Asia > Middle East > Europe

ISSUE NO. 01

SEPTEMBER 2012
CONTENT

Background ESDM Regulations MOF Regulations Conclusion

Indonesia Tightens Control of Mineral Ores Export

Background

Note This article is only intended for general reading. Under no circumstances is it to be relied upon in substitution for specific advice on any issue(s) that may arise relating to its subject matter.

he last three years saw a significant increase in export of mineral ores from Indonesia following the enactment of the Mining Law (Law 4/2009) in 2009. The Ministry of Energy and Mineral Resources (ESDM) reported that exports of nickel ore increased by 800%, iron ore by 700%, and bauxite by 500%. This occurred despite the Mining Law mandating that miners must process and refine the ore within the country. This mandatory requirement has to be implemented no later than 12 January 2014. Nevertheless, as yet no comprehensive plan has been properly devised by mining companies to build domestic refinery facilities. It was against this backdrop that the Government of Indonesia recently issued a series of regulations that were intended to accelerate the implementation by mining companies

of their processing and refining obligations. These regulations are as follows: 1. ESDM Minister Regulation No. 7 of 2012 dated 6 February 2012, as recently amended by Regulation No. 11 of 2012 dated 16 May 2012. To implement these ministerial regulations, the Director General of Mineral and Coal Mines has issued Regulation No. 574.K/30/ DJB/2012 dated 11 May 2012 (together with the referenced ministerial regulations, ESDM Regulations) 2. Minister of Trade Regulation No. 29/M-DAG/PER/5/2012 dated 7 May 2012 (MoT Regulation); 3. Minister of Finance Regulation No. 75/PMK.011/2012 dated 16 May 2012 (MoF Regulation).

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For more information, please contact our team:

Azman Jaafar

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ESDM Regulations
enerally, with effect from 6 May 2012, mining companies are prohibited from exporting mineral ores. An exception to the rule is the mining companies have secured a recommendation letter from the Director General of Mineral and Coal Mines. The recommendation letter will specify the types, quantity, price of the ores to be exported, as well as the destination country. To secure the recommendation letter, mining companies must comply with the following requirements: Produce a valid mining business license; Settle all financial obligations owed to the State; Submit a working and/or cooperation plan for the processing and refining activities in the country; and Sign an integrity pact confirming their commitment to procure the processing and refining facilities by 12 January 2014.

Tan Choon Leng

Partner Direct + 65 6381 6800 Mobile (SG) + 65 9873 9537 Email choonleng.tan@ rhtlawtaylorwessing.com

Winston Seow

Partner Direct + 65 6381 6968 Email winston.seow@ rhtlawtaylorwessing.com

Roy Andrian

Senior Associate (Foreign Lawyer) Direct + 65 6381 6836 Mobile (SG) + 65 9770 0284 Mobile (ID) + 62 811 836938 Email roy.andrian@ rhtlawtaylorwessing.com

MoT Regulation

he MoT Regulation maintains the notion that the export of mineral ores is something that needs to be controlled to ensure ample supply of mineral ores in the country. One way to achieve this is to regulate the export mechanism whereby any export of mineral ores can only be done by a mining company that has been registered with and obtained an export approval from the Minister of Trade. To be registered with and to have obtained an export approval from the Minister of Trade, mining companies must first secure a recommendation letter from the Director General of Mineral and Coal Mines as described above. Furthermore, the MoT Regulation stipulates that any mineral ore exported will be subject to verification by a certified surveyor. Results of the verification will be documented in a surveyors report detailing the qualitative analysis of the composition and content of mineral that is contained in the ores to be exported. The exporter is responsible for any costs associated with the verification process. In the past, verification was not necessary; leading to a mismatch of export data between Indonesia and the destination country. The MoT Regulation also imposes reporting obligations on the exporter in relation to its export activities. The report has to be submitted to the Director General of Foreign Trade no later than the 15th day of each month, with a copy to the Director General of Mineral and Coal Mines. Failure to submit the report will lead to the exporter being derecognized as a qualified exporter by the Minister of Trade. This sanction may also be imposed if an exporter exports its mineral ores with the types and/ or in the quantity not in accord with the approved export documentation.

Eviaty Jenie

Senior Associate (Foreign Lawyer) Direct + 65 6381 6865 Email eviaty.jenie@ rhtlawtaylorwessing.com

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MoF Regulation
o discourage mining companies from exporting mineral ores, the Minister of Finance has imposed export duty on mineral ores.

According to the MoF Regulation, the applicable export duty for mineral ores is 20% of the export benchmark price which will be determined on a regular basis.

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About the Indonesia Practice Group

Conclusion
hile export of mineral ores is only absolutely prohibited after January 2014, the Government of Indonesia has started to implement measures to control export. Mining companies are still allowed to export mineral ores, but controls have been tightened with ample fiscal and other disincentives. It should be understood that the governmental measures discussed in this article are merely transitional prior to an upcoming complete ban in 2014. ur Indonesian Practice comprises experienced lawyers drawn from the region with the necessary collective knowledge, specialist expertise and practical experience to undertake and manage cross-border transactions involving Indonesia. We advise and provide local guidance to clients in mergers and acquisitions, joint ventures, corporate finance, project finance, banking, corporate restructuring, private wealth management and cross-border investments. Our team works seamlessly with local counsel Hanafiah Ponggawa & Partners in Jakarta and together, we have the advantage of expertise, knowledge, experience, language, customs and culture to advise clients on complex transactions; from preliminary strategic advice for planning and risk management, as well as matters involving political, statutory and regulatory issues. Our combined market knowledge of Indonesia sets our team apart from the rest. We also represent clients in several key industries such as minerals and resources (including mining and related downstream activities), oil and gas (including exploration, production and its related downstream business). We have worked with contractors, investors, financiers, regulators and government authorities in the preparation and negotiation of mining contracts, oil and gas cooperation contracts including production sharing, technical assistance, operation cooperation, joint operations, as well as farm out and farm in agreements. Our team provides international capabilities locally, advising clients on inbound and outbound cross-border matters involving countries in the Southeast Asia region, as well as Europe and the rest ofAsia (includingAustralia and New Zealand).

2012 RHTLaw Taylor Wessing LLP This publication is intended for general information and to highlight issues. While we endeavour to ensure its accuracy and completeness, we do not represent nor warrant its accuracy and completeness and are not liable for any loss or damage arising from any reliance thereon. It is not intended to apply to specific circumstances or to constitute legal advice. RHTLaw Taylor Wessing LLP (UEN No. T11LL0786A) is registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A) with limited liability. RHTLaw Taylor Wessing LLP is a Singapore law practice registered as a limited liability law partnership in Singapore (The LLP). It is a member of Taylor Wessing, a group which comprises a number of member firms which are separate legal entities and separately registered law practices in particular jurisdictions. The LLP is solely a Singapore law practice and is not an affiliate, branch or subsidiary of any of the other member firms of the Taylor Wessing group. A list of all Partners and their professional qualifications may be inspected at our main office at Six Battery Road #10-01, Singapore 049909.

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