Implementing Regulation Regarding Obligation To Procure Insurance From Indonesian Insurance Provider For Certain Export/Import Activities
Author: Juni Dani, Bama Djokonugroho, Steffany Oktaria Simorangkir, Yasser Mandela
Later this week, the mandatory procurement of insurance from an Indonesian insurance company and/or Indonesian insurance consortium (“Insurance Provider”) for the export/import of coal, crude palm oil, rice and goods for government procurement will become effective.
To be precise, from 1 February 2019 onwards, the following exporters/importers must procure insurance from an Insurance Provider:
- Exporter of coal (HS Code 27.01, 27.02, 27.03, 27.04, 27.05, 27.06, 27.07 and 27.08) and/or Crude Palm Oil (HS Code 1511.10.00);
- Importer of rice (HS Code 10.06); and
- Importer of goods for government procurement.
After a long and intense discussion by relevant stakeholders, following 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”) on October 2017, which led to the Indonesian government’s issuance of two regulations to amend MR 82/2017 on April 2018 and July 2018, respectively, the Directorate General of International Trade at the Indonesian Ministry of Trade (“DGIT”) finally issued the long awaited implementing regulation for the mandatory procurement of insurance with the enactment of Regulation No. 02/DAGLU/PER/1/2019 (“DGIT 2/2019”).
Here below we listed the salient features of DGIT 2/2019, for your ease of reference:
- Mandatory Procurement of Insurance
DGIT 2/2019 defines mandatory insurance as Marine Cargo Insurance.
We understand currently there are at least 66 (sixty-six) marine cargo insurance products in Indonesia. However, DGIT 2/2019 provides that the exporter/importer can only procure insurance from an Insurance Provider that is listed/registered at the Ministry of Trade.
An Insurance Provider intending to register at the Ministry of Trade is required to submit a written application to the DGIT with the following attachments:
- Copy of business license from Financial Services Authority/Otoritas Jasa Keuangan (“OJK”);
- Copy of permit to distribute marine cargo insurance from OJK;
- Copy of document evidencing minimum authorized capital of IDR 100,000,000,000 (one hundred billion Rupiah);
- Copy of document evidencing minimum equity value of IDR 500,000,000,000 (five hundred billion Rupiah);
- Statement Letter regarding address of branches or representatives in Indonesia or export center of certain goods;
- Statement Letter regarding address of claim agent at the export destination country and/or at the country with insurance service business relations with the export destination country;
- Letter of undertaking to establish/build a system in connection with the Integrated Trading System of the Ministry of Trade (“INATRADE”) via web services; and
- Statement Letter citing that the related Insurance Provider is not sanctioned with limitation of business activity from the OJK.
The copy of documents (listed a-f above) must be endorsed/legalized by a relevant official at the OJK. In this regard, we understand the OJK will provide support in implementing DGIT 2/2019; and the OJK has given proper socialization to relevant stakeholders on procedures to obtain such endorsement/legalization of documents required by DGIT 2/2019 for registration to the Ministry of Trade.
Upon the receipt of the above application for registration, the DGIT will issue an approval of registration within 3 (three) business days after the application is properly received by the DGIT.
- Insurance Policy
DGIT 2/2019 stipulates that the relevant exporter/importer must submit an application (to procure an insurance policy) to the registered Insurance Provider before loading of goods.
The Indonesian Provider must submit data/information electronically pertaining to insurance policy, cover note, reference number or insurance certificate via web services connected to INATRADE within 1 (one) day after the insurance policy, cover note, reference number or insurance certificate is approved.
In the event the Insurance Provider is yet to be able to submit the abovementioned data/information via INATRADE, the Insurance Provider may submit such data/information manually to the exporter and/or importer to be subsequently submitted to a surveyor. However, such manual submission shall only be applicable within 6 (six) months from the enactment of DGIT 2/2019.
Previously, the latest amendment of MR 82/2017 added a provision regarding mandatory verification or technical examination prior to loading of goods, by a surveyor appointed by:
- Minister of Trade for export/import of coal, rice and/or goods for government procurement; or
- President Director of Indonesian CPO Fund Agency/Badan Pengelolaan Dana Perkebunan Kepala Sawit.
As for the obligation to procure insurance, the regulation stipulated the verification or technical examination shall consist of an administrative examination covering data of utilization of insurance from an Insurance Provider.
In this regard, DGIT 2/2019 provides that such administrative examination shall be conducted by the surveyor by examining the data, as provided in the INATRADE. The surveyor will issue a survey report based on such administrative examination.
In conclusion, it seems that the issuance of DGIT 2/2019 is intended to cover/answer concerns from relevant stakeholders regarding the readiness of implementing system/regulation for the performance of provisions as stipulated in MR 82/2017. This also shows evidence to the Indonesian government determination to the mandatory requirement, as set out in MR 82/2017, which shall be implemented as per schedule.
On that note, while the mandatory utilization of a vessel controlled by an Indonesian shipping company will not be effective until 1 May 2020, it may be prudent for any relevant businessman to take into consideration the requirements under MR 82/2017 when entering into a contract for export/import of certain goods, as regulated in MR 82/2017.