Asia’s RCEP Trade Deal to Remove Biofuel Tariffs

by Amandeep Parmar (Argus Media) A new free-trade agreement (FTA) between 15 Asia-Pacific countries will phase out tariffs on a host of biofuels and feedstocks, although existing trade flows may limit the immediate market impact.

The Regional Economic Comprehensive Partnership (RCEP) was signed yesterday by China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations (Asean) group.

Most biofuels trade by these countries is done externally rather than within this bloc. A lack of regulatory support in most Asian countries means biodiesel and feedstocks are generally sold to Europe, which is the biggest and most lucrative market. And ethanol is mostly imported from the US, Brazil or Pakistan, which are likely to remain largely the lowest-cost suppliers, limiting the impact of the RCEP on intra-Asia trade flows.

China will wind down import tariffs on undenatured and denatured ethanol, from 40pc and 30pc respectively to zero, by 20 years after the agreement comes into force. Biodiesel duties will drop to zero from 6.5pc after 10 years but used cooking oil (UCO) rates will be unaffected by the FTA, staying at 10pc.

China is an exporter of biodiesel and UCO, which renders any tariff reductions largely moot. Beijing has scrapped plans to roll out a nationwide 10pc ethanol mandate.

Japan will phase out ethanol tariffs on supplies from Australia, New Zealand and the Asean countries but tariffs from China or South Korea will remain unchanged.

Indonesia will completely phase out UCO and biodiesel duties by the first and 15th years respectively from when the agreement is implemented, both from current levels of 5pc. Ethanol import tariffs will remain at 30pc. But import volumes of all of these products are currently negligible, with Indonesia self-sufficient in biodiesel and an exporter of UCO. The government has shown little interest so far in pursuing its E10 mandate.

Malaysian rates were already at zero for most products, although some HS codes that incorporate UCO will be cut to zero from 5pc one year after the agreement comes into effect.

Ethanol import tariffs into the Philippines will similarly be cut from 10pc in the first year. The country has an E10 mandate but imports are heavily reliant on the US, which remains the lowest-cost supplier. READ MORE