Expensive logistics costs: Illegal levies strangling players
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Biaya logistik mahal: Pungli makin mencekik pebisnis
28 October 2021
By: Lim Fathimah Timorria and Hendra Wibawa
Bisnis, Jakarta – Importers are pressing the government to eliminate additional costs for container services outside of ports demanded by cargo agents in order to not burden players.
Indonesia Importers’ Association (GINSI) Central Executive Board Chairperson, Subandi, said that the costs increased significantly from before the pandemic, and it had forced players to adjust their prices amid the global logistics costs increase.
He complained that the additional costs were unclear illegal levies demanded by cargo companies. The illegal levies can reach around Rp1 million to Rp3 million per container.
“The costs to deliver goods to Indonesia refer the global prices, and [costs] at ports have been accounted for. However, there is no benchmark for costs outside of ports. So, it is up to the agents, while importers can do nothing about it,” he stated on Wednesday (27/10).
Based on the invoice copy received by Bisnis on Tuesday (26/10), it was revealed the total cost that must be paid reached Rp118.7 million with a container deposit of Rp40 million.
Subandi explained that the total cost was far higher than the cost for the same service at ports.
Importers usually only pay around Rp45 million for every delivery order (DO).
“Every cost increase significantly impacts the price of goods. Moreover, it is currently wilder than it was before the pandemic. How can the total cost reach Rp160 million?” he affirmed.
He predicts that the additional costs are related to the ongoing economic recovery as import performance is starting to go back to normal after months of being imbalanced with export activities.
“As exports and imports are starting to go back to normal, cargo agents with unclear permits are buying container space from shipping companies. In other words, they buy up tickets then they sell them to trade players with a higher price.”
Indonesian Exporters Association (GPEI) Secretary General, Toto Dirgantoro, also reported that there were illegal levies conducted by freight forwarding companies.
According to him, usually, illegal levies are conducted by demanding additional costs for export container shipping.
“It is conducted by forwarding [companies] on less load containers (LCLs) and full containers that go through the forwarding [companies],” Toto said.
He continued that freight forwarding companies demanded up to Rp250,000 for services that officially costed Rp100,000. The additional costs are stated as administrative costs.
“We must also pay US$95 in rupiah for terminal handling charges to the shipping companies, but the exchange rate is up to the shipping companies. There is no set exchange rate. This is what causes the high costs. Moreover, for LCLs, the costs at container freight stations are also expensive,” he stated.
Requires complete evidence
Meanwhile, Indonesian National Shipowners’ Association (INSA) Central Executive Board Chairperson, Carmelita Hartoto, declined the illegal levies allegations made by cargo companies to importers.
She said that her association did not find any proof of the alleged illegal levies. Hence, Carmelita is asking GINSI to explain in detail the report to citizens so that there would be no misunderstanding on the allegation.
“We from INSA as an association did not find [proof of the illegal levies] as the association does not conduct business,” she stated through a written statement on Tuesday (26/10).
According to her, illegal levies will not have invoices. On the other hand, referring GINSI’s report, several importers that admitted to being victims of illegal levies receive invoices for the import.
“Hence, recordings of the illegal levies are required so that we do not take the wrong action,” she stated.
On another occasion, Foreign Trade Acting Director General, Indrasari Wisnu Wardhana, stated that the Trade Ministry was continuously communicating with shipping companies to allocate space on ships for players in Indonesia.
Until now, the lack of space on ships has increased the tariff of container shipping on international routes.
“We are working together with partners in Kadin Indonesia (Indonesian Chamber of Commerce and Industry). We are communicating with main line operators (MLOs) to allocate space on their ships. Containers are no longer an issue, but the current issue is the space,” he stated.
According to him, shipping on international routes in Indonesia is dominated by foreign companies, which makes it difficult for Indonesia’s foreign trade activities.
“However, hopefully there are less challenges faced by players. We are continuously communicating with MLOs and supporting players as the authority on ships are held by the Transportation Ministry.”
Disruptions in global logistics started from imbalanced international trade. Goods delivered in containers shipped using sea transportation modes for exports and imports are trapped at main ports in Europe and the United States of America (USA).
Wisnu explained that the trade war between the USA and China triggered the scarcity of containers. The trade relationship between the two countries triggers quality disparity of long-distance sea transportation services, such from Asia to the USA and from Asia to Europe.
“China also repositioned and paid expensive prices so that containers outside of China could be returned to China,” he stated.
China’s steps are responded by MLOs by placing ships and repositioning containers to several hub ports in China, such as Shanghai, Shenzhen, Ningbo-Zhoushan, and Guangzhou. This is causing container scarcity and expensive ocean freight.
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