EU Hits Indonesia With New Biodiesel Levies, Risking Tit for Tat

(Bloomberg) --

The European Union imposed tariffs on biodiesel from Indonesia to counter alleged subsidies to producers in the country, risking tit-for-tat retaliation by the Indonesian government.

The EU duties on Indonesian exporters of this type of biofuel, which is made from vegetable oils and animal fats for use in diesel engines, range from 8% to 18%, the European Commission, the bloc’s executive arm, said on Tuesday.

The levies mark the preliminary outcome of an EU probe into claims by the European biodiesel industry that the Indonesian government gives trade-distorting aid to the likes of PT Ciliandra Perkasa, PT Wilmar Bioenergi Indonesia and PT Musim Mas.

“Subsidized imports of Indonesian biodiesel are causing a threat of material injury to the union industry,” the Brussels-based commission said in the EU’s Official Journal. The anti-subsidy duties are due to take effect on Wednesday, will last for four months and may be prolonged for five years.

Subsidy Inquiry

The import taxes are the latest twist in a long-running EU trade dispute with Indonesia over biodiesel and mirror a fight the bloc has had with Argentina.

The duties restore a degree of protection that European biodiesel producers such as Verbio Vereinigte BioEnergie AG lost last year when the EU scrapped tariffs aimed at countering alleged below-cost -- or “dumped” -- sales in the bloc by Indonesian exporters.

That move followed successful Indonesian challenges against the anti-dumping duties, which had been introduced in 2013, at the World Trade Organization and in the EU courts.

The EU opened the subsidy inquiry in December and the Indonesian trade minister said earlier this month that, should the bloc decide to apply new biodiesel levies of 8% to 18%, Indonesia would raise its tariffs on European dairy goods to the same levels (from 5% to 10%).

The preliminary EU duty rates vary depending on the Indonesian producer. The levels are 8% for Ciliandra Perkasa, 15.7% for the Wilmar Group, 16.3% for the Musim Mas Group and 18% for the Permata Group and all other Indonesian biodiesel exporters.

Indonesian exporters’ combined share of the EU biodiesel market rose to 3.3% -- or 516,088 metric tons -- in the 12 months through September 2018 from 0.2% in 2017 and 0.3% in 2016, according to the commission.

Trade tensions between Europe and Indonesia have also grown as a result of a separate EU decision this year restricting the types of biofuels from palm oil that may be counted toward the bloc’s renewable-energy goals. In Indonesia, palm oil is the main raw material for making biodiesel.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Peter Chapman, Iain Rogers

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