Ministry of Trade left out auto-parts tariff cuts decision

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.