Do you run a business where you need to have goods shipped in from overseas? If so, you’ll have to get through customs clearance in Indonesia before your goods arrive in your hands.
Indonesia sees massive movements in international trade yearly, with goods crossing its borders daily. Just in April 2024, its imports reached US$16.06 billion, a 4.62% increase from the same time last year. Before joining the fray, you will need a firm understanding of customs regulations and how to declare value for imports.
Our guide provides an overview of Indonesia’s customs process, clearance charges, and required documentation when importing into Indonesia. We’ll also dive into the 6 methods of customs valuation, along with how DHL Express ID can help you to ensure accurate paperwork and customs compliance.
What is declared value?
In international shipping, declared value refers to the transaction value of the goods being imported or exported. You should declare the true value of the goods and ensure that this value is consistent with the value on the commercial invoice and any proof of payment or receipt. This is important because customs authorities may request these documents to verify the declared value and assess appropriate duties and taxes.
Indonesia’s customs authorities will use your declared value to determine the duties, taxes, and other levies applicable to the goods. Therefore, it is crucial for you to ensure that the declared value is accurately stated in your export paperwork.
You might encounter other terms such as ‘commercial value’ and wholesale value’. These terms mean different things, and you must be clear on which value you declare. Here’s a breakdown of these terms:
- Commercial value: Also known as retail value, this refers to the price paid by the end buyer for a product. When calculating your declared value for retail shipments, the value should be calculated using the commercial value. For example, if you are importing 10 laptops that you intend to sell for $1,000 each, the declared value of the shipment should be $10,000. In other words, you are calculating declared value based on the price at which you intend to sell the item.
- Wholesale value: This refers to the price paid for a single item when purchasing in bulk. Another way to look at it is how much the seller would need to pay to replace a damaged or lost product. If you are importing raw materials, you will likely use the wholesale value to determine the declared value. For example, if you are importing 100 bolts of fabric at $50 each, the wholesale value is $50. In this case, the declared value for this shipment would be $5,000.
The customs clearance process for imports
As part of Indonesia’s customs clearance process, your goods will have to undergo customs valuation to determine any relevant duties or taxes. To this end, you will need to lodge a customs declaration with supporting documents to the authorities. One of these documents is the commercial invoice for international shipping prepared by the seller, which details information on the goods being imported or exported. The declared value of your goods must be stated in this invoice.
Customs will assess the duties and taxes based on your goods’ declared value, Harmonised System (HS) classification, and origin. To avoid incurring a customs fine, make sure that this value is accurately stated. Do also have proof of transaction ready in case the customs authorities request it. After you have paid the required customs clearance charges and duties, the goods will be released for shipment.
The 6 methods of customs valuation
1. Transaction value
Generally, the transaction value is the most common method for the customs valuation procedure. For this method to be used, evidence of sale for export to the country of importation must be provided. The commercial invoice serves as this evidence.
However, there may be instances where the transaction value is not available or considered unacceptable due to price distortions. Price distortions can be caused by factors such as exchange rate fluctuations and changes in market conditions. In such cases, the World Trade Organisation (WTO) has laid out five other methods of customs valuation, which are applied in hierarchical order.
2. Transaction value of identical goods
Under this method, the transaction value is determined based on the price paid or payable for identical goods sold for export to the country of importation. The goods must be identical in terms of physical characteristics, quality, reputation, country of origin, and producer.
3. Transaction value of similar goods
This method assesses the transaction value based on the price paid or payable for similar goods sold for export to the country of importation. The similar goods method applies for goods that closely resemble each other in terms of component materials and characteristics. The goods should also be commercially interchangeable, being capable of performing the same functions. However, the goods must have the same producer, origin, and destination.
4. Deductive value
When the previous two methods cannot be applied, the deductive method is used. This approach derives the value of the goods from the price of the greatest aggregate quantity sold to a buyer in the country of importation. In this case, the buyer and seller must be unrelated.
5. Computed value
While this approach is rarely used, it seeks to determine the customs value based on the goods’ cost of production, factoring in a reasonable amount for profit and general expenses. In this case, the production costs, material costs, profits, general expenses and other insurance and transportation costs are added to compute the final value.
The sequence of this method and the deductive value method can be switched at your request, but not at the discretion of the customs officer.
6. Fall-back method
The fall-back method relies on any reasonable means consistent with the principles and provisions of the WTO's Valuation Agreement. It's often used as a last resort. When the previous methods cannot be used, other reasonable means and available data can be employed to determine the customs value of the goods.
What happens to undervalued goods at customs?
Undervaluation is an offense in which an importer or exporter declares a value lower than the actual transaction value of the goods. This offence can lead to severe legal penalties, including fines, the seizure of goods, and even criminal prosecution.
To reiterate, it is crucial to maintain compliance by avoiding undervaluation at all costs. As customs may request additional proof to justify your declared value, it’s good practice to have your supporting documents ready.
Export your goods with the support of DHL Express
Accuracy and transparency are paramount when declaring the value of goods in international trade. Yet, negotiating Indonesia’s customs declaration process, the export documents, and import paperwork involved can be a tedious process, especially while juggling your daily business operations.
However, by opening a DHL Express business account with us, we can support you in the shipping process, from accurate value declaration to the seamless entry of goods to their destination. Enjoy the assurance of a smoother international shipping journey with DHL Express today.
