16 Sep 2022
Moratorium on Private Port Licenses Could Leave Miners High and Dry
Under Indonesian law, private entities can apply for a license to construct, operate and manage a dedicated or “special” sea terminal (“Special Terminal”) for their own cargo loading/unloading and sea transportation operations (“Special Terminal License”). This license, which enables a company that has a main line of business other than port management to own and operate its own vessel berthing facilities, has long served as a solution for the transportation needs of companies operating in remote areas, far removed from the nearest public ports. Large-scale industrial estates also often rely on the license to provide shipping access to their tenants.
Further, the holder of a Special Terminal License may apply for an additional license to allow its terminal to be used by third parties (known as a “Special Terminal - Temporary Public Use License ”).
Now, in a move that has important implications for companies that avail of Special Terminals for their sea transportation needs, the Directorate General of Sea Transportation has imposed moratoriums on:
The imposition of the two moratoriums is stipulated in Directorate General of Sea Transportation Directive No. A.402/AL/DJPL (“the Directive”).
We will now discuss the effects of the two moratoria in turn.
2. Moratorium on New Special Terminal Licenses
The moratorium on the issuance of new Special Terminal Licenses will particularly affect newly established businesses in remote areas that plan to rely on sea transportation to bring in their supplies and ship out their products
The prevailing regulations (most notably Ministry of Transportation Regulation No. 52 of 2021 (“Reg. 52/2021”)) allow companies that engage in the following business lines to construct, own and manage dedicated terminals for their own use:
Consequently, the moratorium applies to companies engaging in any of the above sectors.
3. Moratorium on Special Terminal - Temporary Public Use Licenses
The moratorium also suspends the issuance of Special Terminal - Temporary Public Use Licenses. While Reg. 52/2021 generally prohibits the use of a Special Terminal by a third party, there is an urgency exemption: should a third party or entity in the surrounding area also need to use it for their loading and unloading operations, the port owner may apply for a Special Terminal - Temporary Public Use License.
The moratorium on new Special Terminal - Temporary Public Use Licenses will particularly affect the mining industry as many mining companies (particularly coal miners) in remote areas currently avail of port facilities owned by other mining companies using this license. As such a license has a specific expiry date, the moratorium will prevent a holder from extending their license, which in turn could threaten the operations of other mining companies currently using their ports.
4. ABNR Commentary
The moratorium basically stems from staffing and funding issues, especially in relation to customs and excise, due to the significant increase in the use of Special Terminals since the end of the pandemic and on the back of surging energy prices. The staffing and funding issues arise because exports and imports through Special Terminals need to be supervised by Customs & Excise. Further, a significant number of Ministry of Transportation staff is required to monitor port safety and security.
Mining appears to be the sector that is most significantly affected by the Directive, particularly as regards the moratorium on the issuance or extension of Special Terminal - Temporary Public Use Licenses. This is because, as mentioned in section 3 above, many miners use ports owned by other miners based on this license.
While unlikely to be significant, there is also a possibility that some national strategic projects may be affected by the moratoriums. One example is the ongoing development of the 2,112-hectare Bintuni Bay Industrial Zone in West Papua Province, which is to be served by a Special Terminal. While the Directive provides that national strategic projects may be exempted from the moratorium, consultations must first be held with the Directorate General of Sea Transportation in order to obtain such an exemption. This is obviously something that has the potential to cause delay, or additional expense at the least.
This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.
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