Toll Manufacturing Agreement Template for Indonesia

A Toll Manufacturing Agreement is a specialized contract that allows you to outsource your production operations to a third-party manufacturer in Indonesia while retaining ownership of your products, materials, and intellectual property. Under this arrangement, you provide the raw materials and specifications, while the toll manufacturer uses their facilities, equipment, and expertise to produce your goods according to your exact requirements.

When do you need this document?

You need a Toll Manufacturing Agreement when you want to manufacture products in Indonesia but lack the necessary production facilities or expertise. This arrangement is particularly valuable for companies entering the Indonesian market, scaling production without capital investment, or accessing specialized manufacturing capabilities. The agreement is commonly used in pharmaceuticals, food and beverage, chemicals, textiles, and electronics industries where specific technical knowledge or equipment is required. You also need this document when seeking to comply with local content requirements or when your business model focuses on product development and marketing rather than manufacturing operations.

Key legal considerations

Your agreement must address several critical legal aspects to protect your interests. Quality control provisions should establish your right to inspect facilities, audit processes, and reject non-conforming products. Intellectual property clauses must protect your trade secrets, formulations, and proprietary processes from unauthorized use or disclosure. The contract should clearly define liability allocation for product defects, environmental compliance, and workplace safety incidents. Payment terms, including pricing mechanisms and adjustment clauses, must be precisely specified. Additionally, include termination provisions that protect your ability to retrieve materials, equipment, and confidential information upon contract expiration or breach.

Legal requirements in Indonesia

Your Toll Manufacturing Agreement must comply with Indonesian industrial and investment regulations. Under Law No. 3 of 2014 on Industry, the toll manufacturer must possess appropriate industrial business licenses and comply with national industrial standards. Government Regulation No. 107 of 2015 governs manufacturing license requirements that your contractor must maintain. Environmental compliance under Law No. 32 of 2009 requires adherence to waste management and environmental impact assessment requirements. Labor law compliance under Law No. 13 of 2003 ensures proper working conditions and worker rights protection. If foreign investment is involved, Law No. 25 of 2007 on Investment applies, potentially requiring specific ownership structures or local partnership arrangements. Corporate governance requirements under Law No. 40 of 2007 may also apply depending on the parties' corporate structures.