VZCZCXYZ0003
PP RUEHWEB

DE RUEHJA #0555/01 0860937
ZNR UUUUU ZZH
P 270937Z MAR 09
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 1968
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
INFO RUEHML/AMEMBASSY MANILA 3311
RUEHBY/AMEMBASSY CANBERRA 3625
RUEHWL/AMEMBASSY WELLINGTON 3473
RUEHGV/USMISSION GENEVA 7880

UNCLAS JAKARTA 000555 
 
SENSITIVE 
SIPDIS 
 
DU/S PSHEIK 
FAS/OA SHALE 
FAS/OCRA/BPETLOCK, HIGGISTON, RADLER 
FAS/OSTA/JAFLEMINGS 
FAS/ONA/EHUBBARD 
FAS/OFSO/WAINIO 
USTR BWEISEL/KEHLERS 
GENEVA FOR MIN COUNSELOR DMILLER 
CANBERRA FOR AG COUNSELOR GPETTRIE 
WELLINGTON FOR AG ATTACHE SCANDURRA 
 
E.O. 12958: N/A 
TAGS: EAGR ETRD ID
 
SUBJECT: BPOM Cash Cow is Sweeping Away Profits for U.S. Exporters 
in Indonesia 
 
Reftel JAKARTA 2007 002823 
 
¶1. The Indonesian Food and Drug Authority (BPOM) confiscated over 
$500,000 of U.S.-produced packaged foods for retail sale. New import 
registration requirements resulted in the value of U.S. exports of 
breakfast cereals and snack foods dropping by $1.2 million, an 87 
percent decrease in just two months. The biggest impact is on small 
U.S. and Indonesian businesses. Decision makers in BPOM are refusing 
to engage on the problem suggesting a solution will require pressure 
from other Indonesian ministries. End Summary 
 
The Cash Cow Providing Income 
------------------------------------------- 
 
(SBU) 2. Since 2001, the Indonesian government requires packaged 
products for retail sale and selected processed products for use as 
ingredients be registered with the National Food and Drug Authority. 
Registered imported products are issued an ML (imported food) 
number. Importers place stickers on the package with the ML number 
and other information in Indonesian. The burdensome list of 
documents needed to complete the registration process creates a rent 
seeking opportunity for BPOM and Customs officials. (see Reftel) 
Importers have two options. They can pay a consultant, usually 
retired BPOM officials, to create false documents or they can have a 
freight forwarder "facilitate" clearance at the port. Traditionally, 
BPOM officials and police sweep retail stores during the Muslim 
holiday month of Ramadan, when local officials feel social and 
cultural pressures to increase income. Retailers sometimes pay BPOM 
officials to ignore unregistered product or for advance notice of 
the inspections. 
 
BPOM is Sweeping Up 
----------------------------- 
 
¶3. In November 2008, BPOM officials began a targeted effort to 
reduce the number of unregistered products on retail store shelves 
and warehouses. The sweepings continued for a few months. Since the 
number of unregistered product on the shelves has dropped, BPOM 
officials have secretly visited stores to inspect. In some cases, 
the company could convince officials to verify that a suspected 
product was indeed properly registered. However, even when BPOM 
officials cannot find unregistered products, they confiscate legal 
products that do not require an ML number. Or, they criticize 
retailers based on unreasonable standards. For example, they 
complained that halal products were placed next to marshmallows, 
which can contain small amounts of porcine ingredients. 
 
¶4. BPOM is also limiting the amount of product that can be imported 
by placing additional burdens before shipments can be cleared at the 
port. BPOM reportedly reduced the time to register a product from 
one year to two months. However, officials are dusting off old 
decrees with requirements that were not previously enforced. Now 
labels that BPOM officials consider to be "bombastic" such as 
"premium" must be covered up on the package. Product labels in the 
shipment must exactly match the sample provided when registering the 
products. Importers must obtain an import recommendation from BPOM 
for every shipment. (For more information on all of the specific 
requirements, please see Global Agriculture Information Network 
Report ID9004: Import Requirements and Procedures for Processed 
Food.) 
 
¶5. Over the course of two months, officials confiscated $0.5 million 
of U.S. products from only three different retailers. BPOM officials 
and police even confiscated $40,000 of legally registered U.S. 
packaged products. All of the products are considered safe for 
purchase in the United States.  Two importers and a retailer 
destroyed another $200,000 worth of product in their warehouse when 
the expiration date passed and have another $600,000 worth of 
product sitting in warehouses that they will have to destroy soon. 
 
Smaller U.S. Exporters Suffer... 
---------------------------------------- 
 
¶6. In December 2008 and January 2009, U.S. exports of breakfast 
cereals and snack foods to Indonesian decreased 13 percent when 
 
compared to the value during the same period the year before. 
Indonesia represents a $7 million market for U.S. breakfast cereals 
and snack foods, attracting smaller U.S. exporters rather than large 
exporters. Indonesian importers tend to buy from U.S. consolidators 
who sell in smaller quantities. Indonesia was a growing market for 
these products. In 2008, exports of U.S. breakfast cereals and snack 
foods increased 12 percent compared to 2007. The increase occurred 
despite a 77 percent drop in value during December. In December 2007 
to January 2008, U.S. exports of breakfast cereals and snack foods 
were $1.5 million. In December 2008 to January 2009, exports to 
Indonesia were US $197,000. 
 
...as do Smaller Local Businesses 
------------------------------------------ 
 
¶7. Some Indonesian retailers and importers expect to go out of 
business in as soon as six months if imports do not resume. Most 
importers ceased operations after the sweepings began. Shelves in 
the stores are bare and retailers receive numerous complaints every 
day, from expatriates and Indonesians alike. Retailers and importers 
have not been able to make up lost sales with domestic products 
because in many cases appropriate substitutes do not exist. Labor 
laws make dismissing employees expensive but most report they are 
keeping employees as long as possible out of loyalty. Businesses at 
the port are also affected. 
 
¶8. Imported food and beverages account for only an estimated 2.5 
percent of total Indonesian food and beverage sales. In most cases, 
the importers are small, Indonesian family-owned businesses working 
in a niche market. Large multinational companies corner the market 
on sales of Indonesian-made packaged products at retail stores. 
These large hypermarkets have benefited somewhat from the decrease 
in imported product on the shelves of the specialty retailers but 
many consumers are purchasing their favorite items in Singapore and 
Bali, where enforcement is less stringent. 
 
Solutions in the Near-term Are Limited 
--------------------------------------------- ----- 
 
(SBU) 9. The Chairman of BPOM, Husniah Akib, is the lead GOI 
authority on this issue and refuses to engage with us as well as 
other affected trading partners. When Chairman Akib met with 
importers to discuss the issue, she responded to complaints by 
questioning the loyalty of importers to Indonesian national 
interests. The Chairman of BPOM affirmed she is unwilling to 
consider rewriting the decree covering product registration. Her 
approval is also required for any agreement to adjust documentation 
requirements to meet specific country food safety systems. 
 
¶10. FAS efforts to create change center on developing a relationship 
with BPOM officials to foster understanding and increase awareness 
of how the U.S. system works. BPOM has agreed to host FAS during 
their regular internal biweekly discussions. USDA/FAS approved 
funding for a visit by a representative of the U.S. Food and Drug 
Administration to Indonesia to discuss the U.S. food safety system. 
The visit will build relationships at the working level and may 
offer an opportunity to engage the Chairman. 
 
(SBU) 11. A resolution is not likely in the short-term, unless other 
ministries place pressure on the BPOM Chairman. Talking points could 
be drawn from the impact on Indonesian small businesses and the 
employees whose jobs are at risk. GOI identifies food security as a 
priority and added trade and investment as a component of a 
potential comprehensive partnership with USG. We could use the 
prospect of the comprehensive partnership to generate GOI interest 
to engage on this issue. Another option is to express our concerns 
in a meeting under the TIFA industrial and agricultural goods 
working group. We have expressed concerns about Husniah refusing to 
meet on the registration issue in the biannual TIFA meeting with no 
success. 
 
Hume