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.