We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
11 May 2015
On January 5 2015 the minister of trade issued Ministerial Regulation 4/2015, which came into effect on April 1 2015.
Regulation 4/2015 applies to the export of the following prescribed products:
Regulation 4/2015 requires Indonesian exporters of these products to obtain a letter of credit from their product buyer for an amount equal to the value of the products sold before their export. The letter of credit must be received by an Indonesian foreign exchange bank. The prescribed products cannot be exported without a letter of credit in compliance with the regulation.
The minister will appoint surveyors to confirm that a letter of credit has been received by the Indonesian exporter for the value of the prescribed products sold for the equivalent of (or greater than) the 'world price' for the prescribed product. The surveyor will issue a report which is to be provided to certain government agencies, including Bank Indonesia and the Ministry of Finance (but not the director general of tax). The prescribed products cannot be exported without the surveyor's report.
Exporters that do not comply with Regulation 4/2015 may be subject to penalties. The penalties are not specified in Regulation 4/2015, but ongoing violations may ultimately result in the suspension or revocation of export and production licences.
Regulation 4/2015 is subject to further implementing regulations (which have not yet been issued).
The minister of trade issued a similar regulation in 2009 (although the range of prescribed products included more agricultural commodities and fewer minerals, and did not include oil and gas). The minister of trade revoked the regulation in 2010, stating that at that time, Indonesia's foreign exchange reserves had improved and the regulation was no longer required.
The stated purpose of Regulation 4/2015 is to "optimize and accurately record foreign exchange derived from exports while maintaining the stability and improvement of prices of exports".
Regulation 4/2015 includes no transitional provisions, so it appears that actual export deliveries of prescribed products after April 1 2015 will need to comply with the regulation, even though the sales may be subject to a long-term sales contract entered into before the enactment of the regulation.
Similarly, Regulation 4/2015 requires the letter of credit to be issued for at least the "world price" of the prescribed product, but does not define the term 'world price'. One of the major export products subject to Regulation 4/2015 is coal and the government has its own 'Indonesian benchmark price' for coal on which royalty is to be calculated and paid. However, it appears that the pricing for coal for the purposes of Regulation 4/2015 is the world price and not the Indonesian benchmark price.
Regulation 4/2015 also does not recognise that there may be many valid reasons for an exporter to sell a prescribed product at less than the world price – for example, if a buyer makes advance payments to an exporter or commits to a long-term supply contract with an exporter.
For further information on this topic please contact Philip Payne at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (firstname.lastname@example.org). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.