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Indonesia’s economic potential is something that many in Southeast Asia have been paying increasing attention to. Indonesia has one of the largest populations in the world and a growing middle class.1 It’s made strides in reducing poverty to below 10 per cent as well.2 The Australian Financial Review also mentioned that the vitamin maker Blackmores saw its sales rise 72 per cent in Q2 of 2018 since shifting its attention more to Indonesia.3
Many businesses in Malaysia would no doubt want to expand to Indonesia, but for those with inventory based in Malaysia some questions that need to be answered include: “When should I use air freight in my supply chain? How does air freight work?”
In terms of transit time, air freight is great when you need your products shipped yesterday. With Singapore and Indonesia being quite close-by, the flights themselves (mid-mile only) just takes a few hours. This is compared with sea freight which could take longer.
All this speed comes at a price, but there are times when it’s actually cheaper to ship via air freight compared to 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:
Air freight is fast, but has some limitations. 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.
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 and face more regulation. The consignees of these orders tend to be enterprises and businesses who need to be registered with local authorities. Your importing party (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 Malaysia to Indonesia, using a sample air freight shipment from Malaysia’s Klang Valley to Indonesia’s Greater Jakarta region.
While the logistics supply chain from Malaysia to Indonesia can vary depending on your requirements, international shipping via air freight usually follows these steps:
The first mile stage in international shipping involves your shipment leaving the origin address to your logistics service provider’s warehouse, be it a distribution centre or transportation hub. The origin address is where your inventory is stored before delivery, such as an office, warehouse, or your supplier’s address. Depending on your arrangement with your shipping partner, your shipment will be picked up by your shipping partner or dropped off by you at your partner’s designated location.
Packaging and labelling are vital to minimising complications during shipping. Packages may sometimes go through bumpy rides like turbulence. 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.
If your shipment is a B2C parcel, it has to be consolidated on a pallet 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 KLIA. As B2B shipments are already consolidated, the shipment can be transported directly to the airport for customs clearance.
If your origin address is in East Malaysia, your shipment may need a connecting flight from Singapore.
After your shipments have been collected, they need to be cleared for export by Malaysia’s customs officers at KLIA.
Terminal handling processes 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.
To get your goods cleared for export, your shipment usually needs to have the following documents ready:
You or your shipping provider must first register with the Companies Commission of Malaysia to export goods which require a license. Some of these items include certain plants, wood, minerals, and more. You may check out the list of items that require a license to export on Malaysia’s Customs website.4
Your goods also need to be classified and declared to Malaysian Customs prior to export. Like most Customs Offices, Malaysia uses the Harmonised Systems Tariff Code to classify your goods. You can look up the classification of your goods using the HSS Explorer.5 Depending on what you’re shipping, your order may be charged duties and taxes.
For a quick overview of Malaysia’s export procedures, you can find it on their official website (Malay language)6
While knowing all of this is helpful to getting your exports ready, you can check with our customs clearance experts if you’re unsure of which documents to apply for and how to declare your goods.
After getting cleared for export, your order is uplifted onto a plane and leaves Malaysia, bound for Indonesia. The mid-mile leg of the journey (the flight itself) will take around 2 hours at most.
Once your item arrives in Indonesia’s airport (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:
Documents required for B2C and B2B air freight imports
B2C shipments will require fewer documents, being the commercial invoice, packing list, airway bill, 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 bill of lading, 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.7
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.
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 at a transport hub to sort them out before the last mile journey can begin. However, if the address is beyond an address that can 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 speed is paramount for either to provide a great eCommerce experience or for urgent supply chain 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.
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