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Q and A Session on Cabotage Principle in Indonesia: Regulation and Exceptions
Cabotage Principle in Indonesia: Regulation and Exceptions
Setyawati Fitrianggraeni, Reynalda Basya Ilyas, Cassey Jovenia
Q: What is cabotage principle and how is it regulated in Indonesia?
A: The cabotage principle is a principle that restricts foreign flagged ships and manned by non-citizen crews to carry goods or transport passengers within the domestic waters. This principle applies in Indonesia and was first enforced in Presidential Instruction Number 5 Year 2005 concerning Empowerment of National Shipping Industry. Subsequently, Article 8 of Law Number 17 Year 2008 concerning Shipping as last amended by Government Regulation in Lieu of Law Number 2 Year 2022 (“Shipping Law”) provides a provision regarding cabotage in domestic marine transportation as follows:
- Conducted by national marine transportation companies;
- Uses Indonesian flagged ships; and
- Manned by ship crews with Indonesian citizenship.
This regulation is made to implement the cabotage principle in order to protect the country’s sovereignty, support the embodiment of Wawasan Nusantara, and gives the domestic shipping company as much opportunity in the market.[1]
Q: What if a foreign flagged companies conduct marine transportation activities in Indonesia?
A: Foreign flagged ships may still carry marine transportation activities to and from Indonesian ports. This is under the condition that the ports are open to international trade and must appoint a national company as their general agent.[2] The law does not elaborate what is considered as ports that are open to international trade, however international trade can be defined as trade carried by parties from different states which generally are in form of export and import transaction.[3] Below is a list of Indonesian ports that are open to international trade:[4]
- Tanjung Priok Port : Jakarta
- Merak Port : Banten
- Harbour Bay Port : Batam
- Sunda Kelapa Port : Jakarta
- Batam Center Port : Kepulauan Riau
- Tanjung Perak Port : East Java
- Bakauheni Port : Lampung
- Soekarno-Hatta Port : Makassar
Furthermore, for a foreign shipping company to appoint a national company as their general agent in Indonesia, the law requires a Letter of Appointment.[5] The appointed general agent will take care of the foreign shipping company’s ships’ operational and commercial matters.[6]
Q: Are there other exceptions on the cabotage principle in Indonesia?
A: Foreign flagged ships may sail in Indonesia to carry marine transportation activities outside of carrying passengers and/or goods, as long as there is no adequate amount and schedule of Indonesian flagged ships to conduct the activities, moreover, a permit must be first obtained by the foreign vessel.[7] Below are activities outside of carrying passengers and goods:[8]
- oil and gas survey;
- drilling;
- off-shore construction;
- off-shore operation support;
- dredging;
- salvage and underwater works;
- power plant; and
- port construction
[1] Elucidation of Article 8 of the Shipping Law.
[2] Article 11(4) of Shipping Law.
[3] Rinaldy E, Kamus Perdagangan Internasional (Indonesia Legal Center Publishing for Law and Justice Reform 2006), ‘Perdagangan Internasional’ 275
[4] ‘Panduan Penting Impor Barang Melalui Transportasi Laut’ (hukumonline.com, 10 July 2024) <https://pro.hukumonline.com/a/lt668e97b633da7/panduan-penting-impor-barang-melalui-transportasi-laut/#_ftn46> accessed 5 October 2024.
[5] Article 76 of Ministry of Transportation Regulation Number PM.59 Year 2021 concerning Implementation of Services Business Related to Water Transportation (“MOTR 59/2021”)
[6] Article 72(1) of MOTR 59/2021
[7] Article 14A of Shipping Law; Article 206A of Government Regulation Number 22 Year 2011 concerning Amendment to Government Regulation number 20 Year 2010 on Water Transportation (“GR 22/2011”).
[8] Article 206A of GR 22/2011; Article 2 of Ministry of Transportation Regulation Number PM 2 Year 2021 concerning Procedures and Requirements for the Granting of Approval for the Utilization of Foreign Vessels for Other Activities other than Transport of Passengers and Goods within Indonesian Waters.
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