Amendment To Regulation Regarding The Obligation To Utilize Indonesian Shipping Company And Insurance Company For Certain Export/Import Activities
Authors: Bama Djokonugroho, Yasser Mandella
Earlier this year, we published an article in connection with the issuance of Minister of Trade Regulation No. 82 of 2017 regarding Provision on Utilization of Sea Transportation and National Insurance for Export and Import of Certain Goods (“MR 82/2017”), which set out the obligation to utilize Indonesian shipping company and insurance company for the export/import of coal, crude palm oil, rice and goods for government procurement as of May 2018.
The issuance of MR 82/2017 has since been followed by intense discussion by relevant stakeholders, both domestic and internationally, which culminated in an agreement between the Indonesian Coordinating Minister of Maritime, Minister of Industrial, and the Director General of International Trade of the Minister of Trade to amend the legislation.
Just last month, the Indonesian Ministry of Trade has finally issued the Minister of Trade Regulation No. 48 of 2018 (“MR 48/2018”) which effectively amended MR 82/2017, and has come into effect on 10 April 2018.
We have set out below the salient points of MR 48/2018, for your ease of understanding:
- Additional option to Procure Insurance from Indonesian Insurance Consortium.
In addition to the Indonesian insurance company, MR 48/2018 provides that any exporter/importer of certain goods as regulated in MR 82/2017 may also procure insurance for their goods from an Indonesian insurance consortium.
This provision is likely to be added to accommodate the suggestion from the Indonesian Financial Service Authority (Otoritas Jasa Keuangan – “OJK”). We understand that during the meeting with the Minister of Trade and several associations related to the industry affected by MR 82/2017, OJK has suggested the insurance industry to establish a consortium to make sure that the national insurance capacity is sufficient to support the implementation of MR 82/2017.
- No more Exemption to Procure Insurance from Foreign Insurance Company
MR 48/2018 deleted the provision which stated that an exporter/importer regulated in MR 82/2017 may still procure insurance from foreign insurance company if the availability of the relevant insurance product from Indonesian insurance company is limited or not available at all.
- Postponement of Effective Date for Implementation of Obligation Under MR 82/2017
The most important amendment in MR 48/2018 is probably the postponement of effective date for both mandatory utilization of vessel controlled by Indonesian shipping company and procurement of insurance from Indonesian insurance company/consortium which was previously set on 31 April 2018. With this postponement, the Ministry of Trade is expecting the Indonesian shipping industry to be ready to meet the demand for export/import of goods as regulated in MR 82/2017 within 2 (two) years.
For mandatory utilization of vessel controlled by Indonesian shipping company, the effective date shall be postponed until 1 May 2020, while for mandatory procurement of insurance from Indonesian insurance company/consortium, the effective date shall be postponed until 1 August 2018.
In conclusion, we noted that although MR 48/2018 has provided significant changes to MR 82/2017, it is also important to points out that several critical issues which have been raised in our previous article remain unanswered, such as the meaning of “vessel controlled by Indonesian shipping company” as provided in Article 5 of MR 82/2017, as well as further elaboration on the designated authority and procedures to determine the availability of vessels that are controlled by an Indonesian shipping company
Additionally, we also noted several concerns from businesses and practitioner of the shipping/coal/crude palm oil industry that have not been addressed by MR 48/2018, among others:
- There is still no clear explanation on the legal status of any ongoing contracts (especially long term contract) that have agreed on utilization of vessel from a foreign shipping company and/or procure insurance from a foreign insurance company for its transport of goods when the provision under MR 82/2017 become effective.
- There is still no clear explanation/guidance on how the Indonesian government will provide legal support to the industry affected by MR 82/2017. In this regard, we understand that Indonesian government is encouraging for export activity to be done in CIF rather than FOB.
In any case, the issuance of MR 48/2018 should be considered as good evidence that the Indonesian government is open for suggestion and willing to listen and accommodate constructive input from the relevant stakeholders. However, considering that there are many issues remains unclear regarding the implementation of MR 82/2017, we are hoping that the government will issue the relevant technical guidance immediately and clarify the above unanswered/unaddressed issues.
In the meantime, the postponement should be regarded as an opportunity for all parties that will be affected by MR 82/2017 to prepare themselves for compliance with the provision of MR 82/2017, particularly for the obligation to utilize vessel controlled by Indonesian shipping company for export of coal/crude palm oil from Indonesia. Nonetheless, even from now, it may be prudent for any businessmen to take into consideration the requirement under MR 82/2017 when entering into a long term contract for export/import of certain goods as regulated in MR 82/2017 to avoid any future problems.