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Indonesian finance ministry officially cuts crude palm oil export levy to zero

Singapore — Indonesia's Ministry of Finance has reduced the export levy on crude palm oil to zero, from $50/mt previously, an official regulation issued late Tuesday showed.

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The export levy is set at zero when domestic prices of CPO are at or below below $570/mt, according to the document. When CPO prices are between $570/mt and $619/mt, the export levy will be increased to $25/mt and once prices rise to above $619/mt, the levy will be restored to $50/mt.

Export duties on crude palm kernel oil or CPKO, crude palm olein, crude palm stearin, crude palm kernel olein and crude palm kernel stearin will follow the same duty structure for CPO.

Export duty on refined palm oil products such as palm fatty acid distillate (PFAD) and palm kernel fatty acid distillate (PKFAD) has also been reduced to zero for when CPO prices are below $570/mt. The levy will be raised to $20/mt when CPO prices are between $570/mt and $619/mt, and to $40/mt once prices of CPO go above $619/mt.

Palm oil fractions that include split palm fatty acid distillate, split palm fatty acid and refined, bleached and deodorized palm olein (RBDPO), will be taxed at $0/mt below a CPO price of $570/mt, at $15/mt for price between $570-619/mt and $30/mt for price above $619/mt.

All other palm oil refined products, that include RBD palm oil, RBD palm stearin, RBD palm kernel oil and others like palm methyl ester biodiesel will be taxed at $0/mt below a CPO price of $570/mt, at $10/mt for a price at $570-$619/mt and $20/mt for price above $619/mt.

Indonesian producers have been expecting duty reductions since an announcement in the Indonesian media last week, but since no official communication had been received from the finance ministry, producers were unwilling to offer at lower palm oil and palm oil product prices, with duties exempted from the price. The issuance of the official announcement lays to rest the confusion within the industry over exact export duty structure.

Market sources expect that the reduction of the CPO duty by $50/mt will have the greatest impact upon the price of CPO exports and Indonesia is expected to take the lion's share of CPO exports in the next few months.

-- Samar Niazi, samar.niazi@spglobal.com

-- Edited by Irene Tang, newsdesk@spglobal.com