Indonesia - New Export Tariffs on Mineral Ore and Oil Palm Products

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The widely anticipated Ministry of Finance Regulation No.75/PMK.011/2012 was signed into law on 16 May 2012. The new regulation imposes a 20% export tariff on most metal and mineral ores (but not coal). It also imposes a 40% tariff on unprocessed palm fruit, 20% on oil cake and tiered tariffs for crude palm oil and other oil palm derivatives. For crude palm oil, the tariff level depends on the international reference price for CPO (with the relevant index to be specified by the minister), ranging from 0% for a price below US$750 / ton to 22.5% for a price above US$1,250 / ton. The new regulation also imposes tariffs on 15-25% on unprocessed leather products, 5-15% on certain wood products and 15% on cocoa beans.

These tariffs are part of Indonesia's continuing drive both to encourage the development of processing and value added activities within Indonesia as well as retain a larger share of revenues from its domestic natural resources. In particular, the mineral ore tariffs are also part of the measures for a lift of the export ban on mineral ores introduced in Decree 24 earlier this year. However, the tariffs are likely only an interim measure, with a complete ban likely to be put into effect as originally scheduled in 2014. 

O'Melveny & Myers LLP is not licensed to practice law in Indonesia, and this Client Alert should not be construed as providing advice concerning the laws of Indonesia or of any other country or jurisdiction. The foregoing should not be construed as an opinion on the laws of Indonesia. Readers should consult with Indonesian counsel for legal advice on the matters addressed herein.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. O'Melveny Indonesia practice coordinator, Joel Hogarth, and Ratih Nawangsari (Ipop), an O'Melveny counsel qualified to practice law in Indonesia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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