RI Breaks EPA Deal on Auto Tariff, Japan Claims

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  • TEMPO.CO, Jakarta - A source in the Japanese auto industry accuses the Indonesian government of violating the agreement stipulated in the Economic Cooperation Agreement between the two countries (IJEPA).

    The source claims Indonesia has not lowered its import tariff rate on cars from Japan as agreed.

    "The situation shows Indonesia's failing to honor an accord in a bilateral economic partnership agreement, which rarely happens in an EPA," the source said as quoted by The Yomiuri Shimbun, yesterday.

    According to a source familiar with the issue, the two countries will hold negotiations in Tokyo on Wednesday and Thursday this week to rectify the situation. Japanese representatives are likely to demand Indonesia to implement the tariffs adhering to the accord in the EPA.

    At a summit meeting in March, Japan and Indonesia confirmed they would reexamine the EPA.

    One of the clauses under the EPA, which went into effect in 2008, stipulates that both governments agreed Indonesia would lower its import tariff on fully assembled Japanese cars with engine capacities of 1,500-3,000cc to 20 percent between 2013 and 2015, and to five percent starting in 2016. But the actual tariff rate remained at 28.1 percent in 2013; 25.3 percent in 2014 and 22.5 percent in 2015.

    The total value of car exports from Japan to Indonesia in 2014 amounted to about ¥41.5 billion. "A difference in the tariff rate of only a few percentage points causes large losses for companies," a source familiar with the situation said.

    Several analysts assume that Indonesia is reluctant to lower rates in a bid to protect local businesses and maintain high state revenues from customs duties. Bilateral negotiations are expected to be tough.

    In a state visit to Japan in late March, President Joko Widodo President and Prime Minister Shinzo Abe agreed to make a general review on the IJEPA to improve and expand trade and investment ties between the two countries.