Jun 09, 2014
The trade ministry issued a new regulation on Thursday that will increase supervision of imported alloy steel to Indonesia after the government found indications that some importers exploited loopholes in the country’s tariff structure.
The new regulation is also aimed at protecting the domestic industry.
Previously, the Indonesian Iron and Steel Industry Association (IISIA) lodged a formal complaint with the industry ministry over a sudden increase in imported alloy steel infused with boron, a material that reinforces steel. Boron-infused steel is typically used for infrastructure projects.
The association suspected the sudden increase was because several importers seek to exploit a loophole in Indonesia’s tariff structure in terms of which boron-infused steel is exempt from import tariffs.
It found indications that many of the producers and importers collaborated to infuse the steel with boron just to get a zero tariff as the added amount of boron was still insufficient to alter the properties of the steel.
In addition, most of the imported steel comes from China where the steel industry is subsidized and receives incentives from the state, thus making Indonesian steel less competitive.
Basso Datu Makahanap, a committee member of the IISIA, said last month the amount of boron steel imported by using this loophole amounted to around 400,000 metric tons per year, potentially costing the state around Rp 439 billion ($37 million) in lost revenue.
“The policy is a trade ministry response on complaints from the association and the industry ministry,” said Bachrul Chairi, the ministry’s director general for international trade.
He said the ministry had seen imports of four types of boron-infused steel increase by 6.3 percent to 77.61 percent last year from a year earlier.
The new regulation would only allow imports of boron steel by registered parties. In addition, in order to become registered importers, companies will be required to submit additional documents such as sales purchase contracts, according to Bachrul.
The steel will also be subject to further inspection by an independent surveyor and the ministry will revoke permits if the registered importers are found guilty of misdemeanors, Bachrul said.
Indonesia’s steel industry is expanding, though domestic production capacity is far short of demand. Steel consumption was 8.2 million tons in 2012, while production capacity was only 6 million tons.
Total investment in the industry rose to Rp 58.5 trillion last year from Rp 38.3 trillion in 2012, according to the government.
Source: Jakarta Globe