With Indonesia's market potential and price-sensitivity well-noted, exporters from China aiming for Indo still need to know - when's air freight best used?
July 24, 2020
As a country with one of the world’s largest populations, Indonesia’s market potential is hard to miss. With companies like even Blackmores1 seeing greater returns when shifting their efforts to Indonesia, Indonesia’s reduction in poverty and growing middle class2 provides opportunities that shouldn’t be missed.
On the other hand, with the current global situation, many are likely to become more price-sensitive, including people in Indonesia. This means that there will be greater demand for items that compete on price, including those sourced from China.
But for businesses looking to capitalise on all of these, the question of how to ship your goods from East Asia to Indonesia still remains. When does it make sense to ship via air freight? How might an air freight trip from Hong Kong to Indonesia look like?
When should you use air freight over sea freight?
If speed is vital to your supply chain needs, then air freight’s shorter delivery timings are worth considering. When not looking at other legs of the journey, a flight from Hong Kong to Indonesia will take around a day at most.
On the other hand, you need to ensure that the profit you make on these shipments can justify the costs that come with air freight. Air freight usually costs more than sea freight in exchange for all that speed.
Interestingly though, there are actually times when air freight can be cheaper than sea freight. To understand this, it helps to see how air freight rates are calculated.
For air freight, rates are charged to the order’s volumetric weight (how much space it takes up) or its actual weight depending on which is greater. For less-than-container-load shipments, sea freight tends to be charged by volumetric weight, with a minimum chargeable volume being 1 cubic metre (cbm).
Sea freight saves you money if your order is above 2 cbm. However, you don’t get those economies of scale for items that aren’t that big like small cartons that take up between 0.5 to 0.9 cbm since you’re paying for unused space. This is where air freight can be more economical than sea freight.
Fortunately, you don’t need to work all of this out yourself. Logistics service providers like Janio can help advise you on whether air freight or sea freight is better suited to your current leg of the supply chain and also offer you both shipping modes for your orders. To find out more, reach out to us below:
When choosing between air freight and sea freight, consider the following:
The weight and size of your shipment
The products being shipped
Air freight is fast, but can be limited in terms of what you’re allowed to ship. Bulky or oddly-sized items, or items too dangerous to meet air freight’s restrictions on what can be shipped generally should use sea freight instead.
For instance, these products generally can’t be shipped via air freight: products containing gases, all things flammable, toxic or corrosive items like batteries, magnetic substances like speakers, perishable items and more. If you’re shipping these, it makes more sense to use sea freight.
Differences to note between air freight for parcels and bulk orders
B2C air freight shipments tend to face fewer hurdles as they are shipped to individuals compared to bulk shipping to businesses. These shipments are usually below the customs’ de minimis rate of the destination country and do not need extensive customs documentation and also are charged fewer import duties and taxes. The minimum documentation needed is usually commercial invoices and packing lists. This is slightly different in Indonesia however, which has a de minimis rate of USD 3. We cover this in more detail later in the article.
Bulk orders require more preparation for both shipping partners and shippers and face more regulation. The consignees of bulk orders tend to be enterprises and businesses who need to be registered with local authorities. Your importing party (i.e. the consignee) also needs to have import licenses as well as other permits with relevant authorities at hand to clear destination customs clearance. These orders are subject to duties and taxes depending on their customs valuation and the type of goods shipped.
With these differences cleared up, it’ll be good to know how air freight works from Hong Kong and its surrounding territories in China to Indonesia, using a sample air freight shipment from Shenzhen to Indonesia’s Greater Jakarta region.
How does air freight from Hong Kong to Indonesia work?
While the logistics supply chain from China or Hong Kong to Indonesia can vary depending on your requirements, shipping via air freight usually follows these steps:
Collection and First Mile Delivery – Depending on your arrangement with your shipping partner, your shipping partner collects the goods from the origin address or you drop off the shipment at a designated point. The origin address could be your supplier’s address or your own warehouse in China or Hong Kong.
Consolidation and delivery to the airport – loose parcels need to be palletized and packed together with other businesses’ shipments so they don’t bounce around or take up too much space in the plane’s cargo hold.If you’re working with a shipping partner, this will take place at their warehouse. If you’re using Janio as your shipping partner to ship goods from China, your order will be transported to Hong Kong International Airport.
Terminal Handling at the Airport in Hong Kong – The shipment is sent to your shipping partner’s air cargo agent’s warehouse near Hong Kong International Airport (HKG). Here, weighing and inspection of the cargo, tallying up the items with the commercial invoice and packing list and checking all the necessary shipping documents take place.
Origin Customs – Your goods and documents are then inspected by customs clearance officers in Hong Kong and are cleared for export by the Hong Kong Customs and Excise Department.
Uplift and Mid-mile – Your order is loaded onto the plane and it takes off for Indonesia
Destination Customs – Once the shipment reaches Soekarno-Hatta International Airport (CGK), it will be processed by Indonesia’s Directorate General of Customs and Excise.
Additional Domestic Flight (if needed) – As Indonesia is an archipelago, not all addresses are reachable by land vehicles. An additional domestic flight might be needed to send the order to an airport closer to your destination
Sorting and Distribution – Loose parcels are moved via vans or trucks to the transport logistics hub, where they are sorted and dispatched to their relevant destinations. Bulk shipments can be delivered straight from the airport.
Last-mile Delivery – After sorting, the shipments will be transported to your consignee’s address
Collection and First Mile in China or Hong Kong
In the first stage of the delivery, your shipping partner will collect your shipments from a specified collection point. Depending on the arrangements made with your shipping partner, this could be a specified drop off point, or your origin address such as your own warehouse or supplier’s warehouse. The origin address if the place where your inventory is stored prior to delivery.
If you have your manufacturing hub in areas near Hong Kong, like Shenzhen for example, your items will be delivered via van or truck to a warehouse in Hong Kong for consolidation. As B2B shipments are already consolidated, the shipment can be transported directly to the airport for customs clearance.
If your shipment is a B2C parcel, it will be palletized at your shipping partner’s warehouse together with other packages heading to the same destination country before it can be sent for terminal handling and customs clearance at Hong Kong International Airport.
Packaging and labelling are critical to minimising complications during shipping. Packages may sometimes go through bumpy rides like turbulence during the flight. Having extra padding for fragile items, like bubble wrap, styrofoam inserts, and packing peanuts is recommended to prevent your products from bouncing around or getting deformed during shipping. To learn more about the best practices in packaging your goods, we’ve covered this topic in our packaging guide.
Labels should be visible and also remain legible and easily accessible by your shipping partner and customs officials after being transported to the destination airport. You can check out our guide on labelling your shipments which you can also find in our resources for B2C shipping to Southeast Asia.
Terminal handling and Origin customs clearance in Hong Kong
One of the benefits of using Hong Kong as an air freight hub is that it has better flight connectivity to other countries and cities. As of the time of writing for example, there are no direct flights from USA, Europe and other North Asian countries into Shenzhen in China, but most of these countries have flights to Hong Kong. Hong Kong’s trade-friendly terms and reduced restrictions also mean that it can process orders for customs clearance faster than other origins in mainland China.
If you’re shipping with Janio, your shipments will be sent to our air cargo agent’s warehouse near Hong Kong International Airport (HKG) after they’ve been collected and consolidated. At this warehouse, your shipments will go through terminal handling.
The processes involved in terminal handling include weighing and inspection of the cargo, tallying up your shipment’s items with the commercial invoice and packing list, and checking that all required customs documents are in order. Your items will be palletized at the air cargo agent’s warehouse if it hasn’t been palletised yet. After this, your order will be sent for customs clearance.
For your order to be cleared for export from Hong Kong, your shipment at the minimum needs to have the following documents ready:
You can check out the official list of documents to import and export from Hong Kong on the official Hong Kong Customs and Excise Department website.3
Unlike shipping from Southeast Asian countries, exporting from China and Hong Kong requires you to have an export permit before you can ship your goods out. Additionally, if you’re shipping any restricted goods, you’ll need to apply for a special export permit for these goods before it can be exported. You can check the Ministry of Commerce Republic of China’s website to find out more on how to apply for the export permit.4 We’ve provided a site with an English translation in our references as well.5 More information on export permits from Hong Kong can also be found here.6
If you’re ever unsure about what kind of steps you need to take to export your goods from China, you can always check with our customs clearance experts if you’re unsure of which documents to apply for and how to declare your goods.
After checking these documents and clearing your shipments for export, your shipments can be loaded onto a vessel.
Uplift and Mid-mile
After getting cleared for export, your order is uplifted onto a plane and leaves Hong Kong, bound for Indonesia. The mid-mile leg of the journey (i.e. the flight itself) will take around a day at most from Hong Kong to Indonesia.
Customs Clearance in Indonesia
Once your item arrives in Indonesia’s airport, or Soekarno-Hatta International Airport in our case, your shipment will head to a customs warehouse for clearance. Here, customs officers will inspect your parcel and shipping documents and determine if your product is allowed to enter Indonesia.
To clear customs for bulk imports into Indonesia, you or your shipping partner would generally need to provide the following documents:
Commercial invoice, signed by manufacturer or supplier
Importer’s Single Business Number (NIB)
Consignee’s Tax Obligation Main Number (NPWP)
Material Safety Data Sheet (MSDS)
Certificate of Insurance (if applicable)
Import permit (type depends on items imported into Indonesia)
API-U – finished products
API-P – raw/ unfinished materials
API-T – limited import license
Customs Import Declaration
Customs Identification Number (NIK)
Importer Identification Number (Angka Pengenal Import, API)
Letter of Authorisation
Other relevant licenses (e.g. BPOM for health and beauty)
Documents required for B2C and B2B air freight imports
B2C shipments will require fewer documents, being the commercial invoice, packing list, airway bill, and certificate of insurance if required. You’ll also need to provide your consignee’s Indonesian tax number (NPWP) for customs duties and taxation payments.
B2B shipments require all the above, in addition to most of the documents laid out below.
The commercial invoice will need to be signed by the manufacturer or supplier as true and correct. As for the airway bill, you’ll need three endorsed originals and four non-negotiable copies.
B2B air freight shipments also need the customs import declaration, import permit and customs identification number (Nomor Identitas Kepabeanan, NIK), Single business number (NIB) and importer identification number (Angka Pengenal Import, API) of the importing party.
When it comes to the statement letter and letter of authorisation, your shipping partner can help you prepare these documents. As the shipper, you must provide the company letterhead, name and signature of the company director, company stamp and the Meterai 6000 stamp (Indonesian Stamp Duty) for the documents though.
If you are shipping goods classified as dangerous goods, commonly known as DG in the logistics industry, the shipper must also prepare the material safety data sheet (MSDS). The MSDS contains details about the potential hazards when handling the product, and how the product should be handled. If your shipment requires an MSDS, you should be able to get this from your product’s manufacturer.
In Indonesia, there are three types of import licenses. API-U is the general import license used for importing finished goods. API-P is the producer import license used for bringing raw or unfinished products into the country. There is also a third importer license called API-T, which is limited to a specific industry and does not permit you to import goods not related to that sector of the business. If you’re also interested in Indonesia’s customs clearance for B2C shipments, check out our updated customs clearance guide.
Finally, certain items require licenses or permits from controlling government agencies in Indonesia before they can be imported. For instance, health and beauty products require registration and permits from Indonesia’s BPOM (National Agency of Drugs and Food Safety).
Indonesia’s De Minimis Rate
If your order is below Indonesia’s de minimis rate of USD 3, then there is no need to pay import duties and taxes to the customs office. If your item is below Indonesia’s de minimis rate of USD 3, then there is no need to pay additional import duties and taxes to the customs office. Currently in Indonesia, items below the de minimis just need to pay VAT at 10% of the order valuation.
The de minimis rate refers to a value threshold where fewer or no duties and taxes are charged if the shipment’s CIF value, which includes your good’s price, shipping fee, and insurance costs if any, is below that point. This only applies to goods that are delivered via air freight. Earlier in 2020, the Indonesian government revised their de minimis rates from USD 75. To find more information about this regulatory change, you can read our article here.
On the other hand, if your goods exceed the de minimis threshold, higher import duties and taxes like income tax will be levied on your shipment. You would have to pay a value-added tax (VAT) at 10%, and the import duties and income tax depend on the product category as declared by the harmonised systems code (HS code). You may find out the percentage of your import duties, VAT and income tax paid through Indonesia’s Directorate General of Customs and Excise website.8
However, with the COVID-19 pandemic around, the Indonesian government provided temporary duties and tax exemptions on products that are designed to fight the virus, such as hand sanitisers and personal protective equipment. You can find out more information in our article on this temporary regulation.
If you’re shipping a B2C parcel, you can choose to either pay for the import duties and taxes yourself or let your customers pay for the import duties and taxes. This is determined by the incoterms Delivered Duties Unpaid (DDU) and Delivered Duties Paid (DDP). While we strongly encourage you to opt for DDP to keep your shipping experience smooth for your B2C customer, it helps to familiarise with what these arrangements mean.
Distribution and Last Mile in Indonesia
Once your shipment has cleared customs, it will enter the distribution stage of delivery. If the consignee’s address is within the Greater Jakarta region, your B2B shipments can be delivered directly to their destination.
However, B2C parcels need to be sorted at a transport hub to sort them out before the last mile journey can begin. However, if the address cannot be reached by vans or trucks, an additional domestic flight will be needed before your shipments can be sorted or sent to last mile delivery.
The last mile delivery leg of the journey is where your parcel will be sent from the destination warehouse to your consignee’s address. In Indonesia, this stage of the delivery is done via vans or motorcycles. During the last mile delivery stage, your logistics service provider will ensure that your shipment is received by your consignee.
Air freight works best when the shipment can cover the cost of the speed it really needs. It works even better when you have logistics service providers who can tell you when and where it’s best used in your supply chain. Contact us below to find out more about how we can help you or if you’d like an air freight quotation to ship to and throughout Southeast Asia.