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New Cabotage Rules Could Hurt Indonesia's Coal Ports

New Cabotage Rules Could Hurt Indonesia's Coal Ports
Indonesia's coal producers are concerned that the nation's new cabotage rules will cut down on export volumes at its coal terminals.

The Indonesian Ministry of Trade has issued a regulation requiring certain goods - including coal and crude palm oil - to be exported aboard Indonesian vessels and insured with Indonesian insurers, a measure intended to boost the nation's shipping industry. 

Coastwise cabotage restrictions exist in some form in many large economies, including existing laws in Indonesia. However, a restriction on the flag state of vessels used in international trade is rare, and the Indonesia Coal Mining Association (ICMA) says that foreign commodity traders are getting scared off by the uncertainty surrounding the new regulation. If buyers cannot guarantee that they can secure shipping capacity for their cargoes, they may not be as willing to purchase Indonesian coal, the association warns. ICMA is calling for clear technical guidance on the rules in order to clarify how they will impact trade. 

"What about long-term contracts? Can [the rule] be waived, can [we] still use foreign ships? These technical things are a lot to be arranged," said ICMA director Hendra Sinadia at the Argus Coalindo Indonesia Coal Forum on Thursday. He added that the regulation appears to be contrary to Indonesia's treaty agreements with the WTO, with ASEAN and with individual trading partners. "We ask it to be reviewed first," he said. 

The regulation was enacted on October 31 and is due to enter into force at the end of March. ICMA will be meeting with the Indonesian National Shipowners Association (INSA), the Indonesian Palm Oil Entrepreneurs Association (Gapki) and three government ministries to develop firm guidelines before the regulation takes effect.

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