Indonesia: Changes in Beef Import System Could Lead to Surge in Shipments

Following an announcement in late August that Indonesia would abandon its beef import quota system, trade authorities have stopped placing quantitative restrictions on beef and live cattle imports.

Importers seeking permits for the fourth quarter 2013 ordering and shipping period received approvals for all quantities for which they applied, according to monitoring conducted by USMEF in Jakarta in early December. Although the volume of orders remains unknown at this point, traders estimate that between 45,000 metric tons (mt) and 50,000 mt were booked for the fourth quarter. This is more than double Indonesia's beef import volume for the first nine months of the year (21,460 mt).

In late August and early September, Indonesia's Ministry of Agriculture and Trade Ministry issued similar but separate announcements stating that beef imports would be allowed without volume restrictions as long as the domestic fresh beef price in traditional markets remained above $6.33 per kilogram (about $2.88 per pound). The policy announcement referenced Indonesia's high beef prices, which have curtailed consumption but simultaneously encouraged more aggressive domestic slaughter and a reduction in the national herd size.

"Indonesia has a stated policy of achieving self-sufficiency in beef, but this new policy appears to represent a shift in priorities to tackling the country's high beef prices," said Joel Haggard, USMEF senior vice president for the Asia-Pacific region. "As of last week, Indonesia's published beef price was $7.77 per pound."

The new system does not end all restrictions, however. Qualified importers need to apply to both the Ministry of Agriculture and Ministry of Trade for import permits. And although the Ministry of Agriculture's technical import permit is valid for one year, the Ministry of Trade has now established a quarterly system for application, ordering and importation. Specifically, shipments must be imported and presented for inspection and customs clearance before the end of each quarter.

"The new quarterly import system puts U.S. suppliers at a disadvantage because of long shipping times," said Sabrina Yin, USMEF-ASEAN director. "The ordering window spans only a few weeks."

Permit holders who fail to import 80 percent of their allocations for two consecutive quarters will not be issued permits for the following two years. This month, USMEF has visited with Indonesian authorities to discuss the specific challenges of the new quarterly import system to the United States. Further representations have since been made by USDA-Jakarta.

Haggard noted that while importers are pleased with the relaxation of import quotas, concerns remain over whether the system will remain intact through next July's presidential election, which could bring major political realignment and shifts in policy priorities. Indonesian trade authorities have asked importers to state their full-year 2014 trade intentions, which collectively could exceed 100,000 mt, according to the trade association representing Indonesian beef importers. This would exceed the record volume of imports (just over 91,000 mt) realized in 2010.

Rumors have also been circulating that Indonesia could approve imports of Indian and Brazilian beef, but such a change is unlikely in the short term.

"We see significant pent-up demand," said Haggard. "The fact that the Rupiah (Indonesian currency) has depreciated 22 percent year-to-date has not staved off orders."

"If the United States can get approval to lengthen delivery times beyond three months, it could be more of a mainstream player in the market," added Yin.

At its 2011 peak, Indonesia was a top 10 market for U.S. beef and beef variety meat exports, totaling 17,847 mt valued at $28.2 million. Through the first 10 months of this year, U.S. exports totaled 2,137 mt valued at $8.9 million, ranking the United States a distant third in the market behind Australia and New Zealand. The trend is encouraging, however, as a large percentage of this total (1,694 mt valued at $4.25 million) was exported between Sept. 1 and Oct. 31. Through September, Indonesia's total beef imports were valued at just $139 million, compared to $224 million during the same period in 2011. However, large October export totals for Australia, New Zealand and the U.S. suggest that this gap will narrow by year's end.

Efforts to rebuild the level of U.S. exports to this market are ongoing. A number of U.S. beef plants are awaiting review and approval by Indonesian authorities. During early December meetings in Jakarta, USMEF was told that facilities will no longer be preapproved through "desktop" reviews of submitted applications. USMEF and USDA urged Indonesian officials to plan and undertake a long-delayed U.S. beef audit trip, and officials have now stated that such a trip could take place during the first quarter of 2014. The U.S. is also still pursuing a WTO case against Indonesia's import restrictions - more information on this case is available online from the USTR and WTO websites.