EU starts probe on Indonesian biodiesel avoiding import duties

BRUSSELS (Reuters) -The European Union said on Thursday it had launched an investigation into whether biodiesel from Indonesia was circumventing EU duties by going through China and Britain.

The EU is Indonesia’s third-largest destination for palm oil products and an important market for its biodiesel, which is made from palm oil. Indonesia is the world’s biggest palm oil producer.

The EU’s probe followed an initial request from the European Biodiesel Board, an association of European producers.

“The request contains sufficient evidence that the existing countervailing measures on imports of the product concerned are being circumvented by imports of the product under investigation,” the European Commission said in the EU’s official journal.

“A change in the pattern of trade involving exports from Indonesia and the People’s Republic of China and the United Kingdom to the Union has taken place following the imposition of the existing countervailing measures,” it added.

The Indonesian government will monitor the investigation and take steps if there are things that do not comply with World Trade Organization (WTO) rules, Djatmiko Bris Witjaksono, director general of international trade negotiations at Indonesia’s trade ministry, told Reuters on Friday.

Earlier this week, Indonesia requested WTO dispute consultations with the EU over the EU’s imposition of countervailing duties on biodiesel imports from Indonesia.

Asked about this situation, a European Commission spokesperson told reporters that the EU was confident its duties on Indonesia were in full compliance with WTO rules and that the EU was ready to discuss the matter with Indonesia.

Trade relations between the EU and Indonesia have been strained by the bloc’s move to limit imports of commodities linked to deforestation, which is expected to curb EU imports of palm oil from top suppliers Indonesia and Malaysia.

As well as biodiesel, palm oil is used widely in food and cosmetics.

Welcoming the European Commission’s investigation, the European Biodiesel Board said it estimated that imports circumventing duties may have cost the EU around 221 million euros ($240.34 million) last year.

The association was also working with EU authorities to address allegations of fraudulent biodiesel imports from China, it added in a statement.

Germany earlier this year asked the European Commission to investigate shipments from China amid industry concerns that imported biodiesel declared as based on recycled feedstock may contain cheaper oils.

($1 = 0.9195 euros)

(Reporting by Sudip Kar-Gupta in Brussels, Gus Trompiz in Paris and Bernadette Christina and Stefanno Sulaiman in JakartaEditing by Mark Potter, Jane Merriman and Susan Fenton)