New levy a new burden for CPO producers

JAKARTA (JP): Crude palm oil (CPO) producers are claiming the government's plan to impose a redeemable levy on the interisland shipment of CPO and its by-products will cause them a heavy financial burden.

They said Saturday the new measure would take a big bite out of their cash flows, since they would have to set aside a large sum of money before they could deliver their shipments.

Smaller companies which ship CPO products in large volumes to other islands may find it hard to come up with the money required, and may have to seek loans in order to raise the security deposit, they said.

This will be costly to them since interest rates have shot up to more than 50 percent.

They said the measure would also add administrative burdens to the interisland trade of the commodity.

The government announced last week that the interisland shipment of CPO and its derivatives, oil fuel, fertilizer, garlic, cigarettes, rattan, and logs would be taxed to prevent the commodities from being smuggled out of the country.

The levy rates have not been fixed but analysts estimate they will be equal to the export taxes to be imposed on the commodities.

All companies shipping the commodities will have to put a security deposit equivalent to the products' export taxes in a bank.

Procedures

The Directorate General of Customs and Excise will be entitled to the deposit until the companies can produce proof that their shipments have been delivered to the local destination. The firms will then be entitled to reclaim the money.

There have been indications that these commodities, especially palm oil products, are being smuggled out of the country to Hong Kong, Malaysia and Singapore to avoid the export taxes imposed by the government April 22 following the removal of the export ban.

Export taxes for CPO and its derivatives range between 15 percent and 40 percent.

CPO producer Navis Daulay said over the weekend, the new system could also create an administrative burden for palm oil producers.

The system would mean lengthy bureaucratic procedures in domestic trading, Navis, the chairman of the Association of Edible Oils Industries, said.

The Director General of International Trade at the Ministry of Trade and Industry, Djoko Moeljono, said Friday the procedures to obtain the deposit once the companies showed their proof of delivery could be completed within three days at the most.

But Navis said the new system could encourage more collusion practices among the customs and excise officials overseeing the shipment levy.

"If we have to deposit money with them (the customs and excise directorate general), who knows if we will get back the whole amount in the end," Navis told The Jakarta Post in a telephone interview.

Traders are also worried that officials will make companies pay extra fees to speed up the process.

Navis suggested the government cancels the new system and instead improves the inspection of delivery shipments.

The government should use its auditing company, PT Sucofindo, to fully inspect all shipments from the ports where the commodities are embarked to the ports where they are unloaded, he said.

Those found to have smuggled the products must be punished, he said. (das)