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Minister of Finance Sets Export Duties, Including a 20% Export Duty on Raw Mineral Ore Exports

May 2012 - Projects, Energy & Natural Resources . Legal Developments by Lubis Ganie Surowidjojo .

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After four months of mixed signals from the government, the Ministry of Finance has issued Regulation No. 75/PMK.011/2012 on the Determination of Goods Subject to Export Duty ("Regulation"), which imposes a 20% duty on the export of any mixture of two or more raw minerals, ores or rocks if at least one constituent is listed in the Regulation. 

In February, Minister of Energy and Mineral Resources (ESDM) Regulation No. 7 of 2012 was issued, and purported to ban mining companies from exporting raw minerals, ores and rocks. Then in early May, Minister of Trade Regulation No. 29 of 2012 was issued to allow such exports to continue, but only on the condition that mining companies become registered exporters and gain permission from the Ministry of Trade via obtaining a recommendation from the ESDM. ESDM then issued a press release stating that in order to export, companies would be expected to adhere to a host of requirements that appear to be designed to further the intention to implement a full export ban by 2014.

Basically, the Ministry of Finance Regulation forces miners to refine or pay. Appendix IV of the Regulation lists 65 materials (21 metal ores and 10 nonmetal ores and 34 types of rock) that are subject to the export duty. If a company exports a mixture of materials that contains any of the listed materials, it must pay 20% of the "highest price" as the export duty (Articles 10 through 12).

The implied goals of the regulation (and the 2014 ban) are twofold: support and grow the domestic refining sector and make more raw materials available for domestic use. However, such redirection of supply to the refining sector that lacks capacity to handle existing production risks having a severe effect on the industry, and it remains unclear how companies are supposed to finance the construction of refineries, especially with the additional burden of the 20% export duty.

The Regulation also addresses exports of palm fruit (40%); oil cake (20%); crude palm oil (CPO) and various distillates (0-22.5%); cocoa (0-15%); unprocessed leather (15-25%); and certain timber (2-10%). 

Source: Minister of Finance Regulation No. 75/PMK.011/2012 on the Determination of Goods Subject to Export Duty

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