Govt to start implementing CIF contract in August

Trade Minister Gita Wirjawan said that the ministry has targeted to implement the use of cost, insurance and freight (CIF) terms of delivery, including for coal by August 1 as part of the government?s move to increase the country?s export value amid the recent trade deficit.

?The implementation could be done as soon as possible since recording (of export value) using this (CIF) mechanism is very clear,? he said as quoted by Bisnis Indonesia on Friday.

Minister Gita predicted that by using the CIF term Indonesia?s total export value until the end of this year could increase by between US$5 billion - US$10 billion.

Gita also claimed that the plan to switch to CIF system from the currently used free on board (FOB) mechanism had been discussed with stakeholders in the business sector.

Meanwhile, chairman of Indonesia Coal Mining Association (ICMA) Bob Kamandanu said that whether an actual trade transaction is to use the CIF or the FOB mechanism would depend on the contract signed with the respective buyer. He said that Indonesian exporters could not force the CIF mechanism if buyers prefer to use the FOB mechanism.

Currently, most Indonesian exporters still utilize FOB system for transporting goods to overseas, through which they pass the risk of loss to buyers who pay the costs of insurance and freight. This however has somehow prompted foreign buyers to choose foreign vessels to carry their cargoes.

In contrast, most importers already use CIF contracts by which the overseas sellers pay the insurance and freight costs. (*)