Distribution of Wine in Indonesia

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 in the top five of Indonesia’s favorite exporting countries. 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 a conducive environment for grape cultivation, showing promising potential for wine production.

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. Of the total 442.75 million liters of wine consumption in Indonesia, about 340.50 million liters are for still wine consumption, 110.50 million liters for sparkling wine consumption, and 1.75 million liters for fortified wine consumption. The total volume of wine consumption reflects the total revenue generated by wine producers, which reaches USD12.29 billion. The industry is expected to grow steadily in the future.

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 property, including trademarks, in Indonesia. A wine producer should follow these steps to register a trademark:

1. Application: The trademark application can be submitted online through the official website of DGIP (merek.dgip.go.id), or through non-electronic means.
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”). This Announcement Period allows any parties conflicting with the applicant to file objections regarding the filed trademark. The rebuttal may occur between the objecting party and the trademark applicant within two months after the objection is notified to the applicant.
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.
4. Issuance of Trademark Certificate: Assuming the application has successfully passed the substantive examination, DGIP will issue a Trademark Certificate, which is valid for 10 years and can be renewed.

In common practice, the entire process of 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.

Labeling requirements: generally, food and drink products have to fulfill health standards and requirements. A product must have:

• product name
• list of ingredients;
• nett weight;
• name and address of the producer or importer; and
• expiry date.

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 labels. However, given the nature of wine, BPOM exempts the requirement to display the expiry dates of wine products.

License for the sale: alcoholic beverages can be traded or distributed in Indonesia by the business actors who hold the specific license. 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”).

Advertising requirements: 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. Violating this strict provision may lead to administrative sanctions, such as license revocation.

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

Foreign investors are not allowed to establish wineries or wine industry in Indonesia, since it is closed for investment. A wine producer can only 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 the wine trade and distribution in Indonesia. These licenses include:

• 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.
• 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”). 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.
• 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. A distributor may apply for an STP to MoT after the distribution agreement is executed and legalized (see point 5 below).

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

• 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 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%.
• Value Added Tax (“VAT”) and Income Tax: The government imposes VAT and Income Tax on business actors at 11% and 7.5% rates, respectively.
• 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"). PIB is necessary to release the imported goods from the ports before 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.
• 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 IDR 15,000.
2. Category B: Any domestically produced drink with 5 to 20% alcohol content is subject to an excise tariff of IDR 33,000, while any imported product in that category is subject to an excise tariff of IDR 44,000.
3. Category C: Any domestic and imported drinks with more than 20% alcohol content is subject to an excise tariff of IDR 80,000 and IDR 139,000, respectively.
   

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. Indonesian law generally recognizes the principle of freedom of contract under Article 1338 of the Indonesian Civil Code (“ICC”), which states that all valid agreements apply to the individuals who have concluded them as law. A valid agreement must satisfy the following conditions:

• there must be consent of the individuals who are bound thereby;
• there must be the capacity to enter into the obligation;
• there must be a specific subject matter; and
• there must be a permitted cause.

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 language. 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:

• name and address of the parties;
• intent and purpose;
• status of agency or distributorship;
• type of traded goods;
• marketing regions;
• rights and obligations of each party;
• authorization;
• time of validity;
• procedure of termination of the agreement;
• procedure of dispute resolution;
• governing law; and
• grace period for resolution.

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