Indonesia urges EU to remove countervailing duty on biodiesel after WTO ruling

A World Trade Organization panel has sided with Indonesia, ruling that the European Union's 8-18% countervailing duties on Indonesian biodiesel imports, imposed since 2019, were not based on objective evidence, as Indonesia's palm oil export levies were not deemed a subsidy and the EU failed to prove material harm. Indonesia is now urging the EU to immediately revoke these duties, which have significantly impacted its biodiesel exports to a major market. However, a definitive final ruling remains uncertain as the WTO's Appellate Body is non-operational, preventing a conclusive appeal process.

Analysis

A World Trade Organization (WTO) panel has ruled in favor of Indonesia, finding that the European Union's countervailing duties on Indonesian biodiesel were not based on objective evidence. The panel concluded that Indonesia's palm oil export policies did not constitute a prohibited subsidy and that the EU failed to prove a threat of material harm to its domestic industry from the imports. These duties, ranging from 8% to 18% since 2019, had a severe impact, causing Indonesian biodiesel exports to the EU to collapse from 1.32 million kiloliters in 2019 to just 27,000 kiloliters in 2024. While this ruling represents a significant political victory for Indonesia, its immediate practical effect is uncertain. The EU retains the right to appeal, but with the WTO's Appellate Body non-operational, an appeal would effectively place the dispute in a state of legal limbo, potentially preventing a final, binding resolution and delaying any removal of the tariffs.

Key Decisions for Investors

• Investors with exposure to Indonesian palm oil and biodiesel producers should view this ruling as a positive catalyst, but temper expectations for an immediate resumption of exports to the EU pending Brussels' official response and potential appeal.
• The primary risk factor is the non-functional WTO Appellate Body, which means the EU could appeal the ruling and effectively maintain the tariffs, creating prolonged uncertainty for the biodiesel supply chain.
• Consider the potential negative impact on European biodiesel producers, who have been shielded by the duties since 2019 and now face a heightened risk of renewed competition and margin pressure if the tariffs are ultimately lifted.