Indonesia. GAPKI calls on government to postpone tariff hike

The Indonesian Palm Oil Association (GAPKI) on Friday urged the government to delay a planned increase in palm oil export duty, warning it could hurt competitiveness amid uncertainty in global trade due to US tariffs and geopolitical tensions.

Indonesia is to raise its palm oil export duty to 4.75% to 10% from May 17 to help fund a biodiesel blending mandate as well as a palm oil replanting program. The duty currently ranges from 3% to 7.5%.

“The situation is full of uncertainty and launching a policy that will affect the competitiveness of Indonesia’s palm oil exports is a big risk,” GAPKI said in a letter to Finance Minister Sri Mulyani Indrawati.

Indonesia, the world’s largest palm oil producer, faces a proposed 32% tariff from the US, while second-largest producer Malaysia faces a 24% rate. The tariffs have been delayed until July.

“There are concerns that this will make Indonesian palm oil exports increasingly uncompetitive with Malaysia, particularly for the US market, which Indonesia currently dominates,” the group said.

Malaysia levies an export tax of between 3% and 10% depending on the price of palm oil. The duty is set at 10% for May.

Sri Mulyani Indrawati said earlier that Indonesia would adjust the export tax on crude palm oil to reduce the burden on exporters from the US tariffs. The tax is separate from the levy.

Meanwhile, escalating tensions between major palm oil buyers India and Pakistan have raised concerns about a decline in demand, GAPKI reported.

“There is no permanent ceasefire between India and Pakistan yet, which would force buyers from both countries to postpone purchases of crude palm oil and its derivatives,” the group added.

The finance ministry and the coordinating ministry for economic affairs did not immediately respond to requests for comment.

Tags: palm oil, prices