A controversial escrow rule put in effect by the government of Indonesia in August 2023 has taken a bite out of the country’s pasteurized crabmeat exports.
The regulation requires exporters sending cargo with a value of USD 250,000 (EUR 232,000) or more to deposit at least 30 percent of their earnings in a special bank account controlled by the Indonesian government for a minimum of three months. The government’s justification for the regulation, which took effect on 1 August, is that Indonesian exporters often retain their foreign exchange earnings overseas in order to capitalize on more favorable interest rates and support their international operations, instead of that money funneling back into Indonesian operations.
Indonesia had a 55 percent share of the global crabmeat export market in 2020, but that dropped to 45 percent in 2023, partially as a result of the policy, according to Ready Seafood Vice President of Sales Rob Kragh.
“It’s an unintended consequence that’s floating through the entire supply chain,” he said at the 2024 Global Seafood Market Conference in Orlando, Florida, U.S.A. on 23 January.
Kragh said the policy shift favored bigger companies.
“Smaller companies are going to find it really hard to handle that cash flow because they're undercapitalized to begin with, while large companies are going to do better,” he said.
Supreme Crab and Seafood COO Troy Turkin said companies are wary of tying up so much working capital in an Indonesian escrow account for months.
“The reality is that if you don't have a strong cash flow, you're not going to be able to continue to buy from Indonesia. Really, since it's more of the processors that are having to fund this, they’re going to look to ship elsewhere if they can,” he said. “It's just so costly – a container might be USD 500,000 [EUR 460,000] ballpark, which requires the company to put up USD 150,000 [EUR 138,000] per month for 90 days, so that’s USD 450,000 [EUR 415,000]. If you bring in four or five containers, that’s USD 2 million [EUR 1.8 million].”
Brice Phillips, the vice president of sustainability and business development at Baltimore, Maryland, U.S.A.-based Phillips Foods, which specializes in crabmeat and crab cakes, told SeafoodSource in September 2023 his company was going to ...
Image courtesy of National Fisheries Institute
