T

he Trade Ministry has issued a new rule to curb the importation of alloy steel with a boron content, which has caused serious harm to the local steel industry.

Under the rule signed by the trade minister on Monday, boron-added alloy steel importers should secure recommendations from the Industry Ministry to obtain import permits from the Trade Ministry, which will be effective for two years.

Importers will be divided into two types '€” producer importers, who need the material for their production, and registered importers, who generally resell the commodity to other parties.

This rearrangement of the domestic trade in boron-added steel was in order to create a level playing field for both local and foreign steel producers, Trade Minister Muhammad Lutfi said. '€œThrough this regulation, we'€™ve paid attention to the interests of the domestic steel industry as well as importers,'€ he told The Jakarta Post in a phone interview.

Imports of alloy steel with a boron content started to rise sharply in 2009. The increase coincided with a sharp decline in imports of non-alloy steel. Officially, imports of non-alloy steel, such as rolled coil and cold rolled coil, tumbled by 44 percent in 2010, 40 percent in 2011 and 25 percent in 2012.

However, the ministry suspected non-alloy steel was imported under the category of alloy steel, shipments of which from China, Japan and Taiwan rose steeply in the same period.

A very small content of boron in alloy steel enables importers to place it in the category of alloy steel to enjoy lower import duties, or avoid punitive duties, comprising anti-dumping duties and safeguard duties imposed by Indonesia.

Profile steel with boron content, primarily used in construction, for example, incurs import duties of up to 5 percent, while non-alloy steel which does not contain boron, incurs duties of up to 15 percent.

However, non-alloy steel or carbon steel in the form of hot rolled coil, cold rolled coil and profile steel incur anti-dumping duties of between 5.9 percent and 55.6 percent.

This market distortion has caused the government to suffer losses of up to Rp 145 billion (US$12.81 million) in tax revenues per year.

Major steel makers including Krakatau Steel and Gunung Garuda are expected to benefit from the new rule. Earlier, in its report to the Industry Ministry, Gunung Raja Paksi, a subsidiary of the Gunung Garuda group, said a surge in boron-added steel imports caused it to scale down operations and lay off around 300 workers.

The Industry Ministry'€™s director general for manufacturing-based industry, Harjanto, said that his office would list both producer and registered importers and identify the need for alloy steel with a boron content for each importer. It will also assess the realized imports on an annual basis and can recommend revocations of the licences if they are abused.

'€œBasically we will prevent importers distorting the domestic steel market through excessive imports,'€ he said.

Through the new rule, the government would still facilitate the importation of boron-added alloy steel needed for the local downstream industry, while at the same time proportionately safeguarding the upstream industry through calculated imports, Harjanto added.