On 12 January 2014 Indonesia’s ban on the export of ore and other unprocessed minerals took effect, subject to temporary exceptions. These exceptions — for  copper, manganese, iron, lead and zinc concentrates — were established by regulations signed by  President Susilo Bambang Yudhoyono and Minister of Energy and Mineral Resources (MEMR) Jero Wacik  on 11 January 2014. The controversial export ban has been anticipated since issuance of Indonesia’s  2009 Mining Law, which stipulates that mining products must be processed and purified domestically.

The MEMR regulation provides details on the implementation of the export ban and its exceptions.  Among other things, the MEMR regulation specifies the level of processing or purification required  for certain minerals prior to export and the basic procedures for obtaining approval to export  these minerals. Further details regarding the export approval process have been  stipulated by  Indonesia’s Ministry of Trade.

Temporary exceptions from the ban for copper, manganese, iron ore, lead, and zinc concentrates  (which meet specified purity levels) will be available until 11 January 2017. In order to benefit  from these temporary exceptions, the relevant company must commit to developing smelter facilities  within Indonesia (either independently or in collaboration with other parties) and meet various  other requirements. Authorized exports of concentrates will be subject to a special export tax, set  at 20 percent (excepting copper concentrate, for which the tax is initially set at 25 percent) for  the first half of 2014, increasing every six months until reaching 60 percent in the second half of  2016.

Nickel, tin, gold, silver, and chromium are not eligible for exception from the export ban.

Indonesian industry groups have expressed intention to challenge the legality of the ban.  Indonesia’s Mineral Entrepreneurs Association reportedly filed suit at the Constitutional Court  regarding the legality of the new regulations on 16 January 2014. Others may enter the fray; in  2012, the Indonesian Nickel Association and the Association of Indonesian City and Regional  Governments successfully challenged aspects of a predecessor regulation regarding domestic  processing and refining. For further information on the background of this recent development, the predecessor regulations and considerations relating to smelter project development  in Indonesia, please see the Hogan Lovells’ 2012 bulletin “Investment in Indonesia’s mineral  refining and processing sector: value-added regulations and industrial policy” (1 August 2012).