Palm oil exports to tumble on ‘unfair’ custom

The Jakarta Post, Jakarta | Business | Thu, June 26 2014,

Palm oil exports may potentially decline by a double digits in the first half of this year as shipments are hampered by customs issues, according to a business group.

Overall palm oil exports will likely decline by 10.1 percent to 9.83 million tons in the first semester, while outbound shipments of processed oils and fats will drop by 20.5 percent to 5.72 million tons, according to a projection by the Indonesian Vegetable Oil Refiners Association (GIMNI).

Exporters reduced shipments as they struggled with high penalties incurred by unaccommodating customs system, GIMNI executive director Sahat Sinaga said Wednesday.

Current customs codes cannot precisely categorize a number of palm oil products, such as palm wax and heavy end methyl ester, thereby, they are inaccurately declared, according to Sahat.

Eventually, they are hit with fines that can go as high as ten times the products’ export taxes.

“The decline is attributed to exporters’ reluctance to ship products before the clarification is cleared,” he told reporters in a briefing.

As they try to avoid punishment, exporters preferred to sell crude palm oil (CPO), Sahat added. CPO exports will climb by 9.9 percent to 4.11 million tons from January to June, according to the group’s estimate. That will be a setback to the government’s effort to spur growth in the downstream industry.

Sahat urged customs authorities to revise its codes to avert a further drop in palm oil exports.

The decline in palm oil shipments is reflected in monthly export data issued by the Central Statistics Agency (BPS).

Exports of palm oil, the top supporter of Indonesia’s non-oil and gas shipments, plunged by 45.02 percent to $1.12 billion in April from March, which contributed to a 5.92 percent slide in overall exports to $14.29 billion on a monthly basis in April.

In its tentative projection, GIMNI forecast that it was unlikely the export target for 2014 would be achieved due to the poor results in the first semester.

Overall exports are expected to hit 21.37 million tons this year, with processed palm oil settling at 13.45 million tons and CPO standing at 7.9 million tons.

Production will also shrink by around 10 percent to 28 million tons because of slash-and-burm practices in palm oil’s main production area in Riau province and drought resulting from El Niño, in May to August, according to Sahat.

Earlier, another business group, the Indonesian Palm Oil Producers Association (Gapki), estimated exports in 2014 might remain flat at the 21.2 million tons seen in 2013 as domestic consumption would rise on the back of the government’s new policy to increase biodiesel content in fuel blending. This would push up local demand by 25 percent to 10 million tons this year.

Indonesia relies heavily on India, the European Union and China to buy its palm oil exports.

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