Makarim & Taira S.
  February 26, 2013 - Indonesia

Shipping Transportation in Indonesia
  by Tiza Mafira

 Shipment in Indonesia is regulated by the Indonesian Commercial Code (“ICC”) and Law No. 17 of 2008 (the “Shipping Act”), which spawned a variety of implementing regulations.  After 2008 a package of new implementing regulations to the Shipping Act sought to regulate a broad spectrum of water transportation aspects, including:

 

•       Port Affairs (Government Regulation No. 61 of 2009)

•       Navigation (Government Regulation No. 5 of 2010)

•       Water Transport (Government Regulation No. 20 of 2010jo. No 22 of 2011)

•       Maritime Environment Protection (Government Regulation No. 21 of 2010)

•       Multimode transportation systems (Government Regulation No. 8 of 2011)

•       Vessel Registration and Nationality (Ministry of Transportation Regulation No. PM.13 of 2012)

•       Vessel Safety Management (Ministry of Transportation Regulation No. PM.45 of 2012).

 

It is an area with relatively few controversial developments, except for fairly recent changes in cabotage regulation which was a significant game-changer for foreign shipping interests. The following are some highlights from a few contemporary developments:

 

The Cabotage Principle

 

The cabotage principle, which means that each nation is entitled to prohibit foreign flagged vessels from transporting or operating within its coastal/internal/inshore waters, was enacted in Indonesia in 2008, but only became fully effective on 7 May 2011.   The Shipping Act stipulated that domestic sea transport activities must be carried out by national sea transport using Indonesian flagged vessels and manned by Indonesian nationals.  Moreover, foreign vessels are prohibited from transporting passengers and/or goods between ports in the Indonesian territory.

 

An important exemption to this cabotage rule was enacted in April 2011, just in time before the cabotage rule became fully effective in May.  Under Government Regulation No. 22 of 2011, the cabotage principle is delayed for certain offshore oil and gas vessels. Many vessels used for oil and gas activities are high-tech specialized vessels, expensive, and currently not available by Indonesian shipbuilders, such as (1) vessels for conducting oil and gas survey, (2) drilling rigs, (3) offshore constructions, and (5) vessels for dredging, salvage, and underwater work.  These vessels also have a generally short-term lease contract ranging from only three to four months, rendering them not economically feasible to spend a lot of large upfront investment on. In the interest of maintaining the target oil production, the Government of Indonesia has relaxed the cabotage principle for oil and gas activities.

 

This exemption comes with a restriction, however. In order to use a foreign flagged vessel, it must be demonstrated that no Indonesian flagged vessel is available, of that any available one is not sufficient for the proposed activity.  The use of foreign-flagged vessels also still requires a permit from the Minister of Transportation.

 

Minister of Transportation Regulation No. 48 of 2011, also issued in April 2011 further regulates the use of foreign flagged vessels for offshore oil and gas activities by stipulating the time period of operation, the permit procedures and the permitted uses.

 

As for allowable time periods for operation, foreign flagged vessels can operate in Indonesia with varied exemptions expiring between December 2012 and December 2015, depending on the type of activities and the type of vessels. For example, oil and gas vessels for seismic surveys, geophysical surveys and geotechnical surveys are limited to operations until December 2014. Drilling activities are generally able to operate until December 2015.

 

In other words, after December 2015 the exemptions will no longer apply, and the cabotage principle will be fully applied to all vessels.

 

Vessel Registry

 

Under Minister of Transportation Regulation No 13 of 2012 on the Registration and Nationality of Ships, a vessel is must be registered in accordance withthe relevant requirements in the following cases:

 

•       Registration of ownership

•       Registration of mortgage, and

•       Registration of any other proprietary right (i.e. shares over the vessel)

 

Maintenance of a shipping register in Indonesia and the registration of individual vessels are under the authority of SEACOM (the Directorate General for Sea Communications at the Ministry of Communications).

 

SEACOM has laid down detailed procedures for the initial registration of vessels and for changes in such registration consequent upon the sale or transfer of vessels. According to the Shipping Act, vessels which can be registered in Indonesia are:

 

•       Vessels with a gross tonnage of at least 7 GT (seven gross tons).

•       Vessels owned by Indonesian citizens or companies established/incorporated under Indonesian law and domiciled in Indonesia.

•       Vessels owned by Indonesian business entities in the form of joint ventures where the majority of the shares are owned by Indonesian citizens.

•       Vessels not registered in another vessel registration place.

•       Foreign vessels accompanied by a deregistration certificate issued by the relevant authority where the ship was originally registered.

 

A vessel registered in Indonesia and sailing in Indonesian waters is also issued an Indonesian Ship Nationality Certificate from the Minister of Transportation.In addition, a recommendation from the Ministry of Marine Affairs and Fisheries is needed if the vessel is to be used as a fishing vessel.

 

Note that the ownership of vessels may only be registered to Indonesian citizens or companies established under Indonesian law and domiciled in Indonesia. As evidence of the ship’s registration, the owner will be given a deed of ship registration. The ship owner is required to place a registration mark on the ship.

 

Temporary ownership registration is possible for any ship which is still in the process of being built in Indonesia or overseas, provided that the vessel is immediately registered upon delivery.

 

In addition to the registry requirements, Decree of the Minister of Communications No. 20 of 2006 regarding the Obligation of Indonesian Flagged Vessels to be Classified under Biro Klasifikasi Indonesia stipulates that every Indonesian flagged ship of or more than 20 metres in length, or weighing 100 gross tons or more, or having a 250HP main engine or more, must be classified under the rule of PT Biro Klasifikasi Indonesia (BKI), an Indonesian classification society.  Every vessel classified with BKI may also be dually classified under foreign classification societies acknowledged by the Indonesian government, such as:

 

•       Lloyd’s Register of Shipping (UK);

•       Germanischer Lloyd (Germany);

•       American Bureau of Shipping (US);

•       Nippon KaijiKyokai (Japan);

•       Der NorkseVeritas (Norway);

•       Bureau Veritas (France);

•       China Classification Society (China);

•       Korean Register of Shipping (Korea); and

•       Russian Register of Shipping (Russia).


by Tiza Mafira
Associate at Makarim & Taira S.

 

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This article is a publicationprepared by the Indonesian law firm,Makarim & Taira S. It is only intended toinform generally on the topics covered andshould not be treated as legal advice or reliedupon when making investment or businessdecisions. Should you have any questionson any matter contained in this article,or other comments generally, please contact Tiza Mafira - Associate ([email protected]) or Rahayu Ningsih Hoed - Partner ([email protected]).