B&A News Brief – Update on Indonesian Mineral Exports Policy

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On 11 January 2014, the Government of Republic of Indonesia issued two (2) important regulations related to the mining business sector, namely the following:

1. The Government Regulation No. 1 of 2014 on Second Amendment to the Government Regulation No. 23 of 2010 on Mineral and Coal Mining Activities (the “GR No. 1/2014”); and

2. The Minister of Energy and Mineral Resources (“ESDM”) Regulation No. 1 of 2014 on Increasing The Value-Added to Minerals Through Domestic Processing and Refining (the “MR No. 1/2014”). MR No. 1/2014 revoked the Minister of ESDM Regulation No. 7 of 2012 on increasing the Value-Added to Minerals through Domestic Processing and Refining, which was lastly amended by Minister of ESDM Regulation No. 20 of 2013.
The domestic refining requirement of unprocessed minerals or the ban on exports of unprocessed minerals was introduced five years ago by Indonesia’s Law No. 4 of 2009 dated 12 January 2009 on Mineral and Coal Mining. Under the Mining Law, the holders of the mining permits are required to carry out in-country processing and refining to increase the value of certain minerals and coal. It is stipulated that the ban on exports will come into effect within 5 years as of the enactment of the Mining Law, i.e., by 12 January 2014.

The new regulations are an answer to the polemic that has been rampant in the past several years, especially regarding the unprocessed minerals exports ban, which has been criticized by the miners. The new regulations mentioned above are strengthening the government’s move in maintaining their decision to encourage domestic processing and refining of minerals.

MR No. 1/2014 specifically distinguishes the terms “processing” and “refining”.  “Processing” is defined as   activities   related   to   increasing   Value-Added Minerals   or  Rocks  that  produce  products without   different physical and chemical characteristics from its Minerals or Rocks that produce products without original minerals or rocks, i.e. metal mineral concentrate and polished rocks.

While, “refining” is defined as activities related to increasing Value-Added Metal Minerals through extraction and process to increase purity and produce products with different physical and chemical characteristics from its original minerals, i.e. metal and metal alloys.

Increasing the Value-Added of the mining commodities can be conducted through the following processes:

a. Processing and refining for metal minerals;

b. Processing for non-metal minerals; or

c. Processing for rocks.

Relief of Mineral Exports

Pursuant to the Article 11, Article 12 of MR No. 1/2014, exports of certain amounts of metal minerals (i.e., copper, manganese, lead, zinc, iron sand and iron ore), non-metal minerals and rocks would still be allowed until 11 January 2017, after such minerals have been processed and/or refined. Additionally, such exports must also meet the minimum process levels as stipulated in the MR No. 1/2014.

In order to export the said processed metal minerals, the miners must obtain a recommendation from the Directorate General of ESDM, which is a requirement for the application of an export permit to the Minister of Trade.

Other minerals, namely nickel, bauxite, tin, gold, silver, and chromium must be refined before exported.

It is important to take note that as of 12 January 2017, Indonesia will ban all exports of mineral concentrate. By that time, all minerals exported from Indonesia must be fully refined.

 

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For further information, please contact: lawyers@budidjaja.com.

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