Indonesia - Trade BarriersIndonesia - Trade Barriers
In accordance with the WTO Agreement on Agriculture, Indonesia agreed to eliminate non-tariff barriers on agricultural products and replace them with tariffs, but many barriers still remain. In the agricultural sector, 1,341 tariff lines have bindings at or above 40 percent, including the most sensitive and heavily protected sectors.
Domestic agricultural interests pressure the GOI for protection from international competition. Since December 2007, rice imports have been subject to a specific tariff of Rp450 per kilogram. Local agricultural interests also have lobbied the government to increase bound tariff rates on sensitive agricultural products, such as sugar and soybeans. In the case of soybeans, the tariff was increased to five percent in 2013, but this was dropped within a few months following supply shortages and increased prices. Though soybean import tariffs remain at zero, the Ministry of Agriculture has issued a draft regulation that would ban imports during local harvests and potentially increase the import tariff to 19 percent.
There are large differences in how regulations are written and applied. Domestic interests often take advantage of the non-transparency of the legal and judicial systems to undermine regulations to the detriment of foreign parties. New laws on regional autonomy and fiscal decentralization have granted significant powers to provincial and sub-provincial governments. The potential exists that local governments will impose tax or non-tax barriers on inter-regional trade as they seek new sources of local revenue.
The National Food Logistics Agency’s (BULOG) main duties are procuring domestic husked paddy rice during the harvest period at the Government Purchasing Price (HPP= Harga Pembelian Pemerintah). BULOG distributes rice during emergencies, natural disasters, and manages government rice reserves as well as managing a distribution benefit program for low-income citizens. BULOG can also import rice to meet the government rice reserve secure level and to maintain price stability if domestic rice production does not meet demand. BULOG continues to be Indonesia’s sole authorized importer for corn for feed and non-specialty rice.
Indonesia continues to enforce a ban on imports of poultry parts, which has been in place since 2000. U.S. industry estimates the value of lost exports at $10 million or more per year. The GOI controls imports through the issuance of import permits. Import permits for whole chickens have never been issued. While duck and turkey permits have been issued previously, none have been issued since 2014. Additionally, an Indonesian Ministry of Agriculture regulation states that poultry exports are only permitted from facilities where birds are hand-slaughtered according to halal requirements.
The GOI allows imports of most U.S. beef and beef products. The GOI requires a plant by plant audit and approval of every U.S.-based slaughter facility to assess halal processes prior to exporting to Indonesia. U.S. exporters complain Indonesia’s halal approval process is slow, burdensome and lacking in transparency. The United States has continued to press Indonesia to accept a systems audit approach to approving meat and poultry facilities.
The GOI imposes de facto quantitative restrictions on imports of horticultural products by requiring a Letter of Recommendation ("Surat Rekomendasi Impor") and an Import Permit. In approving requests for such letters the GOI can arbitrarily alter the quantity allowed to enter, raising concerns that Letters of Recommendation and Import Permit are being used to limit imports. Additional restrictions on imports have been imposed by way of harvest period bans and restricting products over six months old from entering the country. Following a May 2018 Trade and Investment Framework Agreement (TIFA) meeting in Jakarta, the Ministry of Agriculture (MOA) announced that it would be reviewing these policies with an eye to ensuring their WTO compliance.
In June 2017, Indonesia’s Ministry of Agriculture (MOA) issued Regulation 26/2017 concerning Milk Supply and Circulation, without notice or prior consultation. The regulation is aimed at increasing Indonesia’s self-sufficiency for dairy, requiring milk supply chain structures to be either entirely domestic or joined with domestic producers. Specifically, it requires domestic dairy processors to purchase fresh domestic milk (termed “SSDN”) from local producers, and authorizes an inter-ministerial team to determine the exact amount of SSDN each domestic processor must purchase annually. MOA 26/2017 also requires that dairy importers enter into “partnership agreements” with domestic producers, and invest in the local dairy sector. MOA issues import recommendations for dairy products based on these “partnership agreements” between a company and local milk producers, and can withhold import recommendation or revoke business licenses if a company fails to comply with MOA 26/2017’s provisions.
On July 23, 2015, the Ministry of Finance revised import duties on alcoholic beverages containing ethyl alcohol. This regulation set the import duty at the ad valorem tariff rate of 90 percent for wine, cider, perry, and mead and 150 percent for spirit and liqueurs. (Previously, a tariff was charged at the rate of IDR. 14,000/liters for beer, IDR 55,000/liter for wine, and IDR 125,000/liter for whisky, rum, and other distilled spirits). The Indonesian Ministry of Trade permits registered importers of alcoholic beverages to import duty-paid alcoholic beverage products. Previously, duty-paid and duty-free alcoholic beverages were only imported through a state-owned company, as directed by the Ministry of Trade. The Ministry of Trade regulation states that the companies that import duty paid alcoholic beverages must apply for an imported-alcoholic beverages permit (IT-MB) through the Directorate General of Foreign Trade. To apply for an IT-MB, each importer must obtain an appointment letter from at least 20 manufacturers or brands, and purchase a minimum of 3,000 carton/brand/year. This letter of appointment must be notarized by public notary of the country of origin. The permit is valid for three years and can be extended.
The Indonesian Customs Service uses a schedule of arbitrary “price checks” rather than actual transaction prices on importation documents for assessing duties on food product imports. While Indonesian government officials defend this practice on the basis of combating “under invoicing,” they do not publicize the list or the methods used to arrive at those prices. As a result, although most food product import tariffs remain at five percent, the effective level of duties can be much higher. In addition, the USG has received complaints from importers about costly delays in customs processing and requests for unofficial payments to customs officers. The United States will continue to raise its concerns on these issues with the GOI.
The Indonesian Ministry of Agriculture’s Quarantine Agency recognized the U.S. Fresh Food of Plant Origin (FFPO) safety control system with the Head of Quarantine Agency decree No 463/Kpts/Kt.020/L/11/2009 on November 20, 2009. FFPO recognition must be renewed every two years and was most recently renewed in January 2018. The regulation contains import control measures for 92 horticultural products, providing priority access to Indonesian ports. U.S. FFPO recognition allows eligible U.S. FFPO products to enter Indonesia without certificates of analysis documents, thus avoiding the need to request Indonesia recognition of U.S. food safety labs, a slow and cumbersome process.
Indonesia’s Biosafety Commission for Transgenic Products is responsible for implementing regulations for biotechnology and initiating assessments for product approvals. However, it underwent more than a year of inactivity until its reauthorization by the President in late 2014. Indonesian biotechnology policy does not include a unified science-based framework to implement its regulations. Thus, while there are no transgenic seed crops approved for release, and Indonesia does not produce any biotech crops, there are also no trade constraints based on biotechnology content. Several applications for cultivation of biotech crops are currently in the pipe-line, and the opportunity for biotech sugarcane and corn to be commercialized remains, despite the fact that the new administration has been slow to take action on biotechnology.
Please see the Indonesia section of the United States Trade Representative’s National Trade Estimate on Foreign Trade Barriers.
Indonesia Trade Barriers