With the failure to properly address recurring transshipment and dumping allegations against Indonesian businesses, analysts say the government should learn that it's better to act now than pay later.

The long overdue response to complaints from Indonesia's trade partners -- especially the United States -- on rampant illegal transshipment of textiles and shrimp, as well as dumping allegations on paper products, puts future exports of the commodities at risk.

The U.S. has threatened to impose premium import duties on exports of textiles and to temporarily halt imports of shrimp from Indonesia due to suspicions the commodities originated from China and Thailand.

"There is an immediate need to curb illegal transshipment and respond to dumping allegations to avoid exports of the commodities from being banned entirely," Centre for Strategic and International Studies economist Yose Rizal Damuri said last week.

Transshipment, a legal measure in the ordinary course of business, becomes an unlawful practice when undertaken to circumvent trade laws and other restrictions applicable to the shipment.

The U.S. imposed a quota on imports of China's textile and garment products last year. Since then, exports of the products from Indonesia to the U.S. have increased significantly.

"Chinese manufacturers choose Indonesia because it is easier to obtain an illegal certificate of origin (COO) here," Damuri said.

Illegal transshipment involves claiming a false COO to circumvent quotas, avoid paying higher duties such as antidumping or countervailing duties or to receive benefits from special trade programs.

Unlawful transshipment can establish an erroneous restraint level on a host country based on the level of unlawful transshipped goods, thereby restricting legitimate manufacturers.

The Trade Ministry limits the issuance of the COO to specific areas, such as Java, North Sumatra, Batam and Bali.

However, it is still easy to acquire a fake COO in Indonesia, a source close to the ministry said, "for only US$3,000 to $4,000".

Damuri said the government should impose strict sanctions on those proven to have done such criminal conduct.

Meanwhile, for lined-paper products, the U.S. Department of Commerce said that it was conducting further investigations on alleged dumping of the products.

A country can impose antidumping duties on products sold at a lower price than the price on the home market to protect its own industry.

The Trade Ministry's director for trade safeguard, Martua Sihombing, said the government had sent a letter denying the dumping allegations from the U.S.

"The private sector must work very closely with us in this matter to be able to pass the investigation phase and prove that we did not take such a (protective) policy, or it would hamper our exports' sustainability," Martua added.

In 2003, the U.S. Department of Commerce imposed antidumping import duties on farm-raised shrimp from China, Thailand, Vietnam, India, Brazil and Ecuador. Four Indonesian companies were under investigation for alleged transshipment of the products from China and Thailand. Then fisheries minister Freddy Numberi said that his office would revoke licenses of the companies if they were proven to have committed illegal practices, Antara newswire reported.