TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Coal, palm oil exporters object to new shipping rules
Coal and palm oil exporters have expressed their objection to a new regulation that obliges outbound shipment of key commodities to use domestic shipping companies and insurance services
Change Size
C
oal and palm oil exporters have expressed their objection to a new regulation that obliges outbound shipment of key commodities to use domestic shipping companies and insurance services.
Under Trade Ministry Decree No. 82/2017, which will be effective from April 26 next year, exports of coal and palm oil have to utilize transportation and insurance services provided by local firms. The same arrangement applies to rice imports.
The move is intended to increase business opportunities for national shipping companies as well as insurers in addition to reining in the country’s current account deficit, which is blamed mainly on the service sector.
Both the Indonesian Coal Mining Association (APBI) and Indonesian Palm Oil Producers Association (Gapki) say national shipping companies have yet to command broad global networks and therefore charge exporters more than big international firms. They also claim that local insurance services lacked claims coverage.
“Basically, we support the national shipping and insurance industry, but there needs to be further study on the costs and benefits of this regulation. As coal and CPO [crude palm oil] are Indonesia’s two biggest export commodities, if this regulation burdens the businesses, how will it impact the whole economy?” APBI executive director Hendra Sinadia told The Jakarta Post over the weekend.
“If the national shipping companies can guarantee lower fees, it’s fine, but the thing is, this [policy] will change the transaction system between us and the buyers, and that isn’t easy to do,” he added.
The decree also stipulates that exporters who fail to comply with the new decree may have their trade permits suspended or withdrawn.
However, it still allows traders to avail themselves of international services if they can prove and report that the national providers cannot accommodate their needs.
The regulation was issued as a follow-up to a memorandum of understanding on the change of external trade terms from free on board (FOB) to the cost, insurance and freight (CIF) scheme signed by the Trade Ministry, business groups and financial institutions in 2013. Discussions on the issue, however, began back in 2012.
Under the former terms, exporters are required to deliver goods on board a vessel designated by the buyer, who will pay for the shipment and insurance.
By contrast, under the new terms, the selling party alone arranges shipping and insurance services to have goods transported overseas.
Palm oil exporters grouped under Gapki echoed the APBI’s concerns about higher costs caused by the new rules.
“Businesspeople would automatically use national service providers if they could offer us competitive costs,” Gapki board member Fadhil Hasan told the Post.
In response to such objections, Indonesian National Shipowners Association (INSA) chairwoman Carmelita Hartoto said domestic shipping companies and insurance firms were ready to implement the policy. She added that local shipping firms priced their services in line with supply and demand and took into account the 10 percent value-added tax (PPN) for local vessels and the higher price of fuel in Indonesia compared to other countries.
Carmelita said many local vessels were chartered by international traders rather than by local mining firms.
“Actually, after five years [of discussing and formulating the policy], the issue here is not to agree or not agree anymore, or being ready or not, but about all parties’ goodwill in implementing this together,” she said. “As we all know, the main cause of the country’s current account deficit is the high cost of sea transportation,” she said.
Indonesia’s current account deficit rose to US$5 billion in the second quarter of this year, up from only $2.4 billion in the previous quarter.
Trade Ministry’s Foreign Trade Director General Oke Nurwan said the policy took into consideration the costs and benefits for the national economy as a whole.
