IndonesiaPracticeBulletin_Issue1

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The last three years saw a

signicant 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 Lawmandating that miners must process

and rene 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 renery 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 rening

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 hasissued Regulation No. 574.K/30/

DJB/2012 dated 11 May 2012

(together with the referenced

ministerial regulations, ESDM

Rets)

2. Minister of Trade Regulation No.

29/M-DAG/PER/5/2012 dated 7

May 2012 (MT Ret);

3. Minister of Finance Regulation

No. 75/PMK.011/2012 dated 16May 2012 (MF Ret).

Asia > Middle East > Europe

BackgRounD

NoteThis article is only in-

tended for general reading.

Under no circumstances is

it to be relied upon in sub-

stitution for specic adviceon any issue(s) that may

arise relating to its subject

matter.

SEPTEMBER 2012

conTEnTBackground

ESDM Regulations

MOF Regulations

Conclusion

Indonesia Tightens Control of

Mineral Ores Export

ISSUE NO. 01

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ESDM REgulaTionS

Generally, 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 nancial obligations owed to the State;

Submit a working and/or cooperation plan for the processing and rening

activities in the country; and

Sign an integrity pact conrming their commitment to procure the processing

and rening facilities by 12 January 2014.

MoT REgulaTion

The 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 theMinister of Trade. To be registered with and to have obtained an export approval

from the Minister of Trade, mining companies must rst 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 verication by a certied surveyor. Results of the verication

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

verication process. In the past, verication 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 qualied 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.

For more information,

please contact our team:

Azman JaafarPartner

Direct + 65 6381 6880

Mobile (SG) + 65 9792 3393

Mobile (ID) + 62 81 1 496296

[email protected]

Tan Choon LengPartner

Direct + 65 6381 6800

Mobile (SG) + 65 9873 9537

Emailchoonleng.tan@

rhtlawtaylorwessing.com

Winston SeowPartner

Direct + 65 6381 6968

Emailwinston.seow@


Roy AndrianSenior Associate

(Foreign Lawyer)

Direct + 65 6381 6836

Mobile (SG) + 65 9770 0284Mobile (ID) + 62 811 836938

Emailroy.andrian@


Eviaty JenieSenior Associate

(Foreign Lawyer)

Direct + 65 6381 6865

Emaileviaty.jenie@


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MoF REgulaTion

To 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.

concluSion

While 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 scal 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.

Our Indonesian Practice comprises experienced lawyers drawn from theregion 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 nance, project nance, banking, corporate

restructuring, private wealth management and cross-border investments.

Our team works seamlessly with local counsel Hanaah 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, nanciers, 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 specic 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 rms which are separate legal entities and separately registered law

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IndonesiaPracticeBulletin_Issue1