The Palm Scribe

WTO rules EU must change duties on Indonesia biodiesel

JAKARTA – The World Trade Organization (WTO) has ruled in favor of several challenges by Indonesia to anti-dumping duties imposed on its biodiesel exports to the European Union, saying the measures needed to be changed.

ILLUSTRATION. Convoy of fleet transport crude palm oil ILLUSTRATION. Convoy of fleet transport crude palm oil

A WTO panel on the case, brought by Indonesia in 2014, said in a ruling made public on Thursday that the EU needed to bring its measures into conformity with WTO agreements.

“This is a resounding victory for Indonesia, that would widely open market and invigorate the performance of biodiesel exports to the European Union, after it had suffered from weak levels because of the imposition of the import duty,” Trade Minister Enggartiasto Lukita said in a trade ministry release obtained here on Friday.

The release, dated Friday (26/01/2018) said that a WTO panel on dispute settlement deemed that the European Union has not been consistent with the arrangements under the WTO agreement on anti-dumping during the process of investigation on dumping allegations and setting the anti-dumping duty against Indonesian biodiesel.

Indonesia challenged the EU’s anti-dumping duties, on seven points, in 2014. A panel of the WTO has now ruled in favor of Indonesia for six points, the seventh was rejected. Overall, it means the WTO urges the EU to bring its measures into conformity with WTO agreements.

What are Indonesia’s seven legal challenges brought to the WTO?

  • The EU did not use production costs data that were delivered by Indonesian biodiesel exporters,
  • The EU did not use production costs data to construct a “normal value” for the biodiesel product,
  • The EU calculated a too high profit margin for Indonesian biodiesel producers,
  • The EU’s method to calculate the export price of one Indonesian biodiesel exporter was not in line with provisions,
  • The EU set a tax rate that was higher than the dumping margin,
  • The EU could not prove that biodiesel imports from Indonesia have a negative effect on prices of biodiesel that is manufactured in the EU,
  • The WTO did not agree with Indonesia on the point that there was a too big difference between the temporary anti-dumping duties (0 – 9.6 percent set on 28 May 2013) and the final duties (8.8 – 20.5 percent set on 19 November 2013).

Minister Lukita expressed hope that the victory will lead to open access for Indonesian biodiesel to Europe wider and can restore the volume and value of the exports because the application of the import duty of 8.8 percent to 23.3 percent in 2013 had pushed down exports of Indonesian biodiesel to Europe substantially.

Biodiesel is one of the products of the downstream palm oil industry. Along with Malaysia, Indonesia is a main player in world palm oil. It produced 41.98 million tons of palm oil in 2017, with 38.17 million tons of crude palm oil (CPO ) and the rest in palm kernel oil (PKO).

Based on data from the Central Statistics Agency (BPS), Indonesian biodiesel exports to the European Union wend down by 423.84 percent between 2013 and 2016, from $649 million in 2013 to $150 in 2016. Indonesia’s lowest biodiesel export to the European was recorded in 2015 where exports only reached $68 million.

“If the raise can be maintained in the two years ahead, the value of Indonesian biodiesel exports to the European Union could reach an estimated $386 million in 2019, or about Rp 5.2 trillion while in 2022, it could reach $1.7 billion or Rp 22.trillion,” Lukita said.

Indonesia’s win in this dispute case is giving rise to hopes among exporters and producers of biodiesel in Indonesia. Indonesian biodiesel exports between 2013 and now, had accounted for about seven percent of the market in the European Union.

Oke Nurwan, the Director General of Foreign Trade, said that the verdict of the WTO panel can become a reference for all anti-dumping investigation authorities, so that they can be consistent with the rules of the WTO, especially during the period of investigation. Nurwan said that the case needs to become a material for evaluation so that no one easily accuse Indonesia of engaging in dumping practices.

“Our commitment in securing export markets is to safeguard Indonesian exports so that they can once again compete in the export market destinations such as the European Union,” Nurwan said to Kompas.

Director for Trade Security, Pradnyawati said that the consequence of Indonesia’s victory in the case, the WTO verdict will have to be enforced in line with the arrangements in WTO.

“The European Union is under the obligation of adjusting the import duty that it had applied previously, so that they are in line with the regulations in the WTO anti-dumping agreement,” Pradnyawati said.

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