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The Toll Processing Agreement is a specialized commercial contract used when a company needs to outsource the processing of its materials to a third-party processor in Indonesia. This type of agreement is particularly relevant in situations where a company owns raw materials but lacks the necessary facilities, expertise, or permits to process them. The agreement comprehensively addresses all aspects of the processing relationship, including material handling, quality control, regulatory compliance, and risk allocation. It must comply with Indonesian industrial regulations, including Law No. 3 of 2014 on Industry and related regulations governing manufacturing activities. The document typically includes detailed technical specifications, pricing structures, and operational procedures, making it essential for companies engaged in manufacturing, processing, or industrial activities in Indonesia.

1. Parties: Identification of the parties: typically the Processing Company and the Customer

2. Background: Context of the agreement, business relationship, and purpose of the toll processing arrangement

3. Definitions and Interpretation: Definitions of key terms used throughout the agreement and rules of interpretation

4. Scope of Services: Detailed description of processing services to be performed by the processor

5. Supply of Materials: Terms regarding the supply, delivery, and handling of materials by the customer

6. Processing Standards and Quality Requirements: Quality standards, specifications, and requirements for the processing services

7. Title and Risk: Provisions regarding ownership of materials and finished products, and risk allocation

8. Pricing and Payment Terms: Processing fees, payment terms, invoicing, and related financial provisions

9. Delivery and Collection: Terms for delivery of raw materials and collection of processed products

10. Quality Control and Inspection: Procedures for quality control, testing, and inspection of processed materials

11. Warranties and Representations: Warranties regarding processing capabilities, compliance with laws, and quality standards

12. Liability and Indemnification: Allocation of liability and indemnification obligations between parties

13. Insurance: Required insurance coverage for materials, operations, and liability

14. Term and Termination: Duration of agreement and circumstances for termination

15. Confidentiality: Protection of confidential information and trade secrets

16. Force Majeure: Provisions for handling events beyond parties' reasonable control

17. Governing Law and Dispute Resolution: Choice of Indonesian law and dispute resolution mechanisms

18. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment