EU sets duties of up to 18% on Indonesian biodiesel

Jakarta may respond to EU's anti-subsidy levy by imposing tariffs on bloc's dairy products

BRUSSELS • The European Commission has imposed countervailing duties of 8 per cent to 18 per cent on imports of subsidised biodiesel from Indonesia, saying the move is aimed at restoring a level playing field for EU producers.

The anti-subsidy duties taking effect yesterday will last for four months and could be extended for five years.

"The new import duties are imposed on a provisional basis and the investigation will continue with a possibility to impose definitive measures by mid-December 2019," the European Union executive said in a statement on Tuesday.

Last week, Indonesia's trade minister said he would recommend to an inter-ministerial team a 20 per cent to 25 per cent tariff on EU dairy products in response to the bloc targeting the country's biodiesel.

The EU duties are another blow to Indonesian biodiesel producers after the bloc said in March that palm oil should be phased out of renewable transportation fuels by 2030 due to palm plantations' contribution to deforestation, with huge swathes of rainforest logged in recent decades to create oil palm plantations in South-east Asia, Africa and elsewhere.

Indonesia is the world's top producer of palm oil, which is used as a key ingredient in a wide range of products from food to cosmetics.

The European Commission, which coordinates the EU's trade policy, launched an anti-subsidy investigation last December, following a complaint by the European Biodiesel Board. It said its investigation showed that Indonesian biodiesel producers benefit from grants, tax benefits and access to raw materials below market prices.

The EU biodiesel market is worth an estimated €9 billion (S$14 billion) a year, with imports from Indonesia worth about €400 million, the commission said.

Indonesia Biofuels Producers Association chairman M. P. Tumanggor told Reuters that companies affected by the anti-subsidy duties will likely be forced to renegotiate their contracts with buyers in the EU and it may reduce the country's 2019 biodiesel exports.

"We initially targeted 1.4 million tonnes in exports this year to Europe. That will not be reached," Mr Tumanggor said. The exports would now likely reach around one million tonnes, he said.

He said the association is in consultation with the government on a response to the EU duties.

Indonesian Trade Minister Enggartiasto Lukita said the government will file an official objection within five days.

The ministry will also start a programme for Indonesian dairy importers to help them find replacements for products they usually import from the EU with products from the United States or other countries, the minister said.

The preliminary EU duty rates vary, depending on the Indonesian producer. The levels are 8 per cent for Ciliandra Perkasa, 15.7 per cent for Singapore-based Wilmar Group, 16.3 per cent for the Musim Mas Group, also with operations in Singapore, and 18 per cent for the Permata Group and all other Indonesian biodiesel exporters.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 15, 2019, with the headline 'EU sets duties of up to 18% on Indonesian biodiesel'. Print Edition | Subscribe