The Factory Agreement serves as a fundamental document for establishing manufacturing operations in Indonesia, governed by Indonesian law and regulations. This agreement is essential when setting up production facilities, whether as a new operation or restructuring existing facilities, and is particularly relevant for both domestic and foreign investments in Indonesia's manufacturing sector. The Factory Agreement needs to comply with Law No. 3 of 2014 on Industry, labor regulations, and environmental requirements, while addressing operational specifics such as production capacity, quality standards, and facility management. It's commonly used when establishing manufacturing partnerships, setting up production facilities in industrial estates, or formalizing manufacturing arrangements between parties. The document typically includes comprehensive provisions for operational requirements, regulatory compliance, risk allocation, and dispute resolution mechanisms specific to the Indonesian legal context.
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1. Parties: Identification of the contracting parties, including their legal status and authority to enter into the agreement
2. Background: Context of the agreement, including brief description of the parties' business and purpose of the factory arrangement
3. Definitions: Definitions of key terms used throughout the agreement
4. Scope of Agreement: Detailed description of the manufacturing operations, products, and services covered
5. Term and Renewal: Duration of the agreement and conditions for renewal
6. Factory Premises: Details of the factory location, facilities, and access rights
7. Production Requirements: Specifications for production capacity, processes, and quality standards
8. Compliance and Permits: Requirements for regulatory compliance, licenses, and permits under Indonesian law
9. Quality Control: Quality assurance procedures, inspections, and acceptance criteria
10. Labor and Employment: Requirements related to workforce management and compliance with Indonesian labor laws
11. Health, Safety and Environment: Standards and procedures for workplace safety and environmental protection
12. Representations and Warranties: Basic warranties regarding legal capacity, authority, and operational capabilities
13. Liability and Indemnification: Allocation of risks and responsibilities between parties
14. Insurance: Required insurance coverage for operations and assets
15. Confidentiality: Protection of confidential information and trade secrets
16. Force Majeure: Provisions for unforeseen circumstances affecting performance
17. Termination: Grounds and procedures for agreement termination
18. Dispute Resolution: Procedures for resolving disputes, including jurisdiction and governing law
19. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment
1. Technology Transfer: Required when the agreement involves transfer of manufacturing technology or know-how
2. Foreign Investment Provisions: Necessary when involving foreign investors, addressing specific requirements under Indonesian investment law
3. Equipment Supply: Used when one party is responsible for providing manufacturing equipment
4. Raw Materials Supply: Include when addressing procurement and supply of raw materials
5. Intellectual Property Rights: Required when manufacturing involves licensed IP or creates new IP
6. Training and Technical Support: Include when one party must provide operational training or ongoing technical support
7. Export Requirements: Necessary when products are intended for export markets
8. Local Content Requirements: Include when subject to Indonesian local content regulations
9. Exclusive Manufacturing Rights: Used when granting exclusive manufacturing rights for specific products or territories
1. Product Specifications: Detailed technical specifications of products to be manufactured
2. Quality Standards and Testing Procedures: Specific quality control requirements and testing methodologies
3. Production Capacity and Targets: Agreed production volumes and scheduling requirements
4. Pricing and Payment Terms: Detailed pricing structure, payment schedules, and financial terms
5. Equipment List: Inventory of manufacturing equipment and maintenance requirements
6. Key Performance Indicators: Metrics for measuring operational performance
7. Compliance Checklist: List of required permits, licenses, and compliance requirements
8. Site Layout and Specifications: Factory layout plans and facility specifications
9. Standard Operating Procedures: Detailed operational procedures and protocols
10. Environmental Management Plan: Environmental compliance and waste management procedures
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