Jurisdiction - Indonesia
Reports and Analysis
Indonesia – Bank Issues Regulation On Export Proceeds: Calling Money Home.

28 May, 2013

Bank Indonesia issued a regulation in late 2012, in the midst of the year-end holidays, that places new demands on exporters in the country in terms of where they place their incoming funds and how they report income. While the regulation affects all exporters, much of the opposition to its requirements has come from some of the biggest companies working in Indonesia’s upstream oil and gas industry, many of whom are still smarting from changes to the cost-recovery system introduced by the Government in 2010.

 

On December 27, 2012, BI issued Regulation No. 14/25/PBI/2012 on the Receipt of Foreign Exchange from Export Proceeds and the Withdrawal of Foreign Exchange from Foreign Debt (“PBI 14″). The new regulation replaces another Bank Indonesia regulation with a similarly lengthy title, BI Regulation No. 13/20/PBI/2011, and its amendment, BI Regulation No. 14/11/2012.

 

PBI 14 principally imposes three obligations:

 

  • All foreign exchange from export proceeds must be received through a foreign exchange bank in Indonesia within three months of the registration of the related export declaration. There are two exceptions. The first is if the foreign exchange is owned by the government and is received through Bank Indonesia. The second is if the foreign exchange is received in cash, as long as it is accompanied by a written statement and the necessary supporting documents;
  • Exporters must report export declarations involving more than US$10,000 to the foreign exchange bank, with that information then  to be forwarded to Bank Indonesia in a report on the export transaction; and
  • All cash foreign exchange derived from (i) foreign loans  based on non-revolving loan agreements not used for refinancing; (ii) the difference between the refinancing facility and the amount of a previous foreign loan; and (iii) foreign loans in the form of bonds, medium-term notes, floating rate notes, promissory notes, and commercial paper shall be withdrawn through a foreign exchange bank in Indonesia and be reported to Bank Indonesia.

 

Exporters who fail to comply with the first obligation face a fine in the amount of 0.5% of the foreign exchange from export proceeds not yet received, with a maximum fine of Rp 100 million, or about US$10,200. Exporters that fail to comply with the obligations of point 3 shall by fined Rp 10 million, about US$1,200, for every withdrawal of foreign exchange derived from foreign loans.

 

PBI 14 defines exporters as individuals, legal entities or other entities that are not incorporated and which engage in the export of goods from a customs area. This is a very broad definition that also includes Production Sharing Contractors that export crude oil and/or natural gas.

 

Many Production Sharing Contractors in the oil and gas industry, including big players like Chevron and Total E&P, are reluctant to comply with the requirement that they deposit all of their export proceeds in a foreign exchange bank in Indonesia. The reasons for the opposition vary from one Production Sharing Contractor to another, but include the desire to avoid the administrative process of opening a bank account in Indonesia and questions about the general  trustworthiness and reliability of the Indonesian banking system.

 

But the main reason most Production Sharing Contractors oppose this obligation is that  their Production Sharing Contracts state that they have the right to retain the proceeds from the export of oil and natural gas abroad. Production Sharing Contractors are using this contractual guarantee ─ or what they thought was a contractual guarantee ─ to fight the obligations imposed by PBI 14.

 

SSEK

 

For further information, please contact:

 

Fransiscus Rodyanto, Soewito Suhardiman Eddymurthy Kardono
fransiscusrodyanto@ssek.com
 
 
Banking & Finance Law Firms in Indonesia 

 

Comments are closed.