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3. Barriers to trade
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3.1 Import restrictions

3.1.1 Prohibition of the importation of shrimps/prawns China

At the end of 2004, the Indonesia Ministry of Marine and Fishery announced without prior notice that Indonesia would suspend the importation of shrimps/prawns originated from China, Brazil, Ecuador, India, Thailand, and Vietnam only on the ground that the above products from these countries were determined by the United States as dumped products. The Chinese side suggests that the Indonesian Government comply with WTO rules by providing sufficient reasons and give a prior notification to the WTO about possible trade-related measures before the actual implementation. Trade measures shall be adopted in such a manner that no unnecessary barriers will be created to normal trade activities. In response, the Indonesian side expressed that currently inspections were being made on shrimps/prawns that were deemed polluted by antibiotics and expected that the import ban on Chinese shrimp/prawn products would be lifted after the completion of the inspection by the end of 2005. However, according to Chinese enterprises, the above ban hasn't been lifted yet.

3.1.2 Import licensing procedure involving motor vehicles and spare parts

According to Regulation No.6/M-DAG/Per/4/2005 promulgated by the Ministry of Industry and Trade on 18 April 2004, only approved importers can import the following products: 1.Spare parts for motor vehicles, including clutch assy, timing belt, bearing wheel, transmission assy and engine block; 2. Chassis engine buses; 3. Vehicle of Completely Knock Down (CKD); 4. The Completely Built Up (CBU) buses. The regulation further requires every implementation of importation of the
goods mentioned above obtain a prior import approval from the MIT. The letter of application must contain the type and quantity of goods to be imported and the appropriation of imported goods. The Ministry reserves the right to refuse import approval. However, the regulation doesn't lay down detailed reference for a possible refusal. At the same time, the Indonesian Government failed to notify the WTO whether the measure falls under the automatic import licensing or not. Therefore, the importing procedure regarding motor vehicles and spare parts thereof is considered lack of transparency.

3.1.3 Import permit regarding sugar products

In September 2004, the MIT promulgated two decrees regarding the importation of sugar. According to the relevant provisions, raw sugar and refined sugar can only be imported by company having recognition as Sugar Producer Importer (Sugar IP). Raw sugar and refined sugar imported by Sugar IP is only usable as raw material for production process and banned to be traded or handed over. Refined sugar industrial product possessed by Sugar IP whose raw material comes from imported raw sugar shall only be traded or distributed to sugar industry and banned from being traded on domestic market.

At the same time, the decrees stipulate that importation of plantation white sugar shall only be carried out by company having status as Sugar Register Importer. Plantation white sugar is not allowed to be imported one month before and two months after the milling season of sugar cane unless domestic production and/or supply of plantation white sugar is inadequate to the need. The decrees require the prices of imported plantation white sugar to be higher than 3410 Rupiah per kilo. However, the threshold is subject to change. Besides, the total amount of importable plantation white sugar is also subject to change according to the domestic demand.

Furthermore, the specific time for the milling season of sugar cane is decided by the Minister of Agriculture. So far, the Indonesian Government hasn't notified the WTO whether the non-automatic importing procedure for sugar falls under quota control or not.

The above importing procedure is believed to be lack of stability and predictability, and has therefore increased the business risks of Chinese sugar importers.

3.1.4 Import restriction on optical disc and machineries and equipments used in the production of optical disc

In Aril 2005, the MIT issued two decrees restricting the importation of optical disc and machineries and equipments used in the production of optical disc. According to the provisions of the decrees, optical disc importers must obtain approva l from competent authorities based on the recommendations of several Indonesian Government agencies. Every importation of optical disc or machineries and equipments used in the production of optical disc shall be subject to verification or technical traceability inspection in advance at the country of loading by a surveyor appointed by the Indonesian Government. This has increased the cost of Chinese exporters.

3.2 Discriminatory taxes and fees on imported goods

The Indonesian government announced that as of 1 January 2005, luxury duty on certain imports is removed, involving food, beverages(including diary products, fruit and vegetable juice, non-alcoholic drinks), cosmetics and certain carpets (excluding those containing coconut fiber, silk and wool). However, a 10 percent luxury duty is imposed on refrigeration devices, heating devices, TV sets, sport goods such as angling tools, air conditioning system, tape recorder or video-recorder, radio, camera and photographic devices; a 20 percent luxury duty is imposed on washing machine, dishwasher, clothes dryer, musical instrument, and perfume; 30 percent on motor vessels, other water transportation tools, wood boat, small boats (excluding those used for national or public transportation), certain sport goods; 40 percent on drinks with an alcohol content below 15 percent, leather and artificial leather goods, woolen carpet, crystalware, footwear, chinaware; 50 percent on blankets made of fine animal hair; 75 percent on drinks with alcohol content above 15 percent, gems or mixed products, yacht. As the abovementioned products occupy a large share of the market, the luxury duty is in fact targeted at imported products. As China exports nearly half of these products to Indonesia, the imposition of luxury duty on these products has adversely affected Chinese exports to Indonesia.

3.3 Technical barriers to trade

All the imported medicines must be registered with the Balai Pengawas Obat dan Makanan (BPOM) before they are processed or sold in Indonesia. There are two types of registration procedures: one for traditional medicine, the other is for chemical medicine. Different requirements are made with regard to different procedures. The registration of chemical medicine should be made by the Indonesian sales agent or wholesaler appointed by the manufacturer of such medicine in the exporting country. If the medicine is to be produced in Indonesia, an application is to be submitted by an appointed Indonesian medicine manufacturer. Such measure deprives the manufacturer from the exporting country of the right to register the medicine and tends to hurt the interests of export enterprises.

3.4 Trade remedies

Up to 2005, Indonesia has initiated 4 antidumping and 2 safeguard investigations against Chinese products, mainly involving Ferro Silicon Magnesium, steel pipe, Calcium Carbonate, Paracetamol, wheat flour, porcelain and non-porcelain ceramic tableware. The investigations on Calcium Carbonate, Paracetamol, and wheat flour ended up with the imposition of antidumping measures by Indonesia. On 17 August 2005, Indonesia initiated a safeguard investigation involving lighters.

As of 11 November 2005, the Indonesian Government started to impose a definitive anti-dumping duty of 9.5 percent on wheat flour originated from China. The determination was made based on inadequate facts, which has hurt the Chinese enterprises involved. First of all, the applicant of the case, BOGASARI Flour Company owns 90 percent of the flour market in Indonesia while flour exported from China has less than 3 percent of the market share; secondly, the export of flour from China to Indonesia dropped by 20 percent in 2003 when the applicant enjoyed a substantial increase in output and selling price, resulting in an increase of 10 percent in net profit of the same year. Therefore, it is unlikely that the export of flour from China has caused injury or affected the flour industry of Indonesia. Besides, the Indonesia Anti-dumping Commission' ruling to take antidumping measures against Chinese flour is not justified as the Indonesian Government has already raised the import duty for flour from 5 percent to 30 percent.

In January 2006, a final determination was made regarding the safeguard investigation against porcelain and non-porcelain ceramic tableware. As of 2006, the aforementioned imports are subject to safeguard for 3 years. China is the major exporting country of porcelain and non-porcelain ceramic tableware to Indonesia. The Chinese side believes the following problems existed in the investigation: 1. The applicant, PT Queen Porcelain Company, is not a qualified applicant because the company had only 10 percent of the domestic production capacity, closed down in November 2003, and ceased to produce the investigated products; 2. The safeguard measure covers two kinds of products which are not like products or directly competitive products. Therefore, the practice is inconsistent with the WTO Agreement on Safeguards; 3. There are problems regarding the determination of "unpredictable development".

Apart from that, some Chinese enterprises reported that as of January 1 2005, the Indonesian Government raised the import duty for the investigated products from 5 percent to 30 percent. It took place at the same time when the trade remedy measures were adopted. Such unreasonable double protection of its domestic industry is not good for the normal development of bilateral trade relations. The Chinese side shows concern over the matter and expects the Indonesian Government to be prudent when imposing trade remedy measures.

3.5 Export restrictions

In June and July 2005, the Indonesian Government issued two regulations, putting in place a quantitative control on the export of domestic mixed rattan and semi-prepared rattan. According to the regulations, mixed rattan with a diameter of 4-16mm can be exported in a certain quantity; the companies that can export rattan shall be companies or individuals already obtaining recognition from the competent authority; exporters must submit applications on a three- month basis for the allocation of quantity and the submitted applications shall be completed with the planning of export and domestic selling for three months approaching; besides, every execution of the rattan export shall be subjected to verification or export technical surveillance to be done by experienced independent surveyors, with the cost arising there from to be borne by the exporters.

The above two regulations was adopted in order to guarantee Indonesia's domestic supply of rattan. However, they violate Article XI of GATT1994 for dominating general quantitative restrictions. As every year Chinese enterprises import a large number of rattan products from Indonesia, the above restrictions not only increase the import risk of these enterprises, but also increase the cost of import arising from frequent pre-shipment inspections. Therefore, the Chinese side expresses concern over the matter.

3.6 Inadequate intellectual property right protection

In Indonesia, there has been malicious trademark squatting of famous Chinese names such as "TONG REN TANG", "PIENTZEHUANG", "YUNNAN BAIYAO" "PHOENIX BICYCLE". After obtaining trademark ownership of the above names, the trademark squatters often filed lawsuits against the legitimate agents appointed by Chinese manufacturers for trademark infringement. The Indonesian police either made arbitrary arrests of these agents or impose fines on many occasions so that many famous and high-quality Chinese products were forced out of the Indonesian market. As a result, there are often fake Chinese products in the Indonesian market which were exported deliberately from those who specialize in making fake products in China.

It is also reported by some Chinese enterprises that corruption exists in the Indonesian judicial and law-enforcement bodies. When there was an IPR infringement case against the local people, even though there was sufficient evidence provided by the Chinese enterprise, it was difficult for the Chinese party to win the case. Even though the case was eventually won, the enforcement was so difficult and involved such high cost that often these Chinese enterprises were compelled to give up the judicial compensation. After consultation with the Chinese side, the Indonesian side has agreed to establish a work team dedicated to IPR enforcement and supervision so as to enhance and improve domestic IPR enforcement and relevant policy implementation. While welcoming the above gesture, the Chinese side suggests that the Indonesian Government put in place a sound system on the protection of IPR with an enforcement procedure that won't create an obstacle to legal trade activities.

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