The European Union (EU) has decided to free Indonesian biofuel from provisional countervailing duties, as its preliminary investigation reveals insignificant subsidy margins.
Deputy Trade Minister Bayu Krisnamurthi welcomed the move, saying that it would be positive for biofuel exporters, as they would no longer be required to pay additional duties that might erode competitiveness.
The country’s biofuel exports to the EU stood at US$1.04 billion, accounting for around 90 percent of the country’s total.
“We are now bracing for the second phase of the investigation process, and preparing to submit information demanded by the EU,” Bayu said recently.
The European Commission, the trade body of the 28-member bloc, initiated a probe into the alleged subsidies on Nov. 10 last year following a complaint by the European Biodiesel Board (EBB) representing 60 percent of EU biodiesel output filed on Sept. 27, 2012.
In its complaint, the board claimed that biodiesel producers from Indonesia, along with Argentina, had enjoyed subsidies and incentives from the government, resulting in an unfair competitive edge, which led to material
injury for others in the industry the 28-member bloc.
The subsidies would have put provision of input — palm oil — at below market prices by means of government policies applied through export taxes.
The export taxes would have been higher than those charged on the export of biodiesel, thereby encouraging palm oil producers to sell the commodity in the domestic market.
The arrangement would result in an excess of supply, lowering prices to below-market level and cutting costs of biodiesel producers.
Biofuel Producers Association (Aprobi) secretary general Paulus Cakrawan expected an agreeable result for Indonesian exporters in the final ruling of the EU’s investigation into the case, due in the next month.
According to the preliminary result, the domestic industry did not benefit from any government subsidy, as alleged by the EU.
The biofuel industry was prepared to take the case to the World Trade Organization (WTO) should the EU issue an unfavorable final ruling.
“If they impose countervailing duties on our biofuel, we will appeal to the EU Court and when we still cannot get an affirmative decision, we will advance to the WTO,” Paulus told The Jakarta Post.
On May 29, the European Commission placed anti-dumping duties ranging from 2.8 percent to 9.6 percent on several Indonesian firms that ship biodiesel to the EU.
This followed a preliminary investigation kicked off on Aug. 12 last year resulting from an EBB complaint.
The lowest duty of 2.8 percent is charged on Musim Mas, which is a major local palm oil industry group, while the highest duty is charged to Wilmar Bioenergi, Wilmar Nabati Indonesia and other companies.
According to Paulus, biofuel from Indonesia gains a competitive edge because of an abundant supply of palm oil, of which the country is the world’s biggest producer, that is priced lower than any other vegetable oil, such as rapeseed — used to make biofuel by European producers. Palm oil-based biofuel is sold for $200 per ton less than biofuel made with other types of vegetable oil.
