Efforts by Indonesian president Joko Widodo to shutter illegal ports may be just the first step in shutting down the country’s ports to counterfeit goods.

Indonesia’s geography contributes to the difficulty of enforcing intellectual property (IP) rights, say lawyers who work with trademark and patent rights. While there is some domestic production of counterfeits in Indonesia, high-tech counterfeit goods typically arrive in Indonesia from China through one of the country’s 114 official ports of entry – or, just as likely, one of the hundreds of illegal entry points dotting the more than 17,000 islands of Indonesia.

“We have 17,000 islands and 250 million people. Customs is simply not as strong as we might like,” says Endra Prabawa, a partner at law firm Roosdiono & Partners in Jakarta. “It’s relatively easy to enter Indonesia unofficially, which makes it easy to import counterfeit goods. Customs can’t guard all the islands,” he says.

Once the goods have entered the country, there are few controls on their domestic movement, and there is ample demand. “The demand for counterfeits remains high,” Prabawa says. “Many Indonesian people cannot afford to buy original goods. Even in shopping malls you can find counterfeits.”

Nick Redfearn, the Jakarta-based deputy CEO of law firm Rouse, wrote earlier this year in the firm’s newsletter about Batam, an island some 10 km southeast of Singapore which is part of the Indonesian archipelago.

“Recent news and industry discussions have begun to highlight Batam’s role in counterfeit goods shipment, which appears frequently connected with Singapore.” Redfearn writes. “The Indonesian government, based far away in Jakarta, recently identified approximately 44 illegal entry points in Batam in 2016 – that is, entry points for shipments which don’t pass through customs.”

Customs officials, he says, found 36 examples of a variety of illicit goods, including counterfeits, in February 2016 via operations at the airport, seaports, and in the local market. Officials have observed that imported goods frequently do not pay tariffs or taxes when entering Batam on passenger ships.

“The goods are then transported to Jakarta and other ports in Indonesia, suggesting a large passenger hand-carried goods smuggling problem, too,” Redfearn says. “Customs officials have a hard time controlling this with limited manpower. They often face physical resistance, especially, they say, from women who bring these goods in with the help of porters. Newspapers unsurprisingly report widespread bribery to keep this illegal practice under wraps.”

Redfearn says that in a recent Singapore court case, a seizure in Singapore of transhipped luxury goods from Shenzhen bound for Batam for processing and re-export suggests Batam is being used by Singapore shippers as a route for fake goods.

“Singapore is already widely known as the largest transhipment port in the world, and the general suspicion is that Batam plays a role in counterfeiting transhipment, too,” he writes. “Many Singapore trading and shipping companies are based there, presumably because of the lower risks involved in shipping via Indonesia.”

Indonesian customs officers who work at the ports need additional law enforcement powers, says Yulianto Nurmansyah, managing partner at law firm Nurmansyah Advocates. “[Indonesian] law gives customs authorities some powers, but those powers are not as strong as they should be. For example, Indonesian Customs can only detain goods suspected of being infringing goods for a short period of time. If the goods are infringing goods, they must be given to the police. Other countries allow their customs authorities to seize, detain and destroy those goods.”

The problem with this method, he says, is that in other countries, IP owners only have to work with customs authorities to handle the seizure and destruction of the infringing goods, whereas in Indonesia, they have to wait until the goods are released to police forces, and then deal with local authorities in Indonesia’s 34 provinces.

“They have to spend a lot of money to put together raids in different areas, rather than simply dealing with customs authorities,” he says. “It costs a lot for IP owners to do IP enforcement in Indonesia. If Customs could seize and destroy the goods at the point of entry, it would be better.”

By Gregory Glass

Asia Cargo News | Jakarta