Obligation to Utilize Indonesian Shipping Company and Insurance Company for Export/Import of Coal, Crude Palm Oil, Rice and Goods for Government Procurement
Authors: Bama Djokonugroho, Yasser Mandela
In late 2017, the Indonesian Ministry of Trade issued Minister of Trade Regulation No. 82 of 2017 regarding Provision on Utilization of Indonesian Sea Transportation and Insurance for Export and Import of Certain Goods (“MR 82/2017”). MR 82/2017 was enacted on 31 October 2017, and will come into effect six (6) months after its enactment, i.e. 31 April 2018.
MR 82/2017 has been long awaited by Indonesian shipping companies and insurance companies due to its expected significant impact to the sea transportation business. In essence, MR 82/2017 provides that the following exporter/importer must utilize vessels that are controlled by an Indonesian shipping company and procure insurance from an Indonesian insurance company:
1. Exporter intending to export 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);
2. Importer intending to import rice (HS Code 10.06); and
3. Importer intending to import goods for government procurement.
Article 1 point 5 of MR 82/2017 defines an Indonesian shipping company as a shipping company that is established under Indonesian law, which conducts sea transport activities within Indonesian waters and/or (sea transport) from and to a foreign port. This definition is in line with the definition of an Indonesian shipping company in Government Regulation No. 20 of 2010 regarding Water Transportation.
Moreover, Article 1 point 6 of MR 82/2017 defines an Insurance Company as an insurance company, sharia insurance company, reinsurance company, sharia reinsurance company, insurance broker company, reinsurance broker company, and loss adjuster company. This definition is in line with the definition of an insurance company in Law No. 40 of 2014 regarding Insurance.
An exporter/importer that fails to comply with the above obligation may be imposed with qntlistrative sanctions in the form of suspension of permit or revocation of the permit.
Article 5 of MR 82/2017 provides that an exporter/importer may still use a vessel that is controlled by a foreign shipping company and/or procures insurance from a foreign insurance company, only if availability of the vessel that is controlled by an Indonesian shipping company and/or an Indonesian insurance company is limited or unavailable.
It is worth to note that MR 82/2017 does not provide further details on procedures to determine the availability of a vessel that is controlled by foreign shipping companies and/or the insurance from an Indonesian insurance company. Based on our recent discussion with our contact at the Ministry of Trade, we understand such details are still unclear and may be provided in technical guidance for the implementation of MR 82/2017, which will be issued by the Director General of International Trade at the Ministry of Trade.
Report of Performance of Obligation
MR 82/2017 further requires any exporter/importer of relevant goods, as mentioned above, to submit a report for the utilization of ship controlled by an Indonesian shipping company and procurement of insurance from an Indonesian insurance company to the Director General of International Trade through http://inatrade.kemendag.go.id. The report for of activity in the current month shall be submitted by the 15th day of the following month.
An exporter/importer that fails to submit the above report may be imposed with qntlistrative sanctions in the form of warning letters, suspension of permit or revocation of permit.
The issuance of MR 82/2017 is in line with the current government qntlistration’s spirit to boost/support the performance of Indonesian companies. However, we noted there are several things that need to be clarified from MR 82/2017 in order to avoid confusion and ensure proper implementation of the regulation, among others:
1. MR 82/2017 does not provide a clear explanation of the meaning of “vessel controlled by Indonesian shipping company.” Based on our consultation with the Ministry of Trade, we understand the wording may indicate that the related vessel does not necessarily need to be owned by an Indonesian shipping company and can be a chartered vessel. However, it still remains unclear whether such vessel must be chartered with a bareboat charter or it can apply to a vessel chartered with all types of charter parties (e.g. time charter).
Additionally, MR 82/2017 also does not stipulate whether such controlled vessel must be an Indonesian flagged vessel and/or manned by Indonesian crews.
2. MR 82/2017 also does not provide a clear explanation on the designated authority and procedure to determine the availability of vessel that is controlled by an Indonesian shipping company, as well as insurance by an Indonesian insurance company. Consequently, it is still unclear what kind of situation that can be considered as “limited or unavailable” under Article 5 of MR 82/2017.
For example: Is it possible for an exporter/importer to exercise the exemption and use a vessel that is controlled by foreign shipping companies and/or procures insurance from a foreign insurance company by arguing that the availability of vessel/insurance in a particular price range or specification is limited or unavailable?
In any case, we understand the Director General of International Trade is currently preparing relevant technical guidance, which is expected to be issued prior to the effective date of MR 82/2017. We hope the technical guidance will shed some lights and further clarify the details related to these new obligations, particularly the key items set out above.