WT/GC/W/859  
 
13 December 2022  
(22-9276) Page: 1/6 
General Council  Original: English  
 
 
INDONESIA'S PERSPECTIVE ON CUSTOMS DUTIES ON  
ELECTRONIC TRANSMISSION  
COMMUNICATION FROM  INDONESIA  
The following communication, dated 09 December 2022, is being circulated at the request of the 
delegation  of Indonesia . 
 
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1  BACKGROUND  
1.1.  With the growing importance of e -commerce, Indonesia is of the view that international trade 
rules on e -commerce must ensure the inclusivity and fairness of the global e -commerce ecosystem. 
Since 1998, World Trade Organization ( WTO) Members have agreed and renewed the temporary 
moratorium on customs duties on electronic transmissions, which has in  the last seven years been 
the subject of lengthy debates about whether the moratorium includes electronically transmitted 
content. The  debates are due to the lack of clarity on the definition as well as the lack of consensus 
on the scope related to the implementation of the moratorium.  
1.2.  Even though some literature suggests that the moratorium might offer benefits to the world 
economy and advantages brought on by the expansion of e -commerce, we need to also consider the 
moratorium 's significant impacts on WTO Members, especially developing including least developed 
countries. For instance, domestic retailers in developing countries hardly b enefit from the free -tax 
and duties scheme for electronic transmission, given that the majority of business sectors in 
developing countries are Small and Medium -sized Enterprises (SMEs) who engage minimally in 
cross-border e -commerce.  
2  INDONESIA 'S PERSPECT IVE ON CUSTOM DUTIES ON ELECTRONIC TRANSMISSION   
2.1  Indonesian Customs Law and Classification on Software and Digital Goods  
2.1.  According to the Indonesian Customs Law number 17 Year 2006 on the Amendment of Customs 
Law number 10 Year 1995, Customs Duties are imposed on digital goods (software, electronic data, 
multimedia, etc.) which are delivered via electronic transmission i.e., through internet.  
2.2.  Indonesia has issued a specific tariff heading for digital goods in Chapter 99 (Heading 99.01) 
in the Indonesia C ustoms Tariff Book.  So far, Indonesia imposes most favoured  nation (MFN) tariff 
of zero percent (0%) on software and other digital goods transmitted electronically under Heading 
99.01 which consists of five tariff lines, namely: Operating System Software (9901.10.00), 
Application Software (9901.20.00), Multimedia (9901.30.00), Supporting or Driver Data 
(9901.40.00), and Other Software and Digital Product (9901.90.00)1, as stated in Figure 1 below.  
 
1 Minister of Finance (MoF) of Republic Indonesia Regulation Number 26/PMK.010/2022 regarding the 
Classification System and Imposition of Customs Duty on Imported Goods, 2022 as substitution of MoF 
Regulation Number 17/PMK.010/2018 . WT/G C/W/859  
 
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  Figure 1: Classification on Digital Goods in Chapter 99  
 
 
 
 
 
 
    
 
 
 
 
 
 
         Source: Indonesia Customs Tariff Book 2022  
 
2.2  Shifting Phenomenon and Potential Loss of Revenue  
2.3.  The shifting of physical goods importation to digital form has become a phenomenon that has 
occurred in recent years. Figure 2 shows that in 2017, the estimated imports of digitizable goods 
using 8% of Average Annual Growth Rate (AAGR) was USD 255 billion. However, the physical import 
of those digitizable goods was USD 116 billion. The difference between the estimated import value 
and the physical import value reached USD 139 billion, this number can be estimated as the import 
value of digitizable goods imported using Electronic Transmission. In addition, using the same 
conservative growth rate of online imports of 49 HS code of digitiza ble goods, it is projected that 
the online worldwide imports of digitizable goods imported by Electronic Transmission will rise from 
USD 204 billion in 2020 to USD 365 billion in 2025, that is an increase of 79%.2 
Figure 2: Global Physical Imports and Electronic Transmission of  
Digitizable Products: 1998 -2025 (in USD Billion ) 
 
 
 
 
 
 
 
 
 
 
 Source: South Centr e (2022) , Research Paper Number 157   
 
2 South Centre (2022). WTO Moratorium on Customs Duties on Electronic Transmissions: How much tariff 
revenue have developing countries lost?, Research Paper Number 157 , https://www.southcentre.int/research -
paper -157-3-june-2022/ . 
WT/G C/W/859  
 
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  2.4.  Moreover, in the period 2017 -2020, it is estimated that developing countr ies and LDCs lost 
USD 56 billion of tariff revenue, of which USD 48 billion were lost by the developing countries and 
USD 8 billion by the LDCs. It is interesting to note that this loss of tariff revenue is from the imports 
of just 49 products (at HS six -digit), which include many luxury items like the movies, music, 
oriented matter, and video games.3 In addition, the moratorium could be a continuous provision of 
duty-free access to developed countries to enter the markets of developing countries including LDCs. 
This will have a negative impact on economic growth, employment, and sustainable developmen t.4  
2.5.  The shifting of physical goods importation to digital form has also been a phenomenon in 
Indonesia in the period of 2010 to 2020. The estimated import value of Digitizable Goods (49 HS 
Code) by using the 8% Average Annual Growth Rate (AAGR) is USD 4 .5 billion in total. On the other 
hand, the total amount of physical import of digitizable goods is only USD 3 .16 billion.5 As a result, 
there is a USD 1 .39 billion gap between the total amount of estimated import value and the physical 
import value of dig itizable goods, which indicates that Digitizable Goods importation has been altered 
from physical into digital form.  
2.6.  Figure 3 below shows Indonesia's import value and tax revenue (Value Added Tax/VAT and 
Income Tax) of Digital Goods Importation (HS Code 99 ) during the 2018 -2022. As shown in the 
table, there has been a very significant increase in the import value of digital goods amounting to 
USD 1.1 million in 2020 to USD 56 .2 million in 2021. In addition, an increase in the value of imports 
also occurred until September 2022, in which the import value has reached USD 66 .5 million.6 The 
increase has led to many companies declaring the importation of digital goods voluntarily since 2021.  
Figure 3: Indonesia 's Import Value and Tax Revenue of Digital Goods  
(HS Code 99)  period of March 2018 – September 2022  
 
 
 
 
 
 
 
     Source: Customs and Excise Information Directorate, DGCE  
 
2.3  Rationale for Administering the Importation of Digital Goods  
2.3.1   To Record Trade Statistics  
2.7.  Customs duty policy on digital goods requires the customs administration to monitor the flow 
of contents at the border accordingly . At the same time, the customs administration is expected to 
collect statistical data on contents which is essential for publ ic policy making purposes. That is to 
say, the statistical data collected by the customs administration can be used by the policy makers 
to conduct effective policy and decision -making, especially on areas such as the livelihood of 
brick-and-mortar stores,  infrastructure for e -commerce, and digital capacity development . 
 
3 UNCTAD (2019). Growing Trade in Electronic Transmissions: Implications for the South , Research 
Paper  29, UNCTAD/SER.RP/2019/1, 2019 , https://unctad.org/en/Publication sLibrary/ser -rp-2019d1_en.pdf . 
4 The Moratorium on Customs Duties on Electronic Transmissions: Need for Clarity on its Scope and 
Impact, Communication from South Africa and India, WT/GC/W /833, 2021 . 
5 Directorate General of Customs and Excise, Republic of Indonesia . 
6 Directorate General of Customs and Excise, Republic of Indonesia . 
WT/G C/W/859  
 
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  2.3.2   To Create Level Playing Field  
2.8.  The moratorium on Customs duties on electronic transmissions, creates tax treatment 
discrimination between e -commerce stores (primarily foreign firms engaging i n global e -commerce 
without a local presence) and brick -and-mortar stores (domestic) which results in unfair business 
circumstances.  In practice, imported goods that physically enter the territory of a country are subject 
to customs duties, while importati on of digital goods through electronic transmission is prevented 
from any duties collection. This different treatment on imported products results in higher prices of 
physical products than with digital goods. Therefore, imposing customs duties for content s will 
preserve the fairness of tax treatment between physical and digital goods and create a robust 
business environment.  
2.3.3   To Promote the growth of SMEs  
2.9.  The practice of imposing customs duties on content provides support to domestic creative 
industries including SMEs e.g., software industries (software developer, etc.) through strengthening 
its competitive capability  towards global e -retailers. Considering  global e -retailers offer more 
competitive prices of digital goods coupled with a convenient way of online shopping, there is no 
doubt that the consumers of brick -and-mortar stores will shift to online stores. On this account, in 
the future, the role of cu stoms duties is to increase the prices of imported digital goods so that 
domestic digital goods can maintain their competitiveness and contribute towards domestic digital 
industrial development.  
2.3.4   To Provide Certainty for Government and Businesses  
2.10.  The certa inty in customs procedures is not only for government agencies but also for 
businesses in terms of customs duty and import tax collection, digital goods classification, as well 
as the import declaration procedure.  
2.3.5   To Assess Digital Goods Risk  
2.11.  Customs admi nistration needs to assess digital goods risks which includes the potential 
occurrence of tax avoidance, Intellectual Property Rights (IPR) infringement, and trans -national 
organized crime such as creating weapons with the use of 3D printing, illegal mater ial smuggling, 
and money laundering. In addition, by monitoring the flow of contents, the customs administration 
can control the flow of content that is harmful for the society, such as digital materials for 
terrorist  attacks.   
2.4  The Importance of Policy Sp ace 
2.12.  To remain relevant in the midst of rapid development of the digital economy, we should also 
consider the importance  of a certain degree of policy space to enable highly needed adjustments for 
the imposition of customs duties on importation of digital g oods transmitted electronically. This 
policy space includes both financial space and regulatory space in which customs duties is one of 
the manifestations of state fiscal rights. Moreover, retaining policy space is important for developing 
countries includ ing LDCs to develop a viable domestic digital industrialization and the generation of 
local jobs in the era of Industry 4.0.7  
2.5  Common understanding of Scope, Definition, and Impact of Moratorium on Customs 
Duty on Electronic Transmission  
2.13.  There is no commo n understanding on the scope and definition of the moratorium, despite 
evidence of its negative impact on the digital industry of most developing countries. Therefore, as 
Members consider the policy interventions to address the impacts of the moratorium, i t is imperative 
that WTO Members approach the implementation of the moratorium from a holistic perspective. In 
this regard, all Members need to be equipped with the following crucial elements: multilaterally 
 
7 The Moratorium on Customs Duties on Electronic Transmissions: Need for Clarity on its Scope and 
Impact, Communication from South Africa and India, WT/GC/W /833, 2021.  WT/G C/W/859  
 
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  agreed scope and definition, and a thorough, bal anced understanding on the impact of the imposition 
of the moratorium particularly on developing countries including LDCs.  
2.6  Draft Regulation Regarding Provisions of Imposition of Customs Duties on 
Electronically Transmitted Digital Goods  
2.14.  Indonesia has been developing a mechanism regarding the imposition of customs duties on 
electronically transmitted digital goods. The mechanism will be adjusted to accommodate digital 
goods importation, which is naturally different from the conventional importation. We are c onducting 
intensive discussion in preparation for the implementation of the regulation.  
2.15.  The importer of digital goods will utilize a simplified customs declaration with the minimum 
requirement of filled -in element data compared to the general import. The i mporter will need to fill 
in the relevant data in the customs import declaration. Also, the exclusion of several customs 
measures such as delivery and submission of manifest, unloading and storing in Customs Area and 
Temporary Goods Storage, and physical i nspection, and the customs clearance that is different from 
the conventional import of goods. In addition, the monitoring scheme for the import of digital goods 
will focus on the audit mechanism.  
2.16.  In practice, the imposition of import duties for digital goo ds has previously been applied when 
the import of digital goods is carried out together with the physical media (e.g., CD, DVD, Blu -ray), 
which are classified in HS Code 85.23 with the import tariff rates mostly at 0%. Currently, as the 
shifting of the imp ortation method of digital goods by using electronic transmission, Indonesia has 
provided HS Code 99 to classify the electronically transmitted digital goods, with the same import 
tariff rate of 0%.  
3  CONCLUSION  
3.1.  Indonesian Customs Law has stipulated that Customs Duties are imposed on digital goods 
(software, electronic data, multimedia, etc.) which are delivered via electronic transmission i.e., 
through internet. Indonesia has issued the specific tariff heading for intangible goods in 
Chapt er 99 in the Indonesia Customs Tariff Book. So far, Indonesia imposes most favoured nation 
(MFN) tariff of zero percent (0%) on software and other digital goods transmitted electronically 
under Heading  99.01. However, the termination of the moratorium does  not mean that Indonesia 
will abruptly increase the MFN tariff of electronically transmitted digital goods.  
3.2.  The rationale for imposing customs duties on digital goods are not solely about the state 
revenue, but more importantly regarding these following c oncerns: recording data statistic, creating 
a level playing field for domestic and foreign firms, promoting the growth of local SMEs, providing 
business certainty, and assessing digital goods risks. Indonesia considers that these rationales are 
essential i n establishing state sovereignty.  
3.3.  Indonesia has been developing a mechanism regarding the imposition of customs duties on 
electronically transmitted digital goods. The importer of digital goods will utilize a simplified customs 
declaration with the minimum  requirement of filled -in element data compared with the general 
import and the exclusion of several customs measures.  
3.4.  WTO Members need to analyze the implementation of the moratorium from a holistic 
perspective. For that, we need to be equipped with cruci al elements, such as a multilaterally agreed 
scope and definition, and an understanding on the impact of the imposition of the moratorium on 
customs duties. In addition, we should be having a certain degree of policy space to enable the 
highly needed adjus tments since customs duties are one of the manifestations of the fiscal rights of 
a State.  
3.5.  Customs duties are the most accurate and effective policy tool of the government to administer 
importation of digital goods transmitted electronically referring to a bove-mentioned rationales. 
Imposing of Customs Duties on electronically transmitted content will not create a distortion for 
global trade and it is not meant to put an administrative burden on the importation procedure of 
digital goods using electronic tra nsmission.  WT/G C/W/859  
 
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  3.6.  Termination of the moratorium is also in line with the principles enshrined in the Declaration 
on the Right to Development, which will celebrate its 35th anniversary in 2023. As developing 
countries and LDCs are still struggling to continue to d evelop and become equal to developed 
countries, cooperation and common views are needed in ensuring and removing barriers to 
development.  
3.7.  Indonesia attaches great importance to the e -commerce discussion in the WTO and 
understands that electronic commerce c ould serve as a tool to support economic development for 
many members. Therefore, we emphasize that the moratorium on customs duties on electronic 
transmissions should be terminated in accordance with the WTO Ministerial Decision adopted on 
17 June 2022 contained in WT/MIN(22)/32 and WT/L/1143. Any discussion regarding the 
moratorium should be facilitated under the multilateral framework established in the 1998 Work 
Programme on Electronic Commerce.  
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