Indonesian policymakers are contemplating relocating import entry ports for seven commodities – textiles, clothes, ceramics, footwear, attire, cosmetics, and electronics – to jap ports in Sorong West Papua, Bitung North Sulawesi, and Tenau Kupang East Nusa Tenggara. The relocation is deliberate after the relaxation of import licensing on the seven commodities beneath Commerce Minister Regulation 48/2024, which, amongst others, waives technical concerns as a requirement for acquiring import license.
If carried out, the relocation can be a coverage shortcut to cut back imports and assist home industries compete. Shifting imports to extra distant ports will increase logistics prices and retail costs, thereby giving native merchandise a aggressive worth edge. Nevertheless, it probably violates multilateral guidelines beneath the Basic Settlement on Tariffs and Commerce (GATT) 1994.
At the moment, 75 p.c of Indonesia’s non-oil and gasoline imports are dealt with in Java Island within the western a part of the nation, via the key ports of Tanjung Priok (Jakarta), Tanjung Emas (Semarang, Central Java), and Tanjung Perak (Surabaya, East Java). Java, house to 156.9 million individuals – 55 p.c of Indonesia’s inhabitants – hosts nearly all of customers and distribution facilities for imported items. The remaining 45 p.c is unfold throughout different islands within the western, central, and jap areas.
Because it stands, Tanjung Priok is the most important port for importing the seven commodities in query. For instance, in 2023, the port dealt with footwear imports value $616.4 million, or 64 p.c of the nation’s complete footwear imports of $968.8 million.
In distinction, import actions in West Papua, North Sulawesi, and East Nusa Tenggara are trivial, accounting for 0.02 p.c, 0.05 p.c, and 0.02 p.c of Indonesian imports, respectively. Sorong, Bitung, and Tenau Kupang ports don’t deal with any imports of the seven commodities flagged within the new coverage.
Importers will bear greater prices if they need to transport items from the international locations of origin to ports within the east after which to Java. The ocean distance from Sorong to Jakarta, for example, is 3,935 kilometers, and vessels transit via Makassar in Sulawesi and Surabaya. The relocation of entry ports thus creates a barrier for imports and can enhance the worth competitiveness of native merchandise.
Certainly, imports of seven commodities have surged and are drowning native industries. Probably the most disruptive imports are items bought at below-normal costs from China, whereas imported items from different international locations are typically traded at commonplace market costs.
Furthermore, unlawful imports have been uncontrolled, worsening the accidents suffered by native industries. Again in October 2015, President Joko Widodo declared that he had ordered the customs service to analyze unlawful imports. He introduced that the order had been correctly executed, and unlawful import actions had been curbed.
But 9 years later, in July 2024, an inter-ministerial and company process pressure was established to handle the widespread low-cost and unlawful imported items. The duty pressure has flexed its muscle tissue by closing warehouses, confiscating and destroying these unlawful items.
Now Indonesia is contemplating a brand new method. The relocation of entry ports would have the impact of elevating costs and decreasing the provision of products from all international locations, giving a leg as much as native producers. The change would, nevertheless, additionally restrict client decisions and pressure them to purchase native merchandise that will not all the time match their preferences.
Port relocation is a commerce measure, and thus its conformity with multilateral guidelines must be thought-about. GATT 1994 Article XI:1 (Basic Elimination of Quantitative Restrictions) prohibits “prohibitions or restrictions aside from duties, taxes or different fees, whether or not made efficient via quotas, import or export licences or different measures.” Panels in related World Commerce Group dispute settlements have interpreted “different measures” to incorporate a “broad residual class” affecting the competitiveness of products.
The compelled port relocation implies restriction on the variety of ports obtainable for imports. The Colombia-Panama case within the WTO dispute settlement mechanism (DS366) throughout 2007-2009 serves as a reference for figuring out whether or not such a measure constitutes an import restriction.
In that case, Colombia prohibited imports of textiles, footwear, and attire from Panama or the Colon Free Zone (CFZ), aside from imports despatched to Bogota airport and Barranquilla seaport. Panama argued that the port restriction imposed a limiting situation as a result of there have been solely two ports of entry, out of 11 complete, obtainable. Panama stated it restricted competitors by forcing importers to incur greater delivery prices to achieve key markets exterior Bogota and Barranquilla, discouraging exports and creating uncertainty, making the restriction in violation of GATT Article XI:1.
On Might 20, 2009, the WTO Dispute Settlement Physique adopted the panel’s report, which inter alia judged that Colombia’s port restriction was a prohibited restriction on importation. The port restriction, although not a quota or import license, might be thought-about one of many “different measures” outlawed by Article XI:1.
Though Colombia’s port prohibition was utilized discriminatively to imports solely from Panama or the CFZ, the panel judged that the measure, whether or not discriminatory or not, breached Article XI:1. This might set a precedent if Indonesia adopts port restrictions, even when not geared toward a specific nation, and the measure is challenged on the WTO.
Indonesian policymakers must cautiously weigh the financial advantages of supporting native industries in opposition to the prices of limiting client decisions and the dangers of non-compliance with multilateral commerce guidelines.
