the Management of Complaints of Alleged Environmental or Forestry Pollution or Damage. This Regulation provides that any individual, group, legal entity or governmental institution may submit a complaint regarding possible environmental pollution and/or forest destruction in the planning, implementation and/or post-implementation stage of a project to the responsible institution. It contains further requirements and procedures to submit complaints. This Regulation came into effect on SSEK legal alert 2

3 MOEF Regulation No. P.32/MENLHK/SETJEN/KUM.1/5/2017 dated May 24, 2017, regarding the Amendment of Minister of Environmental Affairs and Forestry Regulation No. P.9/MENLHK-II/2015 regarding Procedures for the Granting and Expansion of Working Areas and the Extension of Timber Forest Product Utilization License for Natural Forest, Timber Forest Product Utilization License for Restored Ecosystem, and Timber Forest Product Utilization License for Industrial Plantation in Forest Production Area. This Regulation amends, inter alia, (i) the forest areas for which a Timber Forest Product Utilization License for Natural Forest, Timber Forest Product Utilization License for Restored Ecosystem, and Utilization License for Industrial Plantation in Forest Production Areas can be granted, and (ii) the requirements for applying for a license. This Regulation came into effect on the date of its issuance. MOEF Regulation No. P.36/MENLHK/SETJEN/KUM.1/6/2017 dated June 8, 2017, regarding Registration and Notification Procedures for Hazardous and Toxic Substances. This is an implementing regulation for Government Regulation No. 74 of 2001 regarding the Management of Hazardous and Toxic Substances. Essentially, it regulates that anyone who produces and/or imports Hazardous and Toxic Substances (Bahan Berbahaya dan Beracun or B3 ) in Indonesia must submit a B3 Registration application to the Director General for Waste and B3 Management. Additionally, importers or exporters of B3 that is intended for limited use and/or is being imported into Indonesian territory for the first time are specifically required to submit a B3 Notification application to the Director General for Waste and B3 Management. This Regulation details the requirements and procedures for such applications and came into force on the date of its enactment. finance Minister of Finance ( MOF ) Regulation No. 52/PMK.010/2017 dated April 17, 2017, regarding Use of Book Value on the Transfer and Obtainment of Property in the Framework of a Merger, Consolidation, Expansion or Acquisition of a Business. This Regulation revokes MOF Regulation No. 43/PMK.03/2008 regarding the same matter. Taxpayers may use book value for the transfer of property in the framework of corporate actions as mentioned in the Regulation title. For a taxpayer to use book value, the related merger, consolidation, expansion or acquisition must fit the definition as provided in this Regulation. The taxpayer must then submit a request to the Directorate General of Tax to use book value. This Regulation came into force on MOF Regulation No. 53/PMK.05/2017 dated April 18, 2017, regarding the Second Amendment of MOF Regulation No. 3/PMK.05/2014 regarding the Placement of State Money in Commercial Banks. This Regulation amends the method for the placement of state monies in a Commercial Bank Partner for the Placement of State Monies ( BUMPUN ), only allowing placement using the over-the-counter method. It also amends the remuneration for the placement of state monies in BUMPUN, providing different remuneration values for Rupiah and other currency. This Regulation came into force on MOF Regulation No. 81/PMK.03/2017 dated June 21, 2017, regarding the Reduction of Administrative Penalty for Land and Building Tax ( PBB ) and Reduction or Annulment of Incorrect Notification of Tax Payable, PBB Assessment Letter or PBB Collection Notice. With the issuance of this Regulation, the Directorate General of Tax, at the request of a taxpayer, can reduce the PBB administrative penalties under certain conditions as provided in this Regulation. It also provides guidelines from the submission of a request to the approval of the reduction in administrative penalty. This Regulation came into force on SSEK legal alert 3

4 MOF Regulation No. 82/PMK.03/2017 dated June 21, 2017, regarding Granting of Reduction of Land and Building Tax ( PBB ). Reduction of PBB can be given in certain situations including if the Tax Object is affected by a natural disaster or for some other extraordinary reason. This Regulation provides details on the amount by which PBB can be reduced, and establishes guidelines from the submission of a request to the approval of PBB reduction. This Regulation came into force on Financial Services Authority ( OJK ) Circular Letter No. 36/SEOJK.03/2017 dated July 11, 2017, regarding Procedures for the Utilization of Services Offered by Public Accountants and Offices of Public Accountants During Financial Service Activities. This Circular Letter provides a number of technical provisions for financial institutions that engage a public accountant or public accounting firm, including a number of new provisions for the appointment of public accountants and public accounting firms. Financial institutions must appoint public accountants and public accounting firms through a General Meeting of Shareholders and report the appointment to the OJK by enclosing documents related to the appointment and a recommendation from an audit committee. In addition, financial institutions must enter into a working agreement with the public accountants and public accounting firms as the basis for any financial audit services. Specifically for banks, including conventional, sharia and rural banks, the scope of any audit activities must be incorporated in the working agreement. This Circular Letter details the matters that must be addressed in formulating such scope of audit activities. It entered into force on the date of its enactment, repealing its predecessors, namely Bank Indonesia Circular Letter No. 3/32/DPNP of 2010 regarding Relationships Between Banks, Public Accountants and Bank Indonesia; and Bank Indonesia Circular Letter No. 7/57/DPBS of 2005 regarding Relationships Between Banks Involved in the Organization of Sharia Business Activities, Offices of Public Accountants, Public Accountants, the Sharia Supervisory Board and Bank Indonesia. OJK Circular Letter No. 20/SEOJK.04/2017 dated May 23, 2017, regarding the Organization of Sustainable Education Programs for Members of Boards of Directors and Boards of Commissioners of Securities Companies Undertaking Business Activities as Securities Underwriters. This Circular Letter sets out technical provisions concerning the organization of sustainable education programs for members of the Board of Directors and Board of Commissioners of securities companies. Securities companies must participate in sustainable education programs at least once every two years, with such participation amounting to a total duration of at least 180 minutes. Upon completion of the sustainable education program, securities companies must submit a report to the OJK within 30 days as of the issuance of the certificate of participation by the relevant organizer of the sustainable education program. This Circular Letter entered into force on the date of its enactment. OJK Circular Letter No. 18/SEOJK.02/2017 dated April 18, 2017, regarding Good Governance and Information Technology Risk Management for Technology-Based Fund-Lending Services. This Circular Letter is an implementing regulation for OJK Regulation No. 77/POJK.01/2016 regarding Technology-Based Fund-Lending Services. It addresses broad matters concerning good governance and risk management, the most important of which include the role and responsibilities of the Board of Directors, data centers and disaster recovery centers, data and information management, and information technology risk management. This Circular Letter entered into force on the date of its enactment. Bank Indonesia ( BI ) Regulation No. 19/3/PBI/2017 dated April 13, 2017, regarding Provisions on Short-Term Liquidity Loans for Commercial Banks. In a bid to address the difficulties relating to short-term liquidity loans ( PLJP ) and preserve the stability of financial systems in Indonesia, this Regulation sets out comprehensive provisions relating to the requirements and procedures to secure a PLJP from BI. To obtain a PLJP, banks must submit an application to BI and meet certain criteria, i.e., the bank must be classified as solvent, it must possess a bank financial soundness composite of at least level 2, it must possess high-quality PLJP collateral (such as commercial papers and credit assets and/or financing assets), and the bank must have the financial resources SSEK legal alert 4

5 to repay the PLJP as reflected through its cash-flow projections. This Regulation entered into force on the date of its promulgation and revoked BI Regulation No. 14/16/PBI/2012 on Short-Term Loan Facilities for Commercial Banks. health Minister of Health Regulation No. 30 of 2017 dated June 20, 2017, regarding the Second Amendment of Minister of Health Regulation No. 1148/MENKES/PER/VI/2011 regarding Pharmaceutical Wholesalers. Among the amendments in this Regulation is the provision that pharmaceutical wholesaler branches can only provide medicines and/or medicinal ingredients from the central pharmaceutical wholesaler or another branch of the pharmaceutical wholesaler appointed by the central pharmaceutical wholesaler. Also, in the event a pharmacist has to be replaced, the head of the health service office at the provincial level, copied to the head of the National Drug and Food Control Agency, must be notified of such replacement in writing. Other changes in this Regulation include the administrative requirements to distribute medicine. This Regulation came into effect on industry Minister of Industry Regulation No. 27/M-IND/PER/7/2017 dated July 11, 2017, regarding Growth and Development of Small and Medium Industry through Machine and/or Equipment Restructuring Programs. This Regulation covers the criteria and requirements for small and medium industries and the implementation of machine and/ or equipment restructuring programs, the monitoring and evaluation of such programs, reporting obligations, and prohibitions and sanctions. The stated aim of this Regulation is to enhance the production of small and medium enterprises and increase their competitiveness. The implementing regulations of Minister of Industry Regulation No. 11/M-IND/PER/3/2014 regarding Small and Medium Industry Restructuring Program, lastly amended by Minister of Industry Regulation No. 20/M-IND/PER/3/2016, shall remain valid as long as they do not contradict this new Regulation, which came into force on Minister of Industry Regulation No. 29/M-IND/PER/7/2017 dated July 14, 2017, regarding Provisions and Procedures for the Calculation of Local Content Level (Tingkat Komponen Dalam Negeri or TKDN ) for Cellular Phones, Hand-Held Computers and Tablet Computers. This Regulation revises the assessment of the TKDN of cellular phones, hand-held computers and tablet computers based on the use of local content through the manufacturing, development and application stages. It also adds a new category for TKDN calculation based on innovation development. This Regulation revokes Minister of Industry Regulation No. 65/M-IND/PER/7/2016 and came into force on SSEK legal alert 5

6 land and real estate Presidential Regulation No. 56 of 2017 dated June 2, 2017, regarding the Social Impact of Land Procurement for National Strategic Projects. This Regulation concerns government compensation for people who lose their land for National Strategic Projects. There are several criteria that people must meet to qualify for the government compensation. Compensation shall include house demolition cost, moving costs, the cost of a rental house and a lost income allowance. This Regulation came into force on payment gateway Bank Indonesia ( BI ) Regulation No. 19/8/PBI/2017 dated June 22, 2017, regarding National Payment Gateway. In a bid to create a more efficient, reliable and secure domestic payment system, this long-awaited Regulation was issued to govern the scope and implementation of a National Payment Gateway ( NPG ). The NPG is a system comprising standards, switching and services, which has been developed to integrate various payment channels and instruments at the national level. This Regulation establishes several important guidelines to implement the NPG, including the mandatory settlement in BI by switching and service institutions, domestic payment transaction processing and national branding. It also mandates that the pricing scheme for the NPG be determined by taking into account several factors, including cost-recovery aspects and tariff and customs structures. NPG organizers are also required to provide several transaction features that should be processed through the NPG, including payments, transfers, cash withdrawals and balance checking. This Regulation entered into force on tax, customs and excise Minister of Finance ( MOF ) Regulation No. 51/PMK.04/2017 dated April 12, 2017, regarding Customs and Excise Objections. This Regulation sets the procedures and requirements to submit an objection to the Directorate General of Customs and Excise. Objections can be submitted in regard to: (i) customs tariff and/or value for import duty calculation resulting in insufficient payment; (ii) other than customs tariff and/or value for import duty calculation; (iii) the imposition of fines and administrative sanctions; and (iv) the imposition of export duty. This Regulation came into force 60 days after its promulgation. MOF Regulation No. 59/PMK.04/2017 dated May 8, 2017, regarding Non-Excisable Goods. This Regulation adds cut tobacco and alcoholic beverages produced through fermentation or refinery processes to the list of non-excisable goods, provided that these goods meet certain criteria. Other categories of non-excisable goods under this Regulation include excisable goods that are in transit in Indonesia before being shipped overseas, excisable goods for export purposes, excisable goods transferred to a factory or storage, excisable goods used as raw or auxiliary materials for the production of new excisable goods, excisable goods that are destroyed or damaged before leaving storage, and excisable goods that are destroyed or damaged before leaving temporary storage. This Regulation provides the criteria for each category of goods to qualify as nonexcisable, as well as sanctions for any violation of the Regulation s provisions. It came into force 90 days after its promulgation. SSEK legal alert 6

7 MOF Regulation No. 68/PMK.03/2017 dated May 16, 2017, regarding the Amendment of MOF Regulation No. 91/PMK.03/2015 regarding the Reduction or Annulment of Administrative Sanctions for the Late Submission of Notice Letter and Correction of Notice Letter, and Delay in Payment or Tax Payment. Under this Regulation, the Directorate General of Tax, on its own initiative or at the request of a Taxpayer, may reduce or annul an administrative sanction related to one of the actions in the Regulation title. This Regulation came into force on tourism Ministry of Tourism Regulation No. 5 of 2017 dated May 12, 2017, regarding Guidelines on the Location and Organization of Meetings, Incentive Travel, Conferences and Exhibitions (MICE). This Regelation sets guidelines for central government and local government officials, convention and exhibition agents, business actors and the general public in assessing and choosing a location for meetings, incentive travel, conferences and exhibitions. With the issuance of these guidelines, the Ministry of Tourism hopes to increase regional income and opportunities, and invite new investment to targeted tourist destinations in Indonesia. This Regulation came into force on trade Minister of Trade ( MOT ) Regulation No. 30/M-DAG/PER/5/2017 dated May 19, 2017, regarding Import Provisions for Horticultural Products. This Regulation provides that the import of horticultural products, including raw and processed fruits, vegetables, mushrooms and plant-based medicines, may be conducted by private companies that hold an Import Identification Number (Angka Pengenal Impor or API ) and stateowned companies appointed by the relevant minister. There are also different types of Horticultural Import Approvals for different types of horticultural products importable by private and state-owned companies. This Regulation provides details on these different types of Horticultural Import Approvals and how to obtain them. In addition, some HS Codes of horticultural products listed in this Regulation are exempted from the provisions thereunder. This Regulation came into effect on its date of its promulgation and revoked MOT Regulation No. 71/MDAG/PER/9/2015. transportation Minister of Transportation Regulation No. PM 38 of 2017 dated May 19, 2017, regarding the Ninth Amendment to Minister of Transportation Regulation No. KM 25 of 2008 regarding the Provision of Air Transportation. This amendment changes several articles in the existing regulation on air transportation, including those on the form of payment of capital or increase of capital of commercial air transportation business entities, as well as removing the paid-up capital requirement for flight schools. This Regulation came into effect on SSEK legal alert 7

8 Minister of Transportation Regulation No. PM 39/2017 dated May 19, 2017, regarding Registration and Nationality of Ships. This Regulation provides three types of ship registration, i.e., (i) ship ownership, (ii) lien encumbrance and (iii) other object registration over ship, such as bareboat charter and leasing. This Regulation confines the foregoing registrations to ships of at least seven gross tonnage, owned by an Indonesian citizen or an Indonesian legal entity, and ships owned by an Indonesian legal entity that enters into a joint venture where the majority of shares are held by the Indonesian entity. It further regulates details on the foregoing types of ship registration along with the requirements and procedures to apply for such registration at the relevant directorate general in the Ministry of Transportation. This Regulation came into force on the date of its promulgation. Minister of Transportation Regulation No. PM 45 of 2017 dated June 9, 2017, regarding the Tenth Amendment to Minister of Transportation Regulation No. KM 25 of 2008 regarding the Provision of Air Transportation. This Regulation amends, inter alia, the procedure for obtaining approval for flight routes that are not stipulated in the attachment to the business license of the commercial entity, and the requirements related to scheduled air transportation business entities. This Regulation came into effect on the date of its promulgation. SSEK legal alert 8