A foreign trade representative office in Indonesia can be set up by overseas companies quickly and with relative ease. In general, a foreign trade representative office is established with the purpose to take care of the interests of the parent company abroad and/or for preparation of the establishment and development of foreign investment activities in Indonesia. Due to their purpose the scope of activities is limited to representation of the overseas company and is therefore not allowed to directly be engaged in sales and related activities.
Other Types of Representative Offices in Indonesia
Beside the Foreign Trade Representative Office, there are other types of representative offices, such as the general Foreign Representative Office and a Foreign Construction Service Representative Office. In this column we will focus on the foreign trade representative office.
Allowed Activities of Foreign Trade Representative Office
According to article 2 of trade regulation 10/M-DAG/PER/3/2006 (“Trade Regulation”), a foreign trade representative office can be shaped in the form of a selling agent, a manufacturers agent and/or a buying agent. Subject to their business shape, the foreign trade representative offices may be involved in the following activities:
1. Activities to introduce, promote and advance the marketing of goods produced by overseas parent company;
2. Supply of information or instructions for the use and importation of goods to local companies/users in the country;
3. Market research activities and surveillance in domestic sales in order to market the goods of the overseas parent company;
4. Market research activities on goods required by the overseas mother company and supply information and instructions about the terms of the export of goods to local companies;
5. Conclude contracts on behalf of the overseas parent company with the local company related to export.
Based on article 12 of the Trade Regulation, a foreign trade representative office is allowed to employ foreign employees. The Trade Regulation requires, however, that for every foreign employee, at least 3 Indonesian staff members are hired.
Restricted Activities of Foreign Trade Representative Office
According to article 4 of the Trade Regulation, a foreign trade representative office is prohibited to be involved in direct trading activities and sales transactions from the beginning until the completion of a project. Such commercial activities include the submission of tenders, the signing of contracts, the settlement of claims, and so forth.
Moreover, for the services as stated under point 1 and 2 above, the foreign trade representative offices must designate a national company as an agent for the products being promoted. Such designation must be approved by the overseas parent company.
Time Restrictions of Foreign Trade Representative Office
Based on article 7 of the Trade Regulation a foreign trade representative office can be established for an initial period of maximum 3 years. The foreign trade representative office may be extended through letter of appointment. The Trade Regulation does not restrict the amount of times a foreign trade representative office can be extended.