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:

1. Conducted by national marine transportation companies;
2. 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]

1. Tanjung Priok Port : Jakarta
2. Merak Port : Banten
3. Harbour Bay Port : Batam
4. Sunda Kelapa Port : Jakarta
5. Batam Center Port : Kepulauan Riau
6. Tanjung Perak Port : East Java
7. Bakauheni Port : Lampung
8. 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]

1. oil and gas survey;
2. drilling;

• off-shore construction;

1. off-shore operation support;
2. dredging;
3. 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.

DISCLAIMER :

This disclaimer applies to the publication of articles by Anggraeni and Partners. By accessing or reading any articles published by Anggraeni and Partners, you acknowledge and agree to the terms of this disclaimer:

During the preparation of this work, the author(s) may use AI-assisted technologies for readability. After using this tool/service, the author(s) reviewed and edited the content as needed for the purposes of the publication.

No Legal Advice: The articles published by Anggraeni and Partners are for informational purposes only and do not constitute legal advice. The information provided in the articles is not intended to create an attorney-client relationship between Anggraeni and Partners and the reader. The articles should not be relied upon as a substitute for seeking professional legal advice. For specific legal advice tailored to your individual circumstances, please consult a qualified attorney.

Accuracy and Completeness: Anggraeni and Partners strive to ensure the accuracy and completeness of the information presented in the articles. However, we do not warrant or guarantee the accuracy, currency, or completeness of the information. Laws and legal interpretations may vary, and the information in the articles may not be applicable to your jurisdiction or specific situation. Therefore, Anggraeni and Partners disclaim any liability for any errors or omissions in the articles.

No Endorsement: Any references or mentions of third-party organizations, products, services, or websites in the articles are for informational purposes only and do not constitute an endorsement or recommendation by Anggraeni and Partners. We do not assume responsibility for the accuracy, quality, or reliability of any third-party information or services mentioned in the articles.

No Liability: Anggraeni and Partners, its partners, attorneys, employees, or affiliates shall not be liable for any direct, indirect, incidental, consequential, or special damages arising out of or in connection with the use of the articles or reliance on any information contained therein. This includes but is not limited to, loss of data, loss of profits, or damages resulting from the use or inability to use the articles.

No Attorney-Client Relationship: Reading or accessing the articles does not establish an attorney-client relationship between Anggraeni and Partners and the reader. The information provided in the articles is general in nature and may not be applicable to your specific legal situation. Any communication with Anggraeni and Partners through the articles or any contact form on the website does not create an attorney-client relationship or establish confidentiality.

By accessing or reading the articles, you acknowledge that you have read, understood, and agreed to this disclaimer. If you do not agree with any part of this disclaimer, please refrain from accessing or reading the articles published by Anggraeni and Partners.

For further information, please contact:

WWW.AP-LAWSOLUTION.COM

P: 6221. 7278 7678, 72795001

H: +62 811 8800 427

Anggraeni and Partners, an Indonesian law practice with a worldwide vision, provides comprehensive legal solutions using forward-thinking strategies. We help clients manage legal risk and resolve disputes on admiralty and maritime law, complicated energy and commercial issues, arbitration and litigation, tortious claims handling, and cyber tech law.

 

S.F. Anggraeni

Managing Partner

fitri@ap-lawsolution.net

 

Reynalda Basya Ilyas

Managing Associate

reynalda.bi@ap-lawsolution.net