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Beranda INVESTIGATION Different Note Pulp

Different Note Pulp

Toba Pulp Lestari factory in Porsea, North Sumatra, November 28, 2019.

"How come? What we do a lot dissolving wood (DW), ”said Arlodis Nainggolan when met in Porsea, North Sumatra, November 27, 2019.

The former Quality Control Manager of PT Toba Pulp Lestari (TPL) Tbk knows very well the production process at the company which was formerly known as PT Indorayon Inti Utama. Because of that he was astonished when we showed him the data which said that TPL actually recorded a lot of its exports as Bleached Hardwood Kraft Pulp (BHKP).

DW and BHKP do come from the same raw material. Both, said Arlodis, are difficult to distinguish with the naked eye because they have the same size and color. It's just that DW processing takes a longer time and produces textile raw materials. Meanwhile, BHKP which needs a shorter production time is used as raw material for paper.

Another difference is the different HS Code in the global market. BHKP is recorded under the code 4703.29.00.00, while DW 4702.00.00.00. The HS Code is used by the government to determine tariffs, collect statistics, and control export-import.

Most importantly, DW and BHKP have a sizable price difference. Based on data United Nations Commodity Trade Statistics Database (UN Comtrade) the difference ranges from 30-40 percent.

The difference in recording the types of products exported by TPL emerged after IndonesiaLeaks received several documents related to this matter last year. One of them is the prospectus of Sateri Holdings Limited, a textile fiber (Viscose Staple Fiber) producer which was submitted to the Hong Kong stock exchange when it was about to take the floor in 2010.

IndonesiaLeaks is a joint effort by a number of media in Indonesia to respond to findings and information from public informants. The program, which was released two years ago, provides a space for anyone to share information that is worth exploring through investigative journalism work. Informants may keep their identity secret for safety reasons.

Newly chopped wood to be used as dissolving wood pulp in the PT Toba Pulp Lestari complex, 28 November 2019. Photo: IndonesiaLeaks

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DW exports by TPL are indeed difficult to trace. In the 2008 to 2014 financial statements, the company only mentions pulp as a product they sell without specifying its type.

DW's new sales trail appears in the prospectus of Sateri Holdings Limited. The document describes that one of the main suppliers dissolving wood to Sateri is PT Toba Pulp Lestari Tbk. However, the buying and selling process did not occur directly, but was mediated by DP Marketing International Limited, which in the prospectus was also called DP Macao.

DP Marketing International Limited is the name that appears in TPL's financial statements. The company was recorded as the main buyer during the 2008-2014 period. Unmitigated, more than 90 percent of the total TPL production in that period was purchased by DP Marketing. The peak occurred in 2014 when all TPL pulp products were distributed to DP Marketing.

The DP Marketing business, which is purely buying and selling, is actually more powerful than the TPL business which focuses on production. In 2008, for example, DP Marketing recorded sales of US$ 139.4 million. Compare with the sales of TPL in the same year of US$ 115.5 million.

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Head of Public Relations of PT Toba Pulp Lestari Norma Patty Handini Hutajulu said that although it is a related party, the sale and purchase relationship between TPL and DP Marketing is carried out with the same terms and conditions as transactions made with third parties. He also said that the company did not know where DP Marketing sold the products purchased from TPL.

"We also do not know how much profit the Macao Council will get," said Norma by email.

The issue of DP Marketing involvement in the sales process, he continued, was due to the small scale of TPL production when compared to other producers in the global market.

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"We made a contract with DP Marketing so that we can focus as a producer of international quality pulp in accordance with market demand," he explained.

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On its official website, Sateri said that the factory is capable of producing up to 1.1 million metric tons of textile fiber. As the largest textile fiber producer in the world, the company, which has five factories in several locations, supplies raw materials for the production of clothing from popular brands such as H&M and Zara.

The atmosphere of the PT Toba Pulp Lestari complex, 28 November 2019. Photo: IndonesiaLeaks

Sateri, in the 2010 prospectus, said that TPL was the largest supplier dissolving wood pulp and paper pulp However, when IndonesiaLeaks checked the monthly report on the Export of Forest Products at the Ministry of Environment and Forestry and Indonesia's export report data at the Central Bureau of Statistics for the 2007-2009 period, there was no DW in the list of commodities exported from Indonesia.

Norma admitted that TPL was already producing Pulp-Dissolving grade since 2005. However, when asked about the types of export commodities reported, he only answered that the company produced Pulp-Dissolving Grade in the 2008-2014 period.

The difference in recording the types of commodities in international trade is impossible. This is because, as said by the Head of Center for Pulp and Paper of the Ministry of Industry Saiful Bahri, standard HS Code is used in the global market.

"There is a consensus of HS codes around the world, so it must be the same. If the main door is to guard the goods at customs, the correction is usually tight, "he said when met by IndonesiaLeaks Friday, December 20, 2019.

The Technical Director of Customs at the Directorate General of Customs and Excise of the Ministry of Finance, Fadjar Doni Tjahjadi, said that his party needed to study whether this case was caused by differences in HS Code classification between Indonesia and China or it was intentional.

"If there is a dispute over the application of the HS Code, the settlement instrument will be brought to the World Customs Organization," he said.

Meanwhile, Deni Surjantoro, Head of the Sub-Directorate for Communications and Publication at the Directorate General of Customs and Excise, said that DW and BHKP were not commodities subject to export duties by the Indonesian government. The same is applied by the Chinese government which eliminates import tariffs for the two types of commodities.

"In terms of customs regulations, there is no potential for avoidance of obligations," he explained

However, differences in recording goods produced, continued Deni, could affect turnover. This has an impact on the calculation of corporate tax that must be paid by the company. (IndonesiaLeaks)

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