Despite a bilateral trade agreement with Japan, the government has not reduced its import duties on certain Japanese cars.
The Japanese government plans to bring up the issue during a ministerial meeting of the Asia Pacific Economic Cooperation ( APEC ) forum in Surabaya, East Java this weekend.
Quoting a report on Nikkei, Reuters said that, as per the agreement, Indonesia was required to reduce tariffs to 20 percent from January on Japanese cars with an engine capacity of between 1.5 liters and 3 liters. However, a 28.1 percent tariff is still in effect.
If the tariffs are not reduced, Japan may file a complaint with the World Trade Organization, the Japanese business newspaper said.
Responding to the report, an Indonesian official has declared that the tariffs in place comply with the bilateral agreement.
The government formally consulted Japanese officials at the Ministry's Economy, Trade, Industry and Foreign Affairs on the amount of duties before they were issued, a Finance Ministry official said on Thursday.
'We agreed on the amount of duty through intensive talks with Japanese officials before issuing the regulation that detailed the provision,' the official, who wants to remain anonymous, told The Jakarta Post on Thursday.
Indonesia offered two schemes of tariff reduction.
The first scheme would lower the tariff to 20 percent on cars with an engine capacity between 1.8 liters and 3 liters this year, and then down to 5 percent gradually over a few years.
The second scheme meant a reduction to 28.1 percent this year, which will gradually decline to zero percent within a few years.
'Our Japanese counterpart picked the second scheme that will finally result in zero percent duty over the designated period,' the official said.
The duty reduction is part of the Indonesia-Japan Economic Partnership ( IJ-EPA ) implemented in 2008.
The import duties are significant to the Japanese automotive industry as Indonesia buys high-tech automotive parts, heavy equipment and machinery from Japan and has for decades been one of the top destinations for Japanese vehicles such as Toyota, Daihatsu, Suzuki and Honda.