Indonesian customs authorities have seized 20 containers of used cooking oil (UCO) that were booked for shipment under an incorrect customs code in an attempt to bypass new export regulations, according to market participants.
The 400t cargo was due to be exported from Surabaya, Indonesia to Pasir Gudang, Malaysia on 9 February on the vessel Ever Boomy but was halted when inspectors discovered it was labelled with the incorrect customs code.
Jakarta had implemented a 20pc domestic market obligation (DMO) on sellers of palm and a host of derivatives in January as the government looks to curb soaring prices that have hit record highs this year.
The shipment was marked under customs code HS15180039, rather than HS15180031, which would include it in the new export restrictions. The former code covers "other inedible mixtures or preparations of vegetable fats and oils", while the latter specifically names palm oil — "inedible mixtures or preparations of the palm oil fruits or palm oil kernels."
The exporter is Starlax, a local supplier of UCO, market participants told Argus. Starlax did not respond to a request for comment.
Indonesian UCO suppliers have pushed back against the new DMO, arguing that their product is not involved in palm oil production. The suppliers say they do not have access to domestic olein markets, effectively cutting off their sales.
A group of 13 suppliers, including Starlax, which account for about 90pc of Indonesia's 25,000-30,000 t/month export sales has even formed a new grouping, the Association of Indonesian Waste Cooking Oil Exporters (AEMJI), to provide a united front against the new trade ministry regulations, but have had no success so far in changing the rules.
This has led sellers to change tack and many are now trying to work within the DMO by forming partnerships with local palm olein retailers to meet the 20pc domestic sales requirement. But progress has been slow and none of the UCO Association members have been awarded export permits so far, with some suffering delays in receiving their passes for unknown reasons.
"I hope what Starlax did does not impede what the Association can do to get the export permits," said AEMJI chairman Setiady Goenawan.
"We have not yet got export approval," said another association member. "We are barely surviving day by day."
Crude palm oil futures hit a new record high of 6,043 ringgit/t ($1,444/t) on the fob Bursa Malaysia exchange today as escalating tensions in Ukraine drove up energy prices. This is adding to the already bullish palm market stoked by adverse weather, labour shortages, low fertilizer use and the impact of Indonesia's DMO.
The soaring cost of palm and absence of Indonesian cargoes have also sent UCO prices to a record high of $1,250/t fob Indonesia, up from $1,160/t at the beginning of the year.
