The Minister of Transportation of the Republic of Indonesia (“Minister“) on December 12, 2017 has issued Minister Regulation number 115 of 2017 on Procedures and Requirements for the Granting of Permit for the Use of Foreign Ships for Domestic Sea-Transportation Activities Other Than the Transportation of Passenger and/or Goods (“Minister Regulation No. 115 of 2017“). This regulation amends Minister Regulation No. 100 of 2016 regarding the same.
The new regulation was issued in consideration that Indonesian-flag jack-up rig/jack-up barge/self-elevating drilling unit, semi-submersible rig, and deep-water drillship (“Special Ships”) are still unavailable or the number is inadequate whilst operation of foreign-flag Special Ships in Indonesia under the Minister Regulation No. 100 of 2016 was limited only until the end of December 2017.
The Minister Regulation No. 115 of 2017 defines the party that eligible to obtain the permit for using foreign ships as ‘project owner’. This definition does exist in the former regulation. It is stipulated in the new regulation that project owner is corporation that has secured contract from government or business entity whose scope of work is for other activities excluding domestic transportation of passenger and/or goods.
The new regulation also emphasizes the requirement of prioritizing Indonesian-flag ships in the procurement process and if the required ships are not available priority must be given to foreign-flag ships with below criteria:
- Foreign-flag ships that will be converted into Indonesian flag before operating in Indonesia and owned by Indonesian entity which majority shareholder is Indonesian citizen
- Foreign-flag ships that purchased by Indonesian citizen or Indonesian entity which majority shareholder is Indonesian citizen and/or its subsidiary which majority shares are owned by Indonesian citizen, and the purchase is financed by leasing company
It is also required in the new regulation that the above foreign-flag ships are furnished with the following documents:
- Leasing agreement between leasing company and Indonesian citizen or Indonesian company and/or its subsidiary which majority shareholders are Indonesian citizen
- Deed of establishment of subsidiary of which majority shareholders are Indonesian citizen or Indonesian company and/or its subsidiary which majority shares are owned by Indonesian citizen
- Statement letter of commitment to convert the vessels into Indonesian flag
The permit to use foreign-flag ships may be granted after at least 1 (one) attempt of procuring Indonesian-flag ship by relevant institution or project owner in accordance with the type and technical specification of the required ship.
Moreover, since under the Minister Regulation No. 100 of 2016 the period of operation of foreign-flag Special Ships was restricted until December 2017, the Minister Regulation No. 115 of 2018 extends their operation period until December 2018.
Article 4 paragraph 5 of the Minister Regulation No. 115 of 2017 provides that permit to operate foreign-flag Special Ships is granted for the period of 1 (one) year and subject to extension. However, the new regulation only allows the operation of foreign-flag Special Ships until the end of December 2018. Hence, since the new regulation was enacted in December 2017, there is a possibility that if the permit is granted after December 2017, foreign-flag Special Ships may only operate in Indonesian waters within less than 1 (one) year and such permit cannot be extended although the regulation says otherwise.
Meanwhile, no change is made in the new regulation regarding the operation period of other types of foreign-flag ships which permit is granted for 1 (one) year period that subject to extension without any limitation.
With regard to the procedures and requirements of obtaining the permit, the Minister Regulation No. 115 of 2017 does not make major changes except those that specifically discussed in the above.
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