The likely consequences of Indonesia's coal export ban to letters of credit (L/Cs), sales contracts, charterparties and bills of lading are outlined in a bulletin published by international lawyers Stephenson Harwood.

The export ban began on 31 December 2021 when the Indonesian ministry of energy and mineral resources issued a policy temporarily prohibiting all Indonesian coal mining companies from exporting thermal coal throughout January 2022 due to dangerously low inventory levels of the fuel at its domestic power stations.

Supply chain disruption

When the ban came into effect some reports suggested that there were more than 100 bulk carriers in ports and anchorages of Kalimantan, with some ships already fully laden.

Meanwhile some ships have reportedly started leaving ports, the risk of disruption remains and in Stephenson Harwood's bulletin, the law firm's London-based associate Simon Domin outlines various legal issues that participants in the coal supply chain may potentially face.

Impact on L/Cs

The bulletin says L/Cs may have been issued but the underlying transaction may be delayed beyond the validity of the documentary credit.

It concludes that this may give rise to a situation where bills of lading or other documents may need to be amended to meet the requirements of the documentary credit.

Ongoing developments

There are reports that in early January 2022, a select group of 25 coal producers in Indonesia, the world's largest thermal coal exporter, had been allowed to resume exports of thermal coal.

Nevertheless the bulletin recommends that anyone involved in the coal supply chain review their contracts carefully and keeps abreast of developments.

Stephenson Harwood's bulletin on the Indonesian coal export ban can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.