REPLIES FROM INDONESIA REGARDING DOCUMENT _G/TFA/Q/IDN/6

The following communication, dated 2 December 2025, is being circulated at the request of the delegation of Indonesia.

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1._       Indonesia appreciates the United States' questions in document _G/TFA/Q/IDN/6. The rewarding Customs Official for successful settling of violations does not incentivize arbitrary or excessive targeting of legitimate importers through the premium mechanism.

Indonesia emphasizes that the premium mechanism under Article 113D of Law No. 17 of 2006 on Customs (amending Law No. 10 of 1995) is firmly anchored in national legislation. The provision states that premium is granted to eligible customs officials which is related to the Customs examination that has resulted in legally confirmed violations according to the regulations, and the premium is not linked to mere suspicion or preliminary findings. 

Moreover, under Articles 93–95 of Law No. 17 of 2006, traders have the right to file an Objection to DGCE, Appeal to the Tax Court, and Review to the Supreme Court against any customs examination. All the procedures are accountable to ensure that legitimate traders are not unfairly targeted.

It should also be noted that the premium mechanism is awarded solely after the case has been legally finalized and the decision has become final and binding or has permanent legal force (inkracht).

The premium mechanism under Article 113D is established with strict legal safeguards and institutional controls. It functions solely as a post-enforcement recognition mechanism after a violation is legally confirmed. The measure is anchored in Law No. 17 of 2006 on Customs, Government Regulation No. 39 of 2019, and Minister of Finance Regulation No. 21 of 2024. This framework ensures that rewards are granted transparently, not as an incentive for arbitrary enforcement, and that they are unrelated to the initial determination of penalties or inspection outcomes. The system strengthens accountability while maintaining fairness and compliance with WTO TFA principles.

2._       According to Article 113D Customs Law No. 17 of 2006, and MoF Regulation No. 21 of 2024, it is stated that "individuals, groups of people, and/or work units that have contributed to handling customs violations are entitled to receive a reward (premium)." 

Customs Officials who have contributed to handling customs and/or excise violations shall include those who have:

a._         addressed administrative violations in the customs and/or excise by providing information, identifying violations either administratively or physically, defending findings in legal proceedings, and completing collection processes; or

b._         addressed criminal violations in the customs and/or excise by providing information, conducting arrests, investigations, and prosecutions.

The scope of contribution in handling criminal customs and excise violations shall also include:

a._         providing legal assistance to units involved in pretrial proceedings as respondents;

b._         conducting research on alleged criminal acts in the excise sector;

c._         managing escrow accounts for entrusted funds; and/or

d._         acting as prosecutors who examine case files until the investigation is terminated for the benefit of state revenue.

Taken together, the above explanations demonstrate that Indonesia emphasizes that only confirmed cases with complete evidentiary validation may qualify for the premium mechanism. The process follows a multi-stage legal review involving the Objection, Appeal, and Judicial Review procedures, ensuring that evidentiary standards are consistently met before any premium is granted. This reflects Indonesia's commitment to a transparent, rules-based system, fully in line with Article 6.3 of the WTO TFA.

3._       The regulation on Rewards (Premiums) has been comprehensively and explicitly stipulated in Law No. 17 of 2006, Government Regulation No. 39 of 2019, and MoF Regulation No. 21 of 2024. On the other hand, importers have the right to file Objection, Appeal, and Judicial Review against the decision on the imposition of sanctions by Customs Officers if they hold a different view regarding such sanctions.

Furthermore, the implementation of Article 113D has been carefully assessed to align with good governance and anti-corruption objectives. The premium system promotes lawful enforcement and recognizes high-risk operational duties rather than discretionary enforcement. The Government of Indonesia continues to review its effectiveness periodically to maintain trader confidence and institutional integrity.

Considering that law enforcement in the field of customs and excise involves high risks and potential dangers, specialized expertise is required in its handling. Therefore, it is necessary to provide recognition or rewards to those who have made significant contributions in uncovering and addressing violations in the customs and/or excise. In addition, the Directorate General of Customs and Excise has the authority to supervise activities in the field of customs and excise. This supervision aims to maintain fair competition among business actors engaged in customs and excise activities.

Therefore, DGCE strongly recommends importers to obey all the customs regulations to avoid the imposition of penalties.

4._       Article 113D complies with the Article 6.3.3 and 6.3.4 WTO TFA with the reasons as follows:

a._         Under Article 93 and 94 of Law No. 17 of 2006, any person subject to a customs determination—including tariff classification, customs valuation, or administrative penalties—may file a written objection. This mechanism is further regulated under Minister of Finance Regulation (PMK) No. 136/PMK.04/2022 on Objections in Customs and Excise (which amends PMK 51/PMK.04/2017). The regulation requires that:

●_             objections must be submitted electronically through the Directorate General of Customs and Excise (DGCE) Service Portal;

●_             objections must be filed within 60 days of the disputed decision; and

●_             a guarantee equal to the amount in dispute must accompany the objection (Article 3 of MoF Regulation No. 136 of 2022).

If the Director General of Customs and Excise does not issue a decision within the statutory timeframe, the objection is deemed granted by default (Article 95, Law No. 17 of 2006). 

Furthermore, if the importer is unsatisfied, Article 27 of Law No. 14 of 2002 on the Tax Court provides the right to appeal the objection decision to an independent judicial body (Tax Court). If the importer cannot accept the decision of the Tax Court, he has the right to submit a Review to the Supreme Court according to the regulations.

Premium under Article 113D can only be disbursed once these steps have been completed and the violation is conclusively established by the result of the above process.

b._         According to Government Regulation No. 39 of 2019, penalties are regulated to ensure greater fairness in imposing administrative sanctions on customs service users in fulfilling their customs obligations, while also promoting the development of the business sector. The purpose of imposing administrative sanctions is to provide a deterrent effect and to foster compliance among business actors who commit violations.

c._         Indonesia affirms that the mechanism is consistent with Articles 6.3.3 and 6.3.4 of the WTO TFA, which require that penalties be proportionate and not imposed in an arbitrary manner. Under Article 94 of Law No. 17 of 2006, objection decisions must be reasoned and based on evidence, and under PMK 136/PMK.04/2022, they are processed electronically and transparently. The appeal mechanism is processed by the Tax Court (Law No. 14 of 2002) in order to ensure impartiality and eliminate conflicts of interest. The premium mechanism does not affect the assessment of Customs Officials to impose the penalty; it is applied only after penalties are settled according to the regulations. Therefore, it is fully aligned with the spirit of the Article 6.3 WTO TFA.

It should also be noted that the premium mechanism does not give rise to any conflict of interest. This safeguard guarantees that the recognition is strictly post-enforcement and unrelated to the initial penalty determination process.

As a conclusion, Indonesia reaffirms that the premium mechanism is entirely separate from penalty assessment and collection. The premium can only be distributed after a violation is legally confirmed through the objection and appeal mechanisms as stipulated in Law No. 17 of 2006 and MoF Regulation No. 136 of 2022. Therefore, it does not create a conflict of interest and remains consistent with Article 6.3.3 and 6.3.4 of the WTO Trade Facilitation Agreement.

5._       Indonesia takes note of the concerns expressed by partners. However, it must be emphasized that the mechanism is an integral part of our legal system under Article 113D of Law No. 17 of 2006, which remains fully in force. It is not a trade barrier but a domestic fiscal recognition instrument, designed solely to safeguard state revenue. Because enforcement actions are subject to objection under MoF 136/2022 (to DGCE) and judicial appeal under Law No. 14 of 2002 (to the Tax Court), the mechanism should not be used to penalize compliant traders or to target them arbitrarily. 

The Government of Indonesia currently has no plan to abolish the reward mechanism under Article 113D. The system is a lawful fiscal instrument aimed at safeguarding revenue and ensuring integrity in enforcement. It operates under full transparency and accountability measures, consistent with Indonesia's domestic law. However, Indonesia remains open to dialogue with the United States to enhance mutual understanding regarding this mechanism and its safeguards.

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