Benchmark Price Determination Regulation

• Author: William A. Sullivan/Christian Teo Purwono & Partners
• Profession: Licensed Foreign Advocate in Indonesia as well as a Solicitor of the Supreme Court of New South Wales
• Pages: 117-133

CHAPTER 10

Benchmark Price

Determination Regulation

I. Executive Summary

1. Overview

The Benchmark Price Determination Regulation (otherwise known as

“MoEMRR 17/2010”) was issued with legal effect from September 23, 2010,

and by way of the implementation of Article 85 (4) of GR 23/2010.

2. Approach

2.1 Pricing: The Benchmark Price for mining products is to be deter-

mined pursuant to a market mechanism and/or in accordance with

prevailing prices in international markets.

2.2 Holders of Production Operation IUPs/IUPKs for mineral products

are obliged to sell mineral products with reference to the Benchmark

Price subject to certain cost adjustments.

2.3 The Relevant Government Authority will determine the Benchmark

Price for mineral products on a monthly basis.

2.4 Production Operation IUP/IUPK holders must reset metal, mineral,

and coal prices, in the case of term sales, once a year.

2.5 Low-quality coal may be sold at a special Benchmark Price, below

the Coal Benchmark Price, and in accordance with the Low-Quality

Coal Benchmark Price.

2.6 Certain Types of Coal and Coal for Specific Purposes may be sold at

a price below the Coal Benchmark Price following approval from

DGoMC on behalf of MoEMR.

2.7 Reporting: Production Operation IUP/IUPK holders must submit

reports regarding sales of mineral products, on a monthly basis, to

the Relevant Government Authority.

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2.8 Use of Local Service Providers: Sellers of metal minerals and coal

must use:

a. Indonesian flagged transportation services providers;

b. National or domestic insurance companies in the case of CIF

sales; and

c. Verification surveyors approved by DGoMC.

2.9 Other: The Benchmark Price requirement applies to sales of mineral

products to both “arm’s-length”buyers and to “affiliates”of the seller

(i.e., related parties).

2.10 Procedures: The detailed procedures for making permitted cost

adjustments to the Benchmark Price for coal only are set out in

DGoMCR 999/2011 as amended by DGoMCR 644/2013.

2.11 In the case of coal sales made on a FOB basis, the only permitted

adjustments to the Benchmark Price are in respect of the costs

of (i) transshipment, (ii) barge transportation, (iii) survey, and

(iv) insurance.

2.12 In the case of coal sales to buyers in the same island where the coal

is produced, the only permitted adjustments to the Benchmark

Price are in respect of the costs of (i) transshipment, (ii) barge

transportation, (iii) survey, (iv) insurance, (v) truck transportation,

and (vi) train transportation.

2.13 The mechanics of the permitted adjustments of the Benchmark Price

for coal are set out in Appendices 1 and 2 to this Chapter 10.

3. Sanctions

Violations of MoEMRR 17/2010 may result in the imposition of administrative

sanctions as follows:

a. Written warnings;

b. Suspension of sales of mineral products; or

c. Revocation of Production Operation IUP/IUPKs.

4. Transition

Following the introduction of MoEMRR 17/2010:

a. Holders of CoWs and CCoWs must comply with all provisions of

MoEMRR 17/2010 in connection with all sales of mineral products;

b. After not later than six months, spot sales contracts, which were entered

into by the holders of Production Operation IUPs/IUPKs/CoWs/CCoWs

prior to the introduction of MoEMRR 17/2010, must be adjusted so as to

comply with MoEMRR 17/2010; and

c. After not later than twelve months, term sales contracts that were entered

into by the holders of Production Operation IUPs/IUPKs/CoWs/CCoWs

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