Government Grants Exemptions From New L/C Rules to Designated Exporters
The government says it will temporarily exempt exporters that are already bound by contractual obligations from the unpopular requirement to obtain letters of credit from local banks, which came into force on Wednesday.
Speaking on Wednesday, the Trade Ministry’s director general of foreign trade, Diah Maulida, said that mining firms and crude palm oil exporters that satisfied the requirements would now be given up to August 31 to comply with the new rules.
“We will give those who seek a dispensation until August 31, but after that there will be no more dispensations granted,” Diah said in Jakarta.
Exporters have to apply to the ministry to receive a dispensation, Diah said, adding that the application must include a copy of the export contract, sales figures and other documentation.
“There are around 15 companies that have already submitted applications, and these have been granted,” Diah said.
Between now and August 31, the Trade Ministry will conduct a survey of Indonesian exporters, she said.
'We will give those who seek a dispensation until August 31, but after that there will be no more granted'
Diah Maulida, Director General of Foreign Trade
Letters of credit will be required for exporters of palm oil and minerals for individual export transactions worth more than $1 million. In addition, exporters will be barred from receiving payment from foreign customers through overseas bacnk accounts.
The new arrangements are designed to reduce capital outflows and ensure that foreign currency remains in Indonesia. They were initially scheduled to go into effect on March 5, but were delayed until Wednesday.
Exporters have complained that the new requirements will raise costs and discourage overseas buyers from purchasing Indonesian products, partly because they will force buyers to deposit at least partial funds into the domestic banking system in advance, instead of after the buyers receive the goods.
At a meeting with Trade Minister Mari Pangestu a week ago, representatives from fourteen mining and four CPO firms urged the government to delay the implementation of the letter of credit requirements until their existing contracts with buyers ended this year.
Max Ramajaya, the business development manager of CPO producer Wilmar International, said that trade contracts were normally valid for two years.
“We are talking about contractual terms that cannot be changed unilaterally,” he said.
Indonesia Mining Association executive director Priyo Pribadi Soemarno said there were some issues that still needed to be resolved.
Priyo predicted that the value of mining exports this year would fall by between 30 percent and 40 percent to $6 billion from the previous average of more than $10 billion per year. The implementation of the new rules would reduce the value of exports even more, he said.
“Another issue is that most of our exporters are contractually bound to offshore institutions. These usually want exporters to use offshore accounts,” he said.
Speaking on Wednesday, the Trade Ministry’s director general of foreign trade, Diah Maulida, said that mining firms and crude palm oil exporters that satisfied the requirements would now be given up to August 31 to comply with the new rules.
“We will give those who seek a dispensation until August 31, but after that there will be no more dispensations granted,” Diah said in Jakarta.
Exporters have to apply to the ministry to receive a dispensation, Diah said, adding that the application must include a copy of the export contract, sales figures and other documentation.
“There are around 15 companies that have already submitted applications, and these have been granted,” Diah said.
Between now and August 31, the Trade Ministry will conduct a survey of Indonesian exporters, she said.
'We will give those who seek a dispensation until August 31, but after that there will be no more granted'
Diah Maulida, Director General of Foreign Trade
Letters of credit will be required for exporters of palm oil and minerals for individual export transactions worth more than $1 million. In addition, exporters will be barred from receiving payment from foreign customers through overseas bacnk accounts.
The new arrangements are designed to reduce capital outflows and ensure that foreign currency remains in Indonesia. They were initially scheduled to go into effect on March 5, but were delayed until Wednesday.
Exporters have complained that the new requirements will raise costs and discourage overseas buyers from purchasing Indonesian products, partly because they will force buyers to deposit at least partial funds into the domestic banking system in advance, instead of after the buyers receive the goods.
At a meeting with Trade Minister Mari Pangestu a week ago, representatives from fourteen mining and four CPO firms urged the government to delay the implementation of the letter of credit requirements until their existing contracts with buyers ended this year.
Max Ramajaya, the business development manager of CPO producer Wilmar International, said that trade contracts were normally valid for two years.
“We are talking about contractual terms that cannot be changed unilaterally,” he said.
Indonesia Mining Association executive director Priyo Pribadi Soemarno said there were some issues that still needed to be resolved.
Priyo predicted that the value of mining exports this year would fall by between 30 percent and 40 percent to $6 billion from the previous average of more than $10 billion per year. The implementation of the new rules would reduce the value of exports even more, he said.
“Another issue is that most of our exporters are contractually bound to offshore institutions. These usually want exporters to use offshore accounts,” he said.