Indonesia’s palm oil groups urge levy cuts to offset US tariff impact

Indonesia’s palm oil industry and farmer groups on Wednesday urged the government to reduce export costs, to offset the impact of market distortion caused by 32 per cent U.S. reciprocal tariffs on Indonesia’s exports.

Palm smallholders’ group SPKS called on the government to lower costs by removing an export tax and levy, saying the U.S. tariff would result in an up to 3 per cent fall in the price farmers receive for palm fresh fruit bunches.

“SPKS estimated President Trump’s tariffs will distort demand for CPO and palm oil products,” the group’s chairman Sabarudin said in a statement.

“The drop in prices at farmers’ level could be offset by the reduction of export tax and levy down to 0 per cent to help stabilise prices of palm fruits,” he added. Indonesia collects a total of $196 per metric ton export tax and levy on crude palm oil shipments

Already on Tuesday, Indonesia said it would adjust its palm oil export tax, which should reduce the burden of the U.S. tariffs on exporters “by an equivalent of 5 per cent”.

While the SPKS urged reducing the costs to zero, Indonesia’s largest palm oil group GAPKI said it is waiting to see what the impact of the reduction will be on costs, the group chairman Eddy Martono said.

He said domestic market obligations, and the palm oil export tax and levy currently increase costs by $221 per ton for Indonesian palm oil exporters.

That compared to an estimated $140 per ton export cost borne by rival Malaysian exporters.

Following the U.S tariffs, GAPKI said it has proposed a $100 per ton cost reduction for shipments specifically to the U.S., to maintain competitiveness against exports from Malaysia.

“If it is not competitive yet, we will talk to the government .. We are not asking this for all export markets, just for this one country,” Martono said.

The U.S., Indonesia’s fourth largest palm oil export market, accounted for about 7 per cent of palm oil export volume and revenue in 2023.

Tags: export, Indonesia, prices, palm oil, U.S., costs, tax, levy, tariffs