Importing Used Clothes in Indonesia, What is the Legality?

PERTANYAAN

There is currently a rash of second-hand clothing imports in Indonesia. How is the law enforced against second-hand clothing smuggling? Is the thrifting business legal?

INTISARI JAWABAN

Basically, the thrifting business is not prohibited in Indonesia, as long as the used goods being traded are not items prohibited by the government.

So, what are the used items or goods that are prohibited to be traded in Indonesia?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Impor Pakaian Bekas di Indonesia, Bagaimana Legalitasnya? written by Vonnie Sutedjo, S.H., LLM from FIFI LETY INDRA & PARTNERS Law Firm and published on Thursday, 6 April 2023.

The article below is the third update of the article entitled Import Ban on Used Clothes (Larangan Impor Pakaian Bekas) created by Letezia Tobing, S.H., M.Kn. and first published on January 29, 2016, then first updated on September 10, 2021, and second updated by Saufa Ata Taqiyya, S.H., and published on Tuesday, November 9, 2021.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Definition and Legal Basis of Import

Before answering your question, we should first understand what is meant by imports.

Import is an activity of importing goods into the customs zone.[1] Customs zone is the territory of the Republic of Indonesia which includes the lands, waters, and air space, and some point within the Exclusive Economic Zone and continental shelf in which the Customs Law applies.[2] In simple terms, imports can be understood as the entry of goods originating from outside the territory of the Republic of Indonesia into the territory of the Republic of Indonesia.

Some of the purposes of imports include the fulfillment of goods that cannot be fulfilled from domestic sources, in order to enhance the national economic growth and to increase the utilization and trade of domestic products.[3] In the event that imports are detrimental or harmful to national interests and domestic production, the government will control foreign trade through business licensing/approval, standards, bans and restrictions.[4]

Therefore, are there imported goods that are prohibited from being traded in Indonesia? According to the Ministry of Cooperatives and SMEs Press Release 81/Press/SM.3.1/IV/2023, the import of used clothing is prohibited by the Indonesian Government, as it is considered detrimental and harmful to the domestic textile industry and has a real impact on Small and Medium Enterprises ("SMEs"). The ban is further regulated in several regulations as follows.

Article 46 number 15 Perppu 2/2022 that amended Article 46 Law 7/2014:

1. Importer must import new goods.
2. In certain circumstances, the Central Government may determine used imported goods.
3. Further provisions regarding the determination of used imported Goods as referred to in paragraph (2) shall be regulated under a Regulation of the Government.

Appendix II number IV Regulation of the Minister of Trade 40/2022

Prohibited Import Goods include used bags, used sacks, and used clothing.

What is Thrifting?

Thrifting is a nonstandard English word, derived from the noun thrift, which means careful financial management or in other words, frugality.

Thrifting is also an activity of finding and buying used goods. Thrift is generally engaged in clothing commodities as a resistance to consumptive fast fashion. The purpose and intention of some people who do thrifting activities are to save money because thrift goods have a much cheaper price than normal prices, including branded goods that come from abroad or imports, or even limited edition goods and clothing that are no longer produced by the company.[5]

Basically, the business of thrifting or selling used goods is not prohibited by the Indonesian Government, as long as the used goods sold are not items prohibited by the government such as used imported clothing. This can be seen with the existence of Standard Classification of Indonesian Business Fields or Klasifikasi Baku Lapangan Usaha Indonesia a.k.a KBLI code 47742 on clothing retail trade, footwear, and used/ second-hand clothing complementary. This KBLI group number 47742 covers the business of retail trade in clothing, footwear, and used/ second-hand clothing complementary, such as used clothes, used pants, used coats, used scarves, and used hats. Therefore, what is prohibited is not the thrifting business from within the country, but the import of used clothing or thrifting from abroad.[6]

What’s the Law on Smuggling Used Clothes from Abroad?

Basically, any importer that imports non-new goods shall be sentenced to imprisonment of at most 5 (five) years and/or a fine of at most Rp5,000,000,000 (five billion rupiah).[7] However, in addition to criminal sanctions of imprisonment and/or fines, every business actor who does not comply with Business Licensing may be subject to administrative sanctions in the form of:[8]

1. written reprimand;
2. withdrawal of goods from distribution;
3. temporary suspension of business activities;
4. Warehouse closure;
5. fine; and/or
6. revocation of Business Licensing.

Then, goods that are prohibited from being imported if they have entered the territory of the Republic of Indonesia are categorized as state property that cannot be used, cannot be utilized, cannot be donated, and have no economic value, which is then destroyed.[9]

Also read: Types of Goods Prohibited from Export and Import

In conclusion, thrifting is an activity of finding and buying used goods. The thrifting business is not prohibited in Indonesia, as the business is included in KBLI number 47742. However, the Indonesian Government prohibits the import of second-hand clothing as it can harm the domestic industry and has a real impact on SMEs. Thus, the government strictly enforces the importation of used clothing with imprisonment and/or fines, administrative sanctions, and destruction of imported used clothing.

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 7 of 2014 on Trade;
2. Regulation of the Minister of Finance Number 178/PMK.04/2019 of 2019 on Settlement of Goods Declared Not Controlled, Goods Controlled by the State, and Goods Belonging to the State;
3. Regulation of the Minister of Trade Number 40 Of 2022 on the Amendment to Regulation of the Minister of Trade Number 18 of 2021 on Goods Prohibited from Being Exported and Goods Prohibited from Being Imported;
4. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which has been passed into law under Law Number 6 of 2023 on 21 March 2023;

Reference:

1. Anggie Arta Mevia Setiyana Putri and Asidigisianti Surya Patria. Perancangan Referensi Gaya Berpakaian Thrifting Melalui Feed Instagram. Jurnal Barik UNESA, Vol. 3 No. 2, 2022;
2. KBLI 47742, accessed on 4 April 2023, at 10.00 West Indonesian Time (zone);
3. Ministry of Cooperatives and SMEs Press Release 81/Press/SM.3.1/IV/2023, accessed on 4 April 2023, at 13.00 West Indonesian Time (zone);
4. Minister of Cooperatives and SMEs Press Release 77/Press/SM.3.1/III/2023, accessed on 4 April 2023, at 12.31 West Indonesian Time (zone);
5. Thrift, Merriam Webster Dictionary, accessed on 4 April 2023, at 12.20 West Indonesian Time (zone).

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[1] Article 1 number 18 Law Number 7 of 2014 on Trade (“Law 7/2014”).

[2] Article 1 number 15 Law 7/2014.

[3] Article 3 letter a and b Law 7/2014.

[4] Article 46 number 10 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation (“Perppu 2/2022”) which amended Article 38 section letter e (3) jo. Article 38 section (4) Law 7/2014.

[5] Anggie Arta Mevia Setiyana Putri and Asidigisianti Surya Patria. Perancangan Referensi Gaya Berpakaian Thrifting Melalui Feed Instagram. Jurnal Barik UNESA, Vol. 3 No. 2, 2022, pp. 125-126.

[6] Minister of Cooperatives and SMEs Press Release 77/Press/SM.3.1/III/2023.

[7] Article 111 Law 7/2014.

[8] Article 46 number 27 Perppu 2/2022 that added new Article 77A Law 7/2014.

[9] Article 33 letter d Regulation of the Minister of Finance Number 178/PMK.04/2019 of 2019 on Settlement of Goods Declared Not Controlled, Goods Controlled by the State, and Goods Belonging to the State (“Regulation of the Minister of Finance 178/2019”).