China agrees to cut palm oil tariff on Indonesian products

China agrees to cut palm oil tariff on Indonesian products

Zakki P. Hakim, The Jakarta Post/Jakarta

The local oleochemical industry should be relieved to hear that
China has agreed to cut import duties on Indonesia's palm oil
derivative products to the same level imposed on Malaysian
products, a senior official at the Ministry of Trade has said.

The ministry's director for regional cooperation, Eliver
Radjagoekgoek, said China agreed to reduce the import tariff on
stearic acid products from 16 percent to 5 percent, effective
Jan. 1, 2005.

Stearic acid is a palm oil derivative used to bind and thicken
lotions and creams, and is also useful in making harder soaps and
candles.

Malaysia started to open up the sector on Jan. 1 under an
advanced ASEAN-China trade liberalization program known as the
Early Harvest Package (EHP), which allowed Malaysian producers to
export stearic acid to China at lower tariffs than Indonesian
producers.

Local industry players were stunned to learn that China had
applied a 10 percent import duty on Malaysia's stearic acid
earlier this year, but imposed a 16 percent tariff on Indonesian
products as the commodity was not included in the EHP earlier in
negotiations.

The ministry's deputy director for inter- and intra-regional
cooperation, Retno Kusumo Astuti, said the commodity's exclusion
from the EHP was decided upon a request from the industry.

The ministry were forced to lobby its Chinese counterpart to
have stearic acid included in the EHP, she said, adding that
China eventually granted the request.

The EHP is part of an Association of Southeast Asian Nations
plan to set up a free trade area with China.

According to the Indonesian Oleochemical Manufacturers
Association (Apolin), the country controls up to 80 percent of
China's stearic acid market, with an annual average export volume
of 300,000 tons, or around $200 million.