Ministry of Trade left out auto-parts tariff cuts decision

Zakki P. Hakim, The Jakarta Post, Jakarta

The government's move to cut import duties on parts for public transportation vehicles after the fuel price hike apparently left out the Ministry of Trade in the decision-making process.

The move also apparently contradicts the country's commitment to the ASEAN Free Trade Area (AFTA) and the preferential agreement between the regional grouping and China.

"Honestly, we were not involved (in the decision-making). It was decided by the Ministry of Industry and Ministry of Transportation," Minister of Trade Mari E. Pangestu said on Thursday.

The industry and transportation ministries were now finding it difficult to appoint official importers for the parts and new buses.

Procedure-wise, the trade ministry is the institution responsible for exports and imports and is authorized to appoint certain exporters and importers for most limited trade.

Mari said she had received reports from all parties and would follow them up to find ways to solve the problems.

In mid-March, Minister of Industry Andung A. Nitimihardja announced the move to the annoyance of local manufacturers, who said the decision could hamper the country's automotive and component sectors.

Ahmad Safiun, chairman of the Federation of Indonesian Metal and Machine Industry Associations (GAMMA), said the government could have instead encouraged parts importers to avail themselves of an existing import tax facility provided under the AFTA.

The facility, known as the Common Effective Preferential Tariff (CEPT) scheme, allows members of ASEAN to import goods, including automotive parts, from fellow members with import duties of between zero and 5 percent.

However, the government said the import duty cuts were needed as the imports were expected to come from China, and would thus be outside the CEPT scheme.

However, most of the products that had had their import duties slashed were actually protected under the ASEAN-China Free Trade Agreement.

Many were on the "highly sensitive" and "sensitive" lists which would not be liberalized until 2015 and 2012, respectively. Highly sensitive products could still be protected with a maximum import duty of 50 percent until 2015, while sensitive products with a 20 percent tarrif until 2012.

The government has cut import duties on clutch assemblies, timing belts, wheel bearings, transmission assemblies and engine blocks for public transportation vehicles to zero from a previous range of between 0 and 15 percent.

Chassis fitted with engines for buses have had their import duty cut to 5 percent from 40 percent, while complete commercial vehicles have had their import taxes cut to 5 percent from 25 percent.

Of these vehicles, the government has slashed import duties on buses to 5 percent from 40 percent. But import quotas remain restricted to 1,150 units.