MAPCO fined $1.8m for botched Indonesia rice shipment

A Myanmar delegation is heading to Indonesia this week to negotiate the release of 16,000 tonnes of rice that have been held at the Port of Surabaya for more than two months, and to discuss a US$1.8 million fine imposed on the exporter for its failure to follow regulations.

The shipment was sent as part of a government-to-government agreement signed in 2013 allowing Myanmar to export rice to Indonesia. But weaknesses in high-level negotiations and communication failures have led to major losses, said U Nay Lin Zin, joint secretary general of the Myanmar Rice Federation.

Myanmar Agribusiness Public Corporation (MAPCO) sent the rice to Surabaya Port at the end of March, but it was not unloaded because the shipment failed to comply with new Indonesian food safety regulations.

“The new Indonesian regulations were announced in mid-2015, but we heard about it in early 2016 – through a trader,” said U Aung Naing Oo, director at the Plant Protection Division under the Ministry of Agriculture, Livestock and Irrigation.

“Imported rice must now be tested by a laboratory approved by the Indonesian government, in the country of origin,” he said. The PPD is the only lab in Myanmar registered with the Indonesian government.

More than two months later, the rice is still at the port, and MAPCO has been asked to pay a demurrage charge of around $1.8 million for keeping its cargo there beyond the allotted time. Harryansah Khairul, counsellor at the Indonesian embassy in Yangon, said the company has since been negotiating with Indonesian authorities to reduce the fine.

“The shipment is worth $5.3 million and the demurrage charges are quite high now, so MAPCO has asked us to reduce the penalty,” he said. The fine was due to rise to $2.3 million as delays continued, but Indonesia has offered a 30 percent discount, he said.

“We will forward the matter to the Indonesian government after proper tests are completed. In the meantime the rice has still not been unloaded. It must be moved and stored somewhere else in the port,” he said.

A Myanmar delegation will travel to Indonesia this week to settle the matter. It will meet with Indonesia’s state-run Bureau of Logistics, or Bulog, which had agreed to buy the rice, and will demand immediate payment, Mr Khairul said.

U Chit Khaing, president of MAPCO, said yesterday that he hoped a compromise could be reached.

“We have been asked to pay $1.8 million, but we are going to ask for a 70pc discount or more, as we have suffered a big loss. This is a government-to-government agreement; we are just trying to carry it out as well as we can,” he said. “We want high-level officials from the ministries of commerce and agriculture to come with us to Indonesia and help us to negotiate.”

According to Mr Khairul, the new restrictions on imports were explained to the Myanmar government last year, but the message was not passed on. “I think the problem might have arisen because Myanmar authorities forgot to tell the companies. We are not blaming the government. This is just a miscommunication,” he said. “When I spoke with MAPCO managing director U Ye Min Aung he said he had not received any information [about the new regulations]. The communication problems may have happened because of the political transition.”

Because the company was not aware of the new regulations, it arranged for the rice to be tested in a third country. “This is the main reason why the shipment has been barred,” Mr Khairul said.

He stressed that exporters should test rice in Myanmar. “Sometimes Thailand and Vietnam accept payment to issue a certificate, even if the rice is not up to standard,” he said.

Some Myanmar companies neglect the rules and regulations, even they understand them, said PPD director U Aung Naing Oo.

“In the past, the PPD sometimes had to issue certificates after a shipment had been sent, if companies did not secure proper certification in advance,” he said. “MAPCO blamed our division for delays, but we are supporting them as much as we can. In the future, we will issue certificates according to the procedures.”

For U Nay Lin Zin, the fault lies with the government. “Instead of dreaming up ambitious long-term plans, it should be dealing quickly with day-to-day problems,” he said. “MAPCO was not the only one hurt. The entire supply chain involved in the shipment lost out.”

Another 34,000 tonnes of rice are due to be shipped to Indonesia under the same government agreement, Mr Khairul said, adding that he hoped both sides would learn from the experience. “We must monitor the regulations from time to time,” he said.

Source: Myanmar Times

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