Jayanty Nada Shofa, Jakarta – Indonesia is currently preparing a system that aims to make it as easy as possible for its companies to benefit from the preferential tariffs. The move came after Jakarta noticed that the tariff-cutting trade pacts that it had spent years negotiating remained underused.
Jakarta's export diversification has been gaining speed. Just last week, Indonesia announced the substantive conclusion of the highly anticipated free trade agreement with the European Union (EU). A day later, Jakarta inked a comprehensive economic partnership agreement (CEPA) with Canada – a separate document that also promises substantial tariff eliminations.
While the texts still have some follow-up parliamentary procedures, Trade Minister Budi Santoso revealed Monday that Indonesia already has tens of trade pacts in force, but many of the country's businesses have yet to claim the benefits that the agreements offer.
A certificate of origin (COO) verifies the country of origin of a product. To be specific, countries have what they call preferential COO, which not only declares where a product is from, but also proves that they are eligible for the import duty exemptions offered by a trade pact. According to Budi, some administrative changes are now underway, so businesses will automatically get preferential COOs, thereby automatically getting zero or reduced tariffs.
"The utilization rate [of our trade agreements] only reaches between 60 and 70 percent." That's why we are working on "automatic" preferential COOs. " If our businesses wish to export steel to Canada, they have no choice but to use the preferential certificate of origin issued by our system. They will automatically get the lowest possible rates," Budi said in Jakarta.
The government has been working on this new system for the past three weeks. However, Budi admitted that it would 'take time" for it to be fully effective.
"Let the government take care of the administrative hassle," the minister said.
Under the CEPA, Indonesia and the EU have agreed to eliminate the import tax in over 98 percent of tariff lines when doing business with each other. Official statistics showed that Indonesia's trade with the European bloc topped $30 billion last year, with Jakarta witnessing a $4.5 billion surplus.
Ottawa has agreed to remove 90.5 percent of the import tax on Indonesian goods entering its market. This marks Canada's first-ever bilateral trade pact with an ASEAN nation. Indonesia-Canada trade totaled $2.7 billion between January and July 2025. Southeast Asia's biggest economy, however, saw a trade gap of $689.4 million with Canada over the said period, amidst soaring imports.
Their respective lawmakers will still have to work on the agreements before the tariff cuts can fully enter into force.