G/SG/N/8/IDN/15  
G/SG/N/10/IDN/15  
 
5 June 2013  
(13-2914)  Page: 1/6  
Committee on Safeguards  Original: English  
 
 NOTIFICATION UNDER ARTICLE 12 .1(B) OF THE AGREEMENT ON  
SAFEGUARDS ON FINDING A SERIOUS INJURY OR THREAT  
THEREOF CAUSED BY INCREASED IMPORTS 
 
NOTIFICATION OF A PROPOSAL TO IMPOSE A MEASURE 
INDONESIA  
(Wheat Flour) 
The following communication dated 3 June 2013, is being circulated at the request of the 
Delegation of Indonesia.  
_______________ 
  
Pursuant to Article 12.1(b) of the WTO Agreement on Safeguards, the Government of the Republic 
of Indonesia, hereinafter referred as "GOI", hereby notifies to the Committee on Safeguards on its findings of investigation concerning the importation of the Subject Good. 
 
A. GENERAL BACKGROUND 
1. On 13 August 2012, the KPPI hereinafter referred as the "Investigating Authority", received 
an application from Indonesian Flour Mills Association (Asosiasi Produsen Tepung Terigu 
Indonesia/APTINDO), hereinafter referred as the "Applicant", requesting for the imposition of a 
safeguard measure on importation of "Subject Good" that is claimed to be the cause of injury as 
incurred by the Applicant. 
 
Based on the examination of the above mentioned application, the Investigating Authority initiated an investigation on 24 August 2012 and announced it in the national daily newspaper 
("Bisnis Indonesia"), and notified the WTO on 4 September 2012 through G/SG/N/6/IDN/19. 
 Referring to the WTO document G/SG/N/7/IDN/1 circulated on 5 December 2012, the GOI has imposed the Provisional Safeguard Measure with the issuance of the Minister of Finance’s 
Regulation Number 193/PMK.011/2012 dated 5 December 2012, which has been promulgated in 
the Berita Negara (State Gazette) of the Repub lic of Indonesia Year 2012 Number 1221 on the 
same date. 
 
Questionnaires were issued to all known producers not just cited in the application, but to both APTINDO and non-APTINDO members consisting nineteen producers known to exist. There are 
nine producers that completed questionnaires. However, as two companies namely, PT. Golden 
Grand Mills and PT. Sriboga Raturaya, declined on-site verifications, the KPPI decided that they be excluded from the domestic industry which as a consequence, is represented by seven producers. 
The seven producers are hereby referred to as the domestic industry. 
 
Questionnaires were also issued to twenty four importers with only three fully completed questionnaires were received. 
 
2. Subject Good  
Wheat Flour under HS Code 1101.00.10. G/SG/N/8/IDN/15 • G/SG/N/10/IDN/15 
 
- 2 - 
 
   
3. Period of Investigation  The period of investigation covers 2008 to 2011. 
 
4. Major Proportion 
 
Table 1: Applicant and Non-Applicant Prop ortion to National Production in 2011 
No. Description Percentage 
1. Applicant Proportion 86% 
2. Non-Applicant Proportion 14% 
 
Based on table 1, it is confirmed that the Applicant represents the domestic industry.  
5. Views and Comments by Interested Parties  
 In accordance to Article 3.1 WTO Agreement on Safeguards, during the process of investigation, 
the Investigating Authority has provided opportunities to the Applicant, other interest parties, and 
representative of exporting countries to submit th eir views, evidences, and responses. In addition, 
the Investigating Authority held public hearing on 17 January 2013.   
Pursuant to Article 12.4 of the Agreement on Safeguards, the GOI also has arranged a consultation 
with those Members having a substantial interest as exporters of the subject good. The consultation was held on 20 December 2012. 
 
Amongst others, the following issues were raised:  
There were no unforeseen developments to  support the application of measures. 
 With regard to unforeseen developments, it is note d that the general policy of the Government of 
Indonesia (GOI) has been to reduce MFN rates on  the subject goods bearing in mind the demand 
for wheat flour to support the development of br ead and noodles as alternative food staples to 
rice. The gradual reduction of rates from bound levels of 27% in 2004 was intended to gradually open up competition in the wheat flour sector while allowing the domestic industry to become well 
established. Combination of imports and strong domestic industry was considered necessary to 
underpin overall growth in this sector to ensure reliability of supply of key food commodities.  
However, the sharp rise in imports in 2008-2010 of the subject goods could not have been 
foreseen with significant quantities entering below the cost of production of the domestic industry threatening the very viability of a number of domestic producers, and resulting in drastically reduced profits and/or financial losses for the domestic Industry overall. 
 
Increased imports are not recent, sudden,  sharp and significant enough, both 
quantitatively and qualitatively to cause serious injury. 
 
It is noted that on a point to point analysis, imports increased by 27 percent points over the 
period 2008-2011. Within the period concerned, a sharp increase in the order of 46 percentage 
points is noted over the period 2008-2010 an d between 2008-2009, a 21 percentage increase 
rising to 25 percentage points over 2009-2010.   It is also noted that imports increased at a rate relative to production over the period 2009-2010. 
A decline is noted in 2011. 
 The Investigating Authority considers that the purp ose of safeguard measures is to protect against 
serious injury, injury of which may not just be limited to an increase in imports (and the rate of 
increases in imports), but also to the conditions of imports; and the combined impact that volume G/SG/N/8/IDN/15 • G/SG/N/10/IDN/15 
 
- 3 - 
 
  and the condition of such imports has on the market  and the domestic industry. The fact that there 
is a decline in imports in 2011 does not offset the serious injury that occurred before nor does it mean that there is no longer any injury in 2011.  
While the period of investigation confirms a significant increase over 2008-2010 and sharp 
increases in 2009 and 2010, the Investigating Authority concludes that the increase in imports alone does not justify the imposition of me asures nor does the decline in 2011 justify a 
termination of a proceeding. 
 There is no injury because most factors ar e positive such as production, capacity 
utilization, domestic sales, ma rket share and productivity. 
 
In assessing serious injury, it is important not just to consider factors affecting the domestic industry in terms of increases or declines, but to assess the underlying reasons for the trends 
noted. 
 In general, consumption of wheat flour in Indonesia is expanding as downstream demand for 
bread and noodles continues to increase. This has attracted new investments to Indonesia in, 
amongst others, 2010 and 2011. Combination of both increased demand and new investment has inevitably resulted in increased production, domestic sales, and productivity.  
In spite of these positive indicators, the increase in imports over the period concerned is largely a 
consequence of import prices being set below those of the domestic industry in order to gain market share and this has had direct effect on the profitability of the domestic industry whose core 
market remains domestic. Increase production and domestic sales has not benefited the domestic 
industry. On the contrary, due to the condition of imports, the domestic industry overall has suffered several reduced profits and/or financial losses. 
 
The importance of the condition of imports can be  seen from the figures in 2011. Although imports 
declined during this period, the market share of  imports remained large enough to continue to 
influence pricing of wheat flour on the Indonesian market resulting in a domestic industry unable 
to increase prices to cover costs. 
 No valid restructuring plan has been submitte d by the domestic industry to justify the 
imposition of measures. 
 The price sensitive nature of wheat flour is addressed in the restructuring plans proposed to the 
Investigating Authority. In terms of cost of manufacturing, the focus of the domestic industry is to 
improve on yields through the implementation of programs focused on:  
a. Minimizing downtime through preventive and predictive maintenance; 
b. Improvement of climate control systems; 
c. Reduce the disruptive impact of shift rotations; and d. Improve the skill factor of millers. 
 
These improvements are also combined with a program of product differentiation at the marketing level through improving logistics, branding and also offering support for major users of wheat flour 
such as bakeries, etc. 
 While the above restructuring plans will vary betw een producers, a monitoring system is to be 
established to ensure the progressive implementa tion of these plans by the domestic industry 
during the duration of the measures. G/SG/N/8/IDN/15 • G/SG/N/10/IDN/15 
 
- 4 - 
 
  B. DATA OF INCREASED IMPORTS 
Table 2: Volume of Imports 
HS Unit 2008 2009 2010 2011 
1101.00.10 Kg 530,913,723 645,010,029 775,533,828 680,124,975 
Source: Statistics Indonesia (BPS) 
 
As affirmed in Table 2, the volume of imports of  the Subject Good showed an increase, by 21.49% 
from 2008 to 2009, and by 20.24% from 2009 to 2010.  Furthermore, there was a decline of the 
volume of imports by 12.30% from 2010 to 2011. 
 
C. EVIDENCE OF INJURY CAUSED BY INCREASED IMPORTS 
The Investigating Authority examined all data and information available having a bearing on the 
actual condition of the domestic industry. In addition, the Investigating Authority also conducted 
on-site verifications to the domestic industry.  The following table 3 and table 4, contained data and information of the situation of the domestic 
industry, which is provided in indices due to confidentiality of the information concerned. 
 
Table 3: National Consumption and Market Shares 
No. Description Unit Year 
2008 2009 2010 2011 
1 National Consumption Index 100 111 119 133 
2 Market Share of the 
domestic industry Index 100 98 96 101 
3 Market Share of 
Imports Index 100 109 122 96 
Source: Applicants and the Investigating Authority. 
 
Based on Table 3, the Investigating Authority discovered the following facts: 
 1. During the period of investigation, there was an increase of national consumption of the 
Subject Good from 100 in 2008 to 133 in 2011. 
 
2. During the period 2008-2011, the market shar e of the domestic decreased by 6% annually 
and market share of imports increased by 5% annually. 
 
Table 4: The Applicant’s Data of Injury 
No. Description Unit Year 
2008 2009 2010 2011 
1. Domestic Sales Index 100 108 120 133 
2. Production Index 100 108 121 135 
3. Capacity Utilization Index 100 101 109 115 
4. Profit/Loss Index 100 198 220 84 
5. Employment Index 100 99 98 102 
6. Inventories Index 100 194 343 497 
7. Productivity Index 100 109 124 132 
 Source: As verified by th e Investigating Authority. 
 G/SG/N/8/IDN/15 • G/SG/N/10/IDN/15 
 
- 5 - 
 
  Although the domestic industry has been able to increase production and domestic sales which in 
turn has benefited capacity utilization rates and productivity, a sharp decline in profits 
from 2010/2011 onwards is noted and based on the inve stigation, this fall in  profits results from 
an inability to increase prices during escalating raw material costs. As such, the benefit of 
increases in production capacity utilization and do mestic sales has been offset by the reduction in 
net revenues. In addition, it is noted there were relatively sharp increases in inventories due to the holding of stocks by certain producers in the hope of an improvements in pricing. 
 
The Investigating Authority has analyzed the extent to which this reduced profit is attributable to the condition of imports, which in volume terms declined in 2011. In this respect, it is important to bear in mind that wheat flour is a price sensitive commodity and the continued availability of 
imports at prices below the cost of production of  the domestic industry has had a very significant 
adverse impact on the domestic industry. While im ports declined in 2011, the overall market share 
of imports remained significant and sufficient to influence price trends. 
 
From the seven producers constituting the domestic industry, the viability of four the producers was at stake upon which the PSM has been applie d and overall the profitability of the domestic 
industry is not sufficient to justify the investments made. 
 D. OTHER FACTORS THAT MAY CONTRIBUTE TO INJURY 
In order to find whether there are other factors that, beside the increased volume of imports of the 
Subject Good, threaten to cause serious injury to the Applicant, the Investigating Authority has 
also analyzed the following known factors:  
1. The capacity of the domestic industry is in  excess of domestic consumption and exports are 
not sufficient to absorb this overcapacity. In this  respect, the Authority notes that the capacities 
have entered on stream in Indonesia anticipating the increased in consumption that is confirmed 
from the indices above.  
 Although there is an excess of capacity, it is noted that capacity utilization rates have improved beyond what would be considered the break-even  point for a commodity sensitive industry. The 
Authority therefore concludes that the serious injury witnessed is not due to overcapacity, but 
rather the conditions of imports that have severally affected profitability.  
2. Consideration is being given to whether the problem faced by the domestic industry in 
Indonesia is because of the fact that there are no local raw materials. In this respect, the domestic 
industry does rely on imports of wheat and ther efore the cost of production also fluctuates 
according to the vagaries of supply and demand on the international market. 
 In this respect, the Authority considers that it is only reasonable to expect the wheat flour industry 
to adjust prices to raw material costs whether the source of wheat is local or imported and that the 
serious injury witnessed in this case is due to significant volume of imports entering below and/or 
barely above raw material costs which could not have been foreseen. Furthermore, the domestic industry has been able to offset the vagaries of supply and demand through forward contracts and 
reasonable stocks levels. 
 3. An assessment has been made on whether the decline in profitability is due in whole or in 
part to competition between producers constituting the domestic industry. In this respect, it is 
noted that there is intense competition between producers in Indonesia with prices varying between producers. In particular, the well-established producers do not have to absorb startup costs of new investments. On the whole however, the condition of imports in terms of pricing is 
such to have affected not only new investment in Indonesia but also the well-established 
producers.  
4. Consideration has been given to whether the injury is downstream generated due to demand 
in the noodle and bread-making sector. In this respect, there is no evidence to suggest that the decline in overall profitability of the domestic industry is due to price pressure downstream. On the 
contrary, prices of downstream staple products have generally remained strong in line with 
growing demand.  G/SG/N/8/IDN/15 • G/SG/N/10/IDN/15 
 
- 6 - 
 
  Based on the aforesaid findings, the Investigating Au thority is of the view that there are no other 
factors contributing to the threat of serious in jury as suffered by the Applicant, beside the 
increased volume of imports of the Subject Good.  
E. THE CAUSAL LINK 
In accordance to the findings as duly elaborated in Sections C and D, the Investigating Authority 
concluded that there is a strong evidence of a ca usal link between the increased volume of imports 
of the Subject Good and serious injury as suffered by the Applicant. 
 F. PROPOSED MEASURE  
1. In view of the aforementioned conclusion of the Causal Link, the Investigating Authority has 
proposed to the Government of the Republic of Indonesia a Safeguard Measure to be imposed on 
the importation of the Subject Good for a period of four years. Consideration is being given to maintaining and liberalizing the existing provisional safeguard measure or the application of a 
quota under the terms of article 5.2(a) of the Ag reement or to invoke the provisions of 5.2(b). 
 With regard to 5.2(b), a number of Members have requested that measures should apply only to 
the supply country principally responsible or the serious injury suffered. 
 2. The proposed Safeguard Measure to be imposed is now being circulated for inputs from 
relevant government agencies, which form and amount will be elaborated in the notification under 
the Article 12.1(c) of the WTO Agreement on Safeguards. 
 3. The imposition of the Safeguard Measure will be carried out in accordance with the 
Article 2.2 and Article 9 of the WTO Agreement on Safeguards. 
 G. CONSULTATIONS 
In light of the Article 12.3 of the WTO Agreement on  Safeguards, it is hereby informed that prior 
consultation as may be required by those Members having a substantial interest as exporters of the product concerned is scheduled to be carried ou t on 5 June, with a view to, inter alia, review 
the information upon which it is proposed to apply measures on the Subject Good, to exchange 
views on the nature of the measures, and to reach an understanding on ways to achieve the 
objective set out in paragraph 1 of Article 8 of the WTO Agreement on Safeguards.  
Members with a substantial interest as such are required to register with the Indonesian 
Safeguards Committee as to their intention to undertake consultation at no later than 7 (seven) days after the date of the relevant WTO communication regarding this notification being circulated, 
to the following address: 
 
THE INDONESIAN SAFEGUARDS COMMITTEE 
(Komite Pengamanan Perdagangan Indonesia/KPPI) 
Jl. M.I. Ridwan Rais No. 5, Building I, 5th floor, Jakarta 10110 
Telephone / Facsimile: (62-21) 385 7758 
E-mail: kppi@kemendag.go.id 
 
__________