Sunday, July 14, 2024
Hawai'i Free Press

Current Articles | Archives

Friday, February 9, 2018
Will Indonesia's new shipping law impact Hawaii coal imports?
By Michael Hansen @ 8:06 PM :: 5840 Views :: Energy, Jones Act

Will Indonesia’s new shipping law impact Hawaii coal imports?

by Michael Hansen, Hawaii Shippers Council, February 9, 2018

Reuters published on February 7, 2018, the news article, “Coal buyers spooked by Indonesia's new shipping rules: Assoc,” reporting that the Indonesian national government issued new regulations in October 2016 requiring coal and raw palm oil exporters to ship on Indonesian flag ships and insure the cargo with Indonesian underwriters. These regulations take effect at the end of April 2018.

The Indonesia Coal Mining Association (ICMA) announced on Thursday, February 8, 2018, that foreign buyers of Indonesian coal are putting “on hold making any new contracts,” as the new regime will make exports more expensive and there is uncertainty regarding the availability of Indonesian flag ships.

The ICMA anticipates that the export of coal will change from the existing “free on Board” (FOB) system whereby foreign buyers arrange shipping and insurance to a “cost insurance and freight” (CIF) system whereby the Indonesian exporters would have to arrange shipping and insurance.

Indonesian coal is imported by and used exclusively by AES Hawaii Inc. (AES) to fuel their coal-fired electrical power plant located at Kalaeloa, Oahu Island, Hawaii, which generates approximately 20% of the island's electrical power supply.

The coal cargoes are discharged at the State’s Kalaeloa Barbers Point Harbor (KBPH) from bulk carriers using an bulk unloading system.

Some commenters have referred to these Indonesian regulations are a form of cabotage, such as the Jones Act.

However, that is not correct, as cabotage refers to domestic shipping, and these new Indonesian regulations apply to the foreign trade and are known generically as “cargo reservation,” “flag reservation” and “commercial cargo preference.” Both cabotage and cargo reservation are forms of protectionism.

Key excerpts from Reuters:

Buyers of Indonesian coal are holding back orders of the fuel after the government issued new shipping rules for coal and crude palm oil that would restrict exports to Indonesian vessels, an industry association said on Thursday.

Jakarta issued rules in October requiring coal and palm oil exporters to use Indonesian-flagged vessels and Indonesian insurance companies, to boost the role of the archipelago’s shipping industry in its export market.

However, guidelines on implementing the rules and possible exemptions have not been released, raising concerns among shippers in Indonesia, the world’s top thermal coal exporter and palm oil producer.

The regulation will take effect at the end of April.

“There was some information, several potential buyers from abroad put on hold making any new contracts,” Hendra Sinadia, executive director of the Indonesia Coal Mining Association (ICMA), told reporters.

Describing the new rules as “dangerous”, Sinadia said they could affect export volumes and state revenues if shipping contracts had to be renegotiated to shift to so-called cost, insurance and freight (CIF) contracts from free-on-board (FOB) contracts.

Under CIF contracts, the seller is responsible for the shipping arrangements and must buy insurance to protect the cargo against losses during the voyage. Under FOB contracts, the buyer procures the vessel and is responsible for all shipping costs.

The industry is worried that time is running out to make adjustments before the rules come into effect, Sinadia said, noting that it would be difficult to do so without the guidelines.

Indonesia Palm Oil Association (GAPKI) Secretary-General Togar Sitanggang said in an interview on Jan. 24 that there were several problems with the new rules, noting there were not enough Indonesian-flagged food-grade tankers, and that Indonesian insurers may lack capacity.

“If we’re selling CPO (crude palm oil), free-on-board at Belawan port, does this mean our buyer has to use Indonesian vessel? That is ridiculous.”

The palm oil industry is awaiting guidance on when foreign vessels can be used if local vessels are unavailable, he said.

“There should be no obstacles, but if we must do this and that, it could hold up exports,” he said.


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii Military History

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Together


Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

July 4 in Hawaii

Land and Power in Hawaii

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Parents Org Hawaii

NFIB Hawaii News

NRA-ILA Hawaii


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

Rental by Owner Awareness Assn

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

School Choice in Hawaii

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii