Exporters move closer to Jakarta beef resolution

James Nason, 18/11/2012

Exporters who have been working to secure the release of millions dollars worth of frozen beef that has been stranded at Jakarta’s main port for four months are a step closer to a resolution.

Indonesian Customs officials have announced they will release 63 containers of frozen manufacturing beef that have been impounded since mid-July.

The beef is part of a consignment of 118 containers from Australia, New Zealand and the United States that was refused entry into Indonesia due to allegations it exceeded the importer’s allocated quota.

While the release of 63 containers is positive news for exporters who have been losing money by the day as the protracted saga has dragged on, the issue remains far from over.

Indonesian authorities have indicated they will still not release the beef until the full demurrage and port holding costs on the containers are paid, a bill which has accumulated to in excess of $1m over the past four months.

Australian exporters are hoping the Federal Government can assist with their negotiations to have the bill either waived or reduced.

They maintain they acted in good faith because the beef was exported under valid import permits signed by Indonesia’s director general of trade, Deddy Selah, and the port holding fees and demurrage costs were accrued due to Indonesian Government actions and circumstances that were beyond their control.

After months of inactivity and pleas by exporters for senior Australian Government ministers to intervene, minister for agriculture Joe Ludwig sent a letter to his ministerial counterparts two weeks ago, and Australian ambassador to Indonesia Geoff Moriarty last week contacted senior Indonesian Government officials seeking a resolution.

Of the 63 containers that have been released for export (subject to the payment of fees), 61 belong to Australian exporters and two belong to an exporter from New Zealand.

An official list of Australian exporters with beef in the consignment includes Allegro Exports, Dunnett & Johnston, Stella Foods, Green Mountain and John Dee.

It is not known why the remaining 55 containers have not been released.

Principal of Allegro Exports, Geoff Bull, said demurrage fees and port holding costs for his company had been accumulating at a rate of $3000 to $4000 a day since Indonesian authorities seized the consignment in mid-July.

He said the Indonesian importer of his beef had guaranteed to pay the demurrage costs, but the amount was now so high there were questions over whether that would happen.

Australian Government response

In a response to an inquiry by Beef Central last week a spokesperson for Prime Minister Julia Gillard confirmed the Australian Government was aware that Indonesia was processing the release of 63 containers of boxed beef for re-export, subject to payment of demurrage and port costs which are currently being negotiated between the commercial parties.

“We were made aware that the beef was held up by Indonesian Customs, due to anomalies with the import documentation presented by the Indonesian importer,” the spokesperson said.

“This is a serious matter and we were conscious that exporters may not have been paid for their product.

“The Australian government actively sought to have the matter resolved quickly, either by allowing the beef to enter Indonesia or by facilitating its re-export to another market.

“Australian Embassy representatives in Jakarta have been working with the exporters, Australian meat industry representatives and the Indonesian authorities to find a solution.

“The minister (Agriculture minister Joe Ludwig) also contacted Indonesian ministers, seeking a resolution to this matter.”

Despite the Government’s view that it has acted rapidly, Mr Bull says the issue could have been resolved far more quickly and at far less cost to exporters had senior Government officials heeded exporter’s pleas for assistance more than 10 weeks ago.

Mr Bull said he also questioned claims that the Indonesian importer involved lacked the quota to cover the shipment.

“Why would an importer of 20 years standing import 118 containers of meat worth $10 miillion dollars, if he didn’t have, or wasn't assured of getting, sufficient quota?,” Mr Bull asked.

Exporter confidence in Indonesia undermined

The protracted debacle is the latest in an increasingly long line events that are undermining exporter confidence in Indonesia.

Since December last year Australia’s beef and cattle trade to the country has been impacted by a series of sudden market changes that have negatively impacted on exporters and importers.

These have included severe quota cutbacks, the imposition of a restrospective 5pc tariff on cattle imports, a new requirement to provide full pedigree history on imported breeders and most recently the loss of control of millions of dollars worth of exported beef.

Mr Bull said he once sold more than $50 million of boxed beef a year into Indonesia but is now seriously questioning whether the risks of dealing with the market are becoming too great.

In most other markets, he said, the process of releasing beef that had not entered the country for re-export would take a few days.

He said the unpredictability of the Indonesian bureaucracy and the delayed response by senior Australian Government figures to intervene on behalf of exporters added to the risk.

“So far this has taken four months and we still aren’t there yet,” he said.

“I’ve been an exporter for more than 30 years but I think I’ve lost 10 years of my life over this.”

Market unpredictability

Exporters dealing with Indonesia can be required to navigate a complicated bureaucratic system and a constantly changing trading environment that does not lend itself to clarity or certainty.

Indonesia’s Central Government is made up of a coalition of more than 20 parties, and each ministry – such as the department of trade, the department of agriculture, the department of finance – is controlled by a different political party.

Mr Bull’s theory is that the exported beef hold up may have been orchestrated by a senior political-party figure in Indonesia under a plan to hold the beef until such that time that exporters were forced to abandon the product, so it could then be seized and resold into the meat-starved Jakarta  market for a massive profit.

“Meat prices in Jakarta have risen 100-150 percent because of shortage, and there are 2000 tonnes of top quality meat sitting there,” Mr Bull said.

“That meat would bring huge prices in Indonesia.”

Importer view

A member of Indonesia’s meat import industry, who declined to be quoted, told Beef Central that many people were suffering as a result of the long-running trade impasse, including a large number of distributors who had paid for the product upfront.

He said the containers had now been held for so long that the demurrage charges would be extremely high, which raised questions over the importer’s capacity to cover the charges.

He explained that to receive a permit, an importer had to have a recommendation from the Department of Agriculture before he could apply for an import permit from the Department of Trade.

He speculated that it was possible the importer had used political connections to negotiate to receive import permits without having secured the necessary quota.

“The last permit recommendation issued per importer is only about 500 tonnes for established players.

“So could it be that the importer with some connection was able to get permits from trade without recommendations from agriculture?

“If that's true, the permits would not be considered valid by quarantine department which inspect documents at the port, which is under the agriculture department.”

He said the importer involved was a not a member of ASPIDI so the association was not in a position to help.

Demurrage ngotiations continue

A spokesperson for Australian minister for trade Craig Emerson told Beef Central on Friday the Australian Government was currently working with industry and Indonesian authorities as a matter of urgency to find a resolution to the detained boxed beef.

“The Australian Embassy in Jakarta has assisted Australian exporters to apply to Indonesian Customs to release Australian containers, including for re-export. 

“Australian officials are helping to bring together relevant parties to resolve the issue of the demurrage costs, which is a commercial matter between exporters and the port authority.”


Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


Get Beef Central's news headlines emailed to you -