ICMA WEBSITES – EDITORIAL (5 AUGUST 2020)
The New Shipping and Insurance Regulation Gives A Sight of Relief for Coal Exporter
The Ministry of Trade (MoT) has just issued the Regulation No. 65 of 2020 on the Amendment of the MoT Regulation No. 40 of 2020 on the Use of National Ship and National Insurance For Export and Import of Certain Commodities. The issuance of the new regulation took coal and CPO exporters by surprise as there had not been any meeting invitations or notifications from the ministry on the revision of the Regulation No. 40 of 2020. The Regulation No. 65 issued barely 4 months after the Regulation No. 40 whereby in the latter regulation the MoT initiated series of meetings involving APBI-ICMA and GAPKI (Crude Palm Oil Industry Association). Despite the minimum involvement of the industry, the newly issued regulation provides a sight of relief for coal and CPO exporters as the requirements to use national ship and insurance are relaxed.
The key provision in the Regulation No. 65 is the requirement for the use of national ship and insurance. Under the new regulation, such requirement will only applicable for export of coal and CPO that using ship/vessels up to 10.000 dry weight ton (DWT). In the previous regulation (Regulation No. 40), export of coal and CPO that utilize ship/vessels up to 15.000 DWT are required to use national ship and national insurance provider. For coal exporters, majority of exports use ships above 15.000 DWT or in this case use bigger vessels like handymax, supramax, panamax, or even cape size. However, some Indonesian coal exporters use ship below 15.000 DWT (barges) to export coal to several neighbouring countries, such as mainly to the Philipines or Malaysia, Myanmar, Singapore, and Vietnam. APBI-ICMA estimates the use of barges accounts of less than 4% of Indonesian coal exports. Therefore the impact of the Regulation No. 40 is relatively low as compared to the previous intention of the MoT which will implement the controversial MoT Regulation No. 82 of 2017 without relaxation.
The issuance of the Regulation No. 65 also provides sight of relief for coal miners as the obligation to use of national insurance providers limited only to export of below 10.000 DWT. Although the monetary impact of the use of insurance is relatively low, but such costs (purchase of insurance premium) are considered as unnecessary costs. Coal exporters purchase insurance from Indonesian insurance provider only to meet the requirement set out under the MoT Regulation No. 82 of 2017 which has been amended three times. In the FOB scheme, the use of ship and insurance provider are the obligation of the buyer or importer. Therefore coal exporters appreciated the initiative from the MOT to revise the Regulation 40 of 2020 which is timely in amidst Pandemic COVID-19 which trigger significant drop in coal demand.