Indonesia has delayed a requirement for miners and traders to use national insurance companies for coal exports as the new regulation has caused uncertainties, officials said over the weekend.
Last year, the country’s Trade Ministry introduced a regulation which requires companies to use national vessels and insurance companies for exports of coal and palm oil as well as imports of rice. The rule had initially slated to kick off in May this year, but the government decided to delay it.
Under the revised rule issued in Apr’18, the companies were given mandate to use foreign vessels until May 2020, while it gave 3 month transition period to use national insurance companies.
But in a meeting between the Trade Ministry and the Indonesian Coal Mining Association earlier this week, the government has decided to delay the requirement to February 2019, from August this year, as companies were unprepared to comply with the rule, Hendra Sinadia, executive director at the Indonesian Coal Mining Association told CoalMint.
Most Indonesian coal cargoes are shipped on a free-on-board (FoB) basis, which means buyers bear the cost of insurance, Sinadia said.
“Most overseas buyers have had long-term contracts with their preferred insurance companies while the government wanted to impose the rule in three months,” Sinadia said. “Of course, it has caused confusion because buyers can’t change their insurance companies fast because they’re not familiar with Indonesian insurance companies.”
Oke Nurwan, director general of foreign trade at the Trade Ministry, confirmed to CoalMint that the government has decided to postpone the mandatory use of national insurance companies for coal exports but didn’t give further details.
In addition, Indonesia’s Financial Security Authority has only released list of domestic insurance companies which can handle insurance for coal shipments, Sinadia said.
The formal revision of the regulation will still need to be formally signed by Trade Minister Enggartiasto Lukita. It may be signed next week waiting for Minister Lukita to return from a trip to the United States.
Indonesia has said the regulation aims at expanding the country’s domestic shipping and insurance sectors.
As for the requirement to use national vessels, the rule is unchanged. It will be applied starting May 2020.
According to preliminary data compiled by ICMA, domestic carriers are able to ship 4.6 MnT per month using 139 vessels, which is a fraction of Indonesia’s monthly coal exports of between 30-35 MnT.
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