INDONESIA – MEASURES RELATING TO RAW MATERIALS REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
Document: REQUEST FOR CONSULTATIONS BY
Date: 27 November 2019
Document codes: WT/DS592/1; G/L/1345; G/SCM/D127/1
Complainant: EU
Respondent: Indonesia
Third parties: Brazil, Canada, China, Japan, South Korea, India, Russia, Saudi Arabia, Singapore, Taiwan, Turkey, Ukraine, UAE, United Kingdom, U.S.
Dispute stage: Panel
Agreements cited: GATT 1994  GATT 1994

INDONESIA – MEASURES RELATING TO RAW MATERIALS
REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
The following communication, dated 22 November 2019, from the delegation of the European Union
to the delegation of Indonesia, is circulated to the Dispute Settlement Body in accordance with
Article 4.4 of the DSU.

My authorities have instructed me to request consultations with the Government of Indonesia
pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement
of Disputes (DSU), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994)
and Article 4.1 of the Agreement on Subsidies and Countervailing Measures (ASCM) with regard to
various measures concerning certain raw materials necessary for the production of stainless steel,
as well as a cross-sectoral import duty exemption scheme conditional upon the use of domestic over
imported goods.

1. Measures at issue

This Request covers restrictions on expor ts of nickel, including an actual prohibition to export and
additional requirements enforced during a partial relaxation of the prohibition, notably domestic
processing requirements and a domestic marketing obligation; as well as export licensing
requirements. Domestic processing requirements also apply to iron ore and chromium, as well as to
coal; while the domestic marketing obligations also extend to coal products. With regard to export
licensing requirements, this Request also covers metal waste and scraps as well as coal and coke.

In addition, this Request covers a preferential import duty exemption scheme for companies engaged
in either the establishment or modernisation of a factory, including an extended duty exemption
period conditional upon certa in local content requirements in terms of the use of machinery,
installation, appliances or utensils.

a. Quantitative restriction on exports

As part of the implementation of a national plan to develop certain downstream industry sectors
including that of stainless steel production, Indonesia introduced a number of limitations on exports
of raw materials. In particular, exports of nickel ore were prohibited in Indonesia in 2014. In 2017,
Indonesia partially relaxed the export ban by temporarily allowing expor ts of certain minerals,
including nickel ore with a concentration below 1.7%, subject to certain additional requirements (see
below). It was foreseen that these requirements be temporary and that the full export prohibition
be reinstated on 11 January 2022 . However, in August 2019 Indonesia 's Ministry of Energy and
Mineral Resources (MEMR) established that the validity of certain documents necessary to export
low-concentration nickel ore expire on 31 December 2019, thereby effectively reinstating the total
export prohibition of nickel ore as of 1 January 2020.

The temporary permission to export low-concentration nickel ore has been without prejudice to the
continued prohibition to export nickel ore with a concentration above 1.7%, which may not be
exported even during the temporary relaxation of the export ban. Exports of nickel ore is also subject
to the additional export requirements as described below.
WT/DS592/1 • G/L/1345 • G/SCM/D127/1

b. Domestic processing requirements

Exports of certain mining products are subject to them undergoing an added value enhancement
through certain processing and/or purification activities in Indonesia as determined by the MEMR.
This obligation is directed to holders of production permits and applies, among others, to nickel ore,
iron ore and chromium, as well as to coal and coal products. As a result, minerals that have not
undergone such processing and/or purification operations, as required by law, may not be exported.
This obligation does not apply in cases of domestic interest or research and development.

c. Domestic marketing obligation

The MEMR stipulates the quantities and types of minerals and coal that are necessary to fulfil
domestic needs in Indonesia and, on that basis, the quantitie s and types of minerals and coal that
may be exported. Exports of the relevant products may therefore only occur once domestic needs
for minerals and coal have been satisfied and consequently in the quantities determined accordingly.
This obligation appears to apply to a number of minerals including nickel as well as to coal.

d. Export licensing

Licenses from the Indonesian authorities are required to export certain raw materials for the
production of stainless steel, notably nickel ore, metal waste and scraps, and coal and coke. In all
cases, the legislative framework in Indonesia lacks necessary details on the granting of export
approval.

Nickel ore with a concentration lower that 1.7%

Nickel ore with a concentration lower that 1.7% may only be exported provided that the holder of
the production permit has used nickel with such level of concent ration in at least 30% of its total
input capacity in the purifying facility; and that it has built or is building a purifying facility, whether
independently or in cooperation with others.

Exports of nickel ore are subject to approval by the Director General of Foreign Trade at Indonesia's
Ministry of Trade (MOT). The application for export approval must contain a number of information
and documents including a recommendation from the Director General for Minerals and Coal at the
MEMR. Such recommendation is conditional upon holders of the permits building refining facilities in
Indonesia. There are no additional details in the applicable legal documents on whether any
additional criteria apply in the decision-making process.

Metal waste and scraps

In order to obtain the export approval of metal waste and scraps,1 exporters are required to submit
an application to the MOT enclosing a number of information and documents including a
recommendation from the Director of Industry at the Directorate -General of Metal, Machinery,
Transportation Equipment and Electronics Industries in Indonesia's Ministry of Industry (hereinafter,
MOI). The applicable legislative instruments contain no further details on whether the issuance of
the recommendation by the MOI is automatic or not for applications that are complete and correct.

Coal and coke

Obtaining a license to export specific coal and coke products is conditional upon registration as a
"recognised exporter" ("ET-Batubara") at the MOT, which is in turn conditional upon submitting an
application to the Director General of the MOT attaching the relevant documents, including a
recommendation from the Director General at the MEMR. The relevant legal instruments include no
further indication on how such recommendation is to be obtained.

e. Prohibited subsidy scheme

The current regulatory framework from the Ministry of Finance (MOF) provides for certain import
duty exemptions (1) in general for companies engaged in building or modernisation of factories, as

1 Including waste and scraps of stainless steel; waste and scraps of alloy steel other than stainless steel
and waste and scraps of nickel.
WT/DS592/1 • G/L/1345 • G/SCM/D127/1

well as (2) more specifically in support of "Industrial Development Areas" ("WPIs"). The relevant
legal instruments as introduced and amended since 2009 provide that companies that are engaged
in the establishment of a new factory ( "building") or modernisation ("development") of an existing
factory may be exempted from import duties on machines, goods and materials for industrial
production over a period of two years with a possible extension of one additional year (2+1). At the
same time, both the general and the specific support schemes provide for the possible extension of
such import duty exemption by another two years (4+1) or even three years (5+1) for
establishments situated in "WPI Potensial II". Such extension is however conditional upon the use
by the importing compa ny benefitting from the duty exemption of at least 30% locally produced
"machinery, …installation, appliances or …utensils…".

While the former scheme appears to be applicable in general, the more specific one appears to apply
to "Industrial Development Areas"("WPI"s) only. The instruments regulating these schemes provide
however that the determination of compliance with any such local content requirement – as a
condition for the extended subsidy measure – is to be issued "by the minister in charge of industry
or the appointed official".

2. Legal and other instruments relevant to the measures at issue

The various measures at issue described above are put in place and evidenced by, and are
implemented and administered through, inter alia, the following legal a nd other instruments,
considered alone and in any combination:

− Law No. 4/2009 "On Mineral Coal and Mining" of 12 January 2009;2

− Government Regulation No. 23/2010 "On the Implementation of Mineral and Coal Mining
Business Activities" of 1 February 2010, as amended by Government Regulation No. 24/2012
of 21 February 2012;3

− Government Regulation No. 1/2017, "On Fourth Amendment of the Government Regulation
No. 23/2010 about the Operation of Mineral and Coal" of 11 January 2017;4

− Ministry of Trade Regulatio n No. 1/2017 "On Export Provisions for Processed and Purified
Mining Products";5

− Ministry of Energy and Mineral Resources Regulation No. 5/2017 "On Enhancement of Value
Added of Minerals Through Activities of Processing and Purification of Minerals Inside the
Country";

− Ministry of Energy and Mineral Resources Regulation No. 11/2018 "On Procedure for the
Granting of Area, Licensing and Reporting in the Business Activity of Mineral and Coal
Mining";

− Ministry of Energy and Mineral Resources Regulation No. 25/2018 "On Minerals and Coal
Business", as amended, including by the Ministry of Energy and Mineral Resources
Regulation No. 50/2018 of 5 December 2018 and Ministry of Energy and Mineral Resources
Regulation No. 11/2019 of 28 August 2019;

− "Ministry of Energy and Mineral Resources Regulation No. 11/2019, dated 30 August 2019,
Regarding the Second Amendment of the Regulation of the Minister of Energy and Mineral

2 Available in English at http://www.apbi-icma.org/uploads/files/old/2013/11/uu_no_4_2009_en.pdf,
last accessed on 19 November 2019.
3 Available in Indonesian and English at
http://www.gbgindonesia.com/en/main/useful_resources/documents/regulations/Government%20Regulation%
20No.%2023%20of%202010%20with%20Amendment%20No.24%20of%202012%20on%20Mineral%20and%
20Coal%20Mining%20Business%20in%20Indonesia.pdf, last accessed on 19 November 2019.
4 Available in Indonesian at
https://papua.kemenag.go.id/files/papua/file/file/ProdukHukum/pp_1_2017.pdf, last accessed on
19 November 2019.
5 Available in English at
http://jdih.kemendag.go.id/backendx/image/regulasi/25000728_Permendag_No._01_Tahun_2017.pdf, last
accessed on 19 November 2019.
WT/DS592/1 • G/L/1345 • G/SCM/D127/1

Resources No. 25/2018 on Mineral and Coa l Mining Business " published on
5 September 2019;

− Ministry of Trade Regulation No. 4/2018 "On Provisions on Exports of Waste and Metal
Scraps" of 10 January 2018;6

− Ministry of Trade Regulation No. 39/2014 "Concerning Provisions on Exports of Coal and
Coal Products" of 15 July 2014,7 as amended by Ministry of Trade Regulation No. 49/2014
amending Ministry of Trade Regulation No. 39/2014 "Concerning Provisions on Exports of
Coal and Coal Products ", Ministry of Trade Regulation No. 52/2018 amending Minist ry of
Trade Regulation No. 39/2014 "Concerning Provisions on Exports of Coal and Coal Products"
and Ministry of Trade Regulation No. 95/2018 amending Ministry of Trade Regulation
No. 39/2014 "Concerning Provisions on Exports of Coal and Coal Products " of
19 September 20188;

− Minister of Finance Regulation No.176/PMK.011/2009 "Concerning the Exemption of Import
Duty on Imported Machines, Goods and Materials for the Building or Development of
Industries within the Framework of Investment " of 16 November 2009 ,9 as amended by
Minister of Finance Regulation No.76/PMK.011/2012 of 21 May 201210;

− Regulation of the Minister of Finance No.105/PMK.010/2016 "Concerning the provision of
taxation and customs facilities for companies in industrial development areas and fo r
industrial areas' companies" of 30 June 2016;11

− Any other instruments through which Indonesia implements and administers the measures
at issue, including letters, circulars or other documents whereby requests are made,
decisions are communicated and/or instructions are imparted; whether between Indonesian
authorities or to individual or groups of companies directly or indirectly involved in exports
of raw materials relevant for the production of stainless steel.

This Request also covers any annexes, appe ndixes, attachments or schedules to the instruments
listed above, as well as any amendments, supplements, replacements, renewals, extensions,
implementing measures or any other related measures.

3. Legal basis for the complaint

The various measures at issue described above appear to be inconsistent with Indonesia's obligations
under the covered agreements, in particular:

− Article XI:1 of the GATT 1994, because by prohibiting exports of nickel ore, by requiring that
nickel ore, iron ore and chromium as well a s coal and coal products undergo specific
processing activities prior to being exported, by requiring that certain amounts of nickel and
coal be sold domestically prior to being exported and by imposing certain export licensing
requirements on nickel ore, metal waste and scraps and coal and coke, Indonesia imposes
measures that restrict exports of raw materials relevant for the production of stainless steel;

6 Available in Indonesian at
http://jdih.kemendag.go.id/backendx/image/regulasi/27010426_Permendag_No__04_Th__2018.PDF, last
accessed on 19 November 2019.
7 Available in English at www.apbi-icma.org/uploads/files/old/2014/08/Permendag-39-2014_english-
version.pdf, last accessed on 19 November 2019.
8 Available in Indonesian at http://inatrade.kemendag.go.id/files/peraturan/240.pdf, last accessed on
19 November 2019.
9 Available in Indonesian at: https://jdih.kemenkeu.go.id/fullText/2009/176~PMK.011~2009Per.htm
and in English at:
www.flevin.com/id/lgso/translations/JICA%20Mirror/english/4494_176_PMK.011_2009_e.html, last accessed
on 19 November 2019.
10 Available in Indonesian at: https://jdih.kemenkeu.go.id/fullText/2012/76~PMK.011~2012Per.HTM
and in English at:
http://www.flevin.com/id/lgso/translations/JICA%20Mirror/english/4770_76_PMK.011_2012_e.html, last
accessed on 19 November 2019.
11 Available in Indonesian at https://jdih.kemenkeu.go.id/fullText/2016/105~PMK.010~2016Per.pdf,
last accessed on 19 November 2019.
WT/DS592/1 • G/L/1345 • G/SCM/D127/1

− Article 3.1 b) of the ASCM, because the specific import duty exemption scheme introduced
by Indonesia in the context of promoting the development of industry and investment and/or
the promotion of economic development in certain regions of the country ( "Industrial
Development Areas " or "WPIs"), provides for an additional (extended) duty exemption
period which is contingent upon the use of locally produced machinery, installation,
appliances or utensils; where such additional support represents the granting of a subsidy
within the meaning of Article 1.1 of the ASCM and making that subsidy contingent upon the
use of domestic goods over imported goods, violates Article 3.1 b) of the ASCM; and

− Article X:1 of the GATT 1994, because Indonesia has failed to promptly publish all measures
of general application relating to the operation of ex port restrictions and the issuance of
export licenses, in such a manner so as to enable governments and traders to become
acquainted with them.

The various measures relating to raw materials necessary for the production of stainless steel
identified in th is Request appear to nullify or impair the benefits accruing to the European Union
directly or indirectly under the covered agreements.

The European Union reserves the right to address additional measures and claims under other
provisions of the covered agreements regarding the above matters during the course of the
consultations.

WT/DS592/1 • G/L/1345 • G/SCM/D127/1

ANNEX

STATEMENT OF AVAILABLE EVIDENCE

For purposes of Article 4.2 of the ASCM, the European Union sets out below evidence available to it
at this time reg arding the existence and nature of the subsidies subject to this Request for
consultations. The European Union reserves the right to supplement or alter this list in the future,
as required:

− Regulation of the Minister of Finance No.176/PMK.011/2009 "Concerning the exemption of
import duty on imported machines, goods and materials for the building or development of
industries within the framework of investment " of 16 November 2009, 12 as amended by
Regulation of the Minister of Finance No.76/PMK.011/2012 of 21 May 201213;

− Regulation of the Minister of Finance No.105/PMK.010/2016 "Concerning the provision of
taxation and customs facilities for companies in industrial development areas and for
industrial areas' companies" of 30 June 2016;14 and

− Any other instruments through which Indonesia implements and administers the measures
at issue, including letters, circulars or other documents whereby requests are made,
decisions are communicated and/or instructions are imparted; whether between Indonesian
authorities or to individual or groups of companies directly or indirectly benefitting from the
import duty exemptions for the "building" or "development" of industry contingent upon the
use of domestic goods and equipment.