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Indonesian Insurance Mandatory for Some Cargoes

Following a series of postponements in 2018 (see our web news of 15/02/18, 27/02/18 and 09/04/18), the Indonesian government confirmed
implementation of an amended version of Regulation 82/2017, starting with
Article 4 which first came into force on a trial basis 1-28 February 2019.  This trial period has now been extended up to
the end of this month (March 2019).

Article 4 of Regulation 82/2017 stipulates that all coal and crude palm
oil exports, and all imported rice and government procurement goods, must be
insured by Indonesian companies which have registered with the Indonesian
Ministry of Trade.

During the trial period, port authorities are checking with exporters
and vessels that their cargoes are insured by Indonesian companies, but no
penalties are being applied.

The Indonesian press has reported that these checks have resulted in
delays for coal exports, but Budd Indonesia advises that their local contacts
saw no evidence of marked delays in the Samarinda and Benjarmasin areas.

The government’s aim is to foster the Indonesian insurance and shipping
sectors and allow local exporters to choose which company insures their
cargoes.  Traditionally FOB (Free on
Board) contracts under which the cargo buyer purchases the insurance, have been
preferred to CIF (Cost, Insurance and Freight) contracts under which insurance
is the responsibility of the shipper. 

The second important provision of Regulation 82/2017 is Article 5 which
makes it mandatory to use Indonesian vessels for the carriage of all coal and
crude palm oil exports, as well as all imported rice and government procurement
goods.

Article 5 is now due to come into effect on 1 May 2020 despite the fact that at present, Indonesia’s domestic fleet only has the capacity to carry about 4 million
of the 30-35 million tons of coal exported every month.

Questions also remain about the enforceability of both the above articles
of Regulation 82/2017 and there are concerns that the closed markets may have a
negative effect on trade.

 

Information provided by Budd Indonesia
budd.indonesia@budd-pni.com

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