Indonesia’s Halal Law Takes Effect, Impacting Products and Services
- Indonesia’s Halal Law requires many consumer products and related services in the country to be Halal-certified from October 17, 2019.
- Businesses that need Halal certification must now go to the newly established Halal Products Certification Agency (BPJPH).
- While some aspects of the Halal Law are clear, many business leaders are awaiting the issuance of implementing regulations to resolve areas of uncertainty.
As of October 17, 2019, Indonesia’s Halal Product Law (“Halal Law”) came into effect. Many consumer products and related services that enter and are traded in the country must now be Halal-certified, while some products and services will have until 2022 to comply.
The Halal Law regulates the processing, materials, and certification of Halal products, in addition to establishing partnerships with international Halal agencies.
The Halal Law mandated the establishment of the Halal Products Certification Agency (BPJPH), a new government agency under the Ministry of Religious Affairs that will issue Halal certificates through a one-stop-shop system.
It is worth noting that, according to the BPJPH, the compulsory Halal labeling law will initially apply to food and beverages before cosmetics, drugs, and other consumer goods, and services related to these goods, which will have until 2022 to comply.
What are the criteria for Halal certification?
Businesspeople will need to study implementing regulation (Reg 31, 2019), which was issued in May, and sets out the scope and requirements for the types of products subject to be Halal certified.
Reg 31, 2019 states that the BPJPH will cooperate with state-owned and private Halal inspection agencies (LPH) to conduct examinations of food and product samples with the results then being presented to the Food and Drug Research Institute of the Indonesian Ulema Council (MUI), who will issue a ruling on whether the sample is deemed Halal. Once approved, the BPJPH can issue the Halal certificate. The key provisions in Reg 31,2019 include:
- The types of products that can be imported, traded, and distributed in Indonesia that requires Halal certification (food, beverages, chemicals, biological products, drugs, cosmetics, and utilized goods that contain traces of animal elements, such as garments);
- The registration of Halal auditors (individuals that can inspect whether a product is Halal; an LPH must have at least three auditors to conduct their testing);
- Non-Halal products must be stated clearly on the packaging with the annotation ‘Not Halal’;
- Businesses will need to be good manufacturing practice (GMP) and Halal GMP certified;
- The types of services that must be Halal-certified (packaging services, animal slaughterhouses, storage services, distribution services); and
- The registration process of international Halal certification bodies (foreign Halal agencies (FHA).
How to get Halal-certified
Businesses that need Halal certification need to do the following:
- Businesses that have yet to get their products or services Halal-certified must register their company and products at the Ministry of Religious Affairs in Jakarta (the current BPJPH office is still not ready to receive applicants and their online portal is not yet developed);
- Once applicants are registered, the BPJPH will issue a special registration number, which must be placed on all packaging or on the product itself;
- The applicant will then choose an LPH agency from a list provided by the BPJPH;
- Pay the fees (these vary depending on the size of the business);
- The LPH agency will conduct the relevant tests on the applicants’ products or services, which includes ingredients contained in food samples; and
- The results of the testing from the LPH will be presented to the MUI, who will issue a verdict on whether the product or service is classified as Halal.
Businesses will have to wait for implementing regulations from the Ministry of Finance regarding the payment of fees, which the BPJPH says will be dependent on the applicants’ type of products or services, and the type of business. However, the following terms have been defined:
- For micro-businesses, the BPJPH will propose to implement no fees from registration to testing to the issuance of the certificate;
- For medium and large-sized enterprises, the registration fees will range between 100 thousand Rupiah (US$7) and 500 thousand Rupiah (US$35);
- Testing and examination fees will range between 3.5 million Rupiah (US$248) and 4 million Rupiah (US$284), depending on the complexity of the raw materials tested; and
- The certificate issuance will cost medium-sized companies between 150 thousand Rupiah (US$10) and 1.5 million Rupiah (US$106) and between 1.5 million Rupiah (US$106) and 5 million Rupiah (US$355) for large enterprises.
Requirements to apply for foreign Halal certificates
For foreign companies looking to export products that require Halal certification into Indonesia, they first must be Halal-certified by an agency from their own country, and that agency must already be registered with the BPJPH. The full list of international partners is forthcoming; however, the following terms have been defined:
- If the agency is recognized by the BPJPH, foreign businesses can then register with the BPJPH with a list and detailed description of their products along with the Halal certification from the local FHA partner;
- The BPJPH will then issue a registration number that must be placed on all packaging; and
- The product is then ready to be exported to Indonesia.
Requirements for foreign Halal registering agencies
FHAs are any Islamic body that is recognized by their country of origin as the agency that can issue Halal certification.
The BPJPH aims to establish cooperation with FHAs so as to ease the process for foreign companies looking to export their products or services into Indonesia.
As stipulated in Reg 31, 2019, FHAs will first need to register with the BPJPH and provide the following evidence:
- Profile of the FHA, with details of its governing body, directors, address, and contact details;
- Proof of Halal production process;
- A copy of the Halal certificate FHAs issue in their country of origin (the regulation states that this needs to be ratified by the Indonesian embassy of the home country);
- Proof of accreditations such as ISO/SMIIC;
- Evidence of running an accredited laboratory used for Halal testing; and
- List and description of the goods being imported into Indonesia.
Halal Law needs more implementation rules
Given Indonesia’s standing as the country with the largest Muslim population in the world, the introduction of the Halal Law in 2014 was welcomed by many local consumers.
According to the Global Islamic Economy Report 2018/2019, Indonesian Muslims spent US$218 billion across various Islamic economic sectors such as travel, finance, pharmaceuticals and cosmetics, and fashion, making the country a potential to become a global Halal market hub.
From this, more than US$170 billion was spent on Halal food, with many multinational FMCG and F&B companies such as Nestle, Kraft Heinze Unilever, KFC, and McDonald’s already benefiting from having the first-mover advantage – they have all developed substantial Halal propositions in the country.
The government will need to speed up its implementation regulations – they have stated there could be as much as 20 in total – as there continues to be a significant degree of uncertainty among business owners.
The Halal Law, for example, states that business owners must demonstrate the source of their raw materials and that these must also be Halal-certified sources. This poses problems as the food production chain is highly diversified, with many ingredients being sourced from all over the world.
The BPJPH, with only one functioning office in Jakarta, and currently no online platform, is also ill-equipped to manage a large number of applicants.
Additionally, the cost of registration and testing will add to the overall production costs of SMEs, in particular, those in the F&B industry, who are crucial to the economy in terms of employment.
Indonesia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City and Jakarta. Please contact us at email@example.com or visit our website at www.dezshira.com.