The Indonesia government has decided to extend a trial period for implementing a rule to use local insurers for coal exports for another three months.
As previously reported, Indonesia’s government decided to went ahead with a plan of requiring companies to use national insurance firms for coal and palm oil exports by 1 Feb’19 after postponing the implementation of the rule for nearly six months. For a start, the government applied a month-long trial period in February.
According to a copy of a Trade Ministry’s letter obtained by CoalMint, the trial period for implementing the rule, which ran from Feb. 1-28, will be extended to May 31.
Signed by the Director General of Foreign Trade, Oke Nurwan, the trial period is extended because “the exporters and/or buyers in the destination countries require time to adjust and comply with the policy.”
The ministry added some countries also have similar policies applied for the government’s procurement of goods, which will need time to negotiate it. During the said trial period, “no sanctions shall be applied,” the ministry said.
In 2017, Indonesia’s Trade Ministry introduced the regulation, which requires companies to use national vessels and domestic insurance companies for exports of coal and palm oil as well as for imports of rice.
Initially, the rule was set to be applied in May 2018. Later on, the government decided to allow companies to use foreign vessels until May 2020 and postponed the rule to use national insurance until February 2019.
Miners had been voicing concerns that the regulation may further disrupt coal exports amid slowing demand from China. Most Indonesian coal cargoes are exported on free-on-board basis, which means the responsibility to lease the vessel and to find insurance companies are in the hands of the buyers.
By requiring Indonesian miners to use domestic insurers, they must negotiate with buyers to change the contract into CIF basis.
Extending the trial period is the right decision as it will give time to inform and convince buyers to use the Indonesian insurers, said Hendra Sinadia, the executive director of the Indonesian Coal Mining Association (ICMA) as quoted by Kontan newspaper on 3 Mar’19.
“In FOB, it’s the responsibility of the importers to get insurance. It can’t be forced. It needs time to convince importers to use the national insurance,” said Sinadia as cited by the paper, adding that miners asked the government to also help talking to importers into using Indonesian insurers.
Sinadia claimed in the past month during the trial period, the government had been actively in communication with major importers of Indonesian coal, including Japan and South Korea.
To avoid disruption on shipment, some companies use both Indonesian and foreign insurers, while only a handful buyers are willing to consider using Indonesian insurers for shipments, he said in the newspaper.
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