New Compliance Obligations in the Shipping Sector Based on Law Number 66 of 2024
Summary
Law Number 66 of 2024 on the Third Amendment to Law Number 17 of 2008 on Shipping (“Law 66/2024”) was enacted and took effect on 28 October 2024, except for the provisions in Article 29 paragraph (2) on joint venture (JV) requirements in water transportation activities and Article 158A on the obligation to register vessels for joint venture companies with foreign participation, which will come into effect one year after promulgation, i.e., on 28 October 2025.
Law 66/2024 was adopted to adjust several provisions in the Shipping Law that are considered inconsistent with current developments, challenges, and legal needs in the implementation of shipping. The amendments aim to address the high logistics costs, strengthen and empower traditional shipping (pelayaran rakyat), enhance the effectiveness and efficiency of port affairs’ management, and optimize the institutional role in the shipping sector, in line with the State’s obligation to protect the nation, promote public welfare, and strengthen national resilience.
Background and Context
Law 66/2024 was enacted based on the following considerations:
First, to establish a sovereign and equitable shipping system that is logistically efficient and capable of strengthening national resilience as an integral part of the national transportation system.
Second, the implementation of shipping has long faced significant challenges, such as persistently high logistics costs. There is an urgent need to strengthen and empower traditional shipping, improve management and governance of ports to be more effective and efficient, and optimize the roles of relevant institutions.
Third, several provisions in Law Number 17 of 2008 on Shipping (“Law 17/2008”) in conjunction with Law Number 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law (“Job Creation Law”) are no longer relevant or adequate to address current developments, actual issues, and legal needs in modern shipping. Therefore, this third amendment is deemed necessary to ensure that Indonesia’s shipping legal framework remains adaptive, responsive, and supportive of national development objectives.
Comparison with Previous Regulations
The following table compares several aspects of regulation between Law 17/2008 in conjunction with the Job Creation Law and Law 66/2024:
Key Provisions
Stricter Requirements for Joint Ventures and Vessel Registration
Law 66/2024 imposes stricter requirements for joint venture (JV) entities engaged in sea transportation with foreign partners and for the registration of vessels operated by such entities, as regulated in Articles 29(2) and 158A:
- The JV must be majority-owned by an Indonesian company established solely for water transportation activities, whose shares are entirely held by Indonesian citizens. The explanation to Article 158A specifies that the Indonesian shareholding must constitute the ultimate beneficial owner and a single-majority, and that foreign ownership (direct or indirect) may not exceed 49%.
- The JV must own and operate vessels flying the Indonesian flag.
- Each vessel must have a minimum size of GT 50,000 (gross tonnage).
- All vessels must be manned by Indonesian crew members.
- To engage in commercial or industrial/mining-specific sea transport, the JV must register vessels of at least GT 50,000 per vessel.
These size and ownership restrictions are intended to strengthen the national shipping industry and ensure that economic benefits from foreign investment primarily accrue to Indonesian stakeholders. This aligns with the cabotage principle and the empowerment of the national maritime transport industry emphasized in Articles 56 and 57.
Article 346A provides exemptions for JVs (both commercial and industrial/mining transport) that were already operating before Law 66/2024 came into effect. However, these exemptions cease to apply if the JV changes its articles of association, alters its shareholding composition, or purchases new vessels after the law takes effect. Article 347A provides that Articles 29(2) and 158A will only come into force one year after promulgation, i.e., on 28 October 2025.
Other Key Provisions
- Sanctions: Article 284 increases the maximum penalty for violations of the cabotage principle by foreign vessels engaged in inter-island transport within Indonesia from 5 years imprisonment and IDR 600 million fine to 11 years imprisonment or IDR 5 billion fine (Category VII).
- Transitional Provisions (Article 346A): Ongoing licensing or vessel registration processes before the enactment of the Law will be processed under the new law if more favorable to the business operator. Existing gross deed issuances remain valid if requirements were fulfilled prior to enactment.
- Monitoring and Review: The Government and the House of Representatives (DPR RI) are mandated to monitor and review the implementation of this Law two years after its enactment.
Conclusion
Law 66/2024 introduces three key regulatory reforms in the shipping sector:
- Empowerment of Traditional shipping through human resource development, fleet expansion, establishment of dedicated terminals, business capacity building, and enhanced cargo availability.
- Tightened Joint Venture Requirements with foreign partners, mandating Indonesian-flagged vessels with large tonnage (>GT 50,000) and single-majority national ownership.
- Institutional Restructuring of Supervision, under which supervisory and law enforcement functions in the shipping sector are placed directly under the Minister, replacing the previous Sea and Coast Guard structure.
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