China to lower tariff on palm oil

China to lower tariff on palm oil

Associated Press, Jakarta

China has agreed to cut its tariff on refined palm oil products as part of wider plans to free up trade in the Asian region, an Indonesian producers' group said on Monday.

Indonesian and Chinese officials have decided to include stearic acid - a product made from refining crude palm oil - on a list of low-tariff goods traded between China and Southeast Asian nations, the Indonesian Association of Oleo-Chemical Producers said.

"The Chinese finance ministry agreed that it will reduce import tariffs for Indonesian stearic acid to 10 percent from 16 percent," said Kris Hadisubroto, the association's chairman.

The reduction will take effect within a few weeks, he added.

Stearic acid is used in the production of many goods, including detergents and cosmetics.

Asia's other major exporter of crude palm oil products, Malaysia, has already reached a low-tariff agreement with China for stearic acid.

Southeast Asian countries and China are in the process of drawing up a list of low-tariff goods which are meant to pave the way for a full free-trade agreement between the two regions by the end of the decade.

Indonesia was initially reluctant to open its refined products market, but changed its mind at the meeting because stearic acid exports to China have fallen 20 percent since June, Hadisubroto said.

Indonesia could not compete on price with Malaysian companies that benefited from lower tariffs, he said.

China needs up to 500,000 tons of stearic acid a year to meet its production needs. Typically, Indonesia supplies about 60 percent of China's demand, or about US$200 million worth every year.