The Cancellation of UCO Export Tax Rebate Policy Will Have Far-Reaching Impacts on Related Industries

The Cancellation of UCO Export Tax Rebate Policy Will Have Far-Reaching Impacts on Related Industries

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued a notice on adjusting the export tax rebate policy. The announcement states that, starting December 1, 2024, the export tax rebate policy for used cooking oil (UCO) will be canceled. This policy change aims to increase export costs, reduce the international competitiveness of related products, and promote the development of domestic industries.

Impact on UCO Exports

The cancellation of the UCO export tax rebate will significantly increase export costs. According to data from the Chinese tax authorities, UCO is subject to a value-added tax (VAT) rate of 13%, which is also the previous export rebate rate. With the rebate canceled, the export cost of UCO will increase by approximately $103 per ton. This will weaken the cost competitiveness of UCO exports, likely reversing the recent surge in export volumes.

Impact on the Domestic Bioenergy Industry

• Lower Raw Material Costs: As UCO becomes less competitive for export, more producers are expected to shift their focus to domestic sales. This will reduce the difficulty and cost for domestic downstream companies to secure raw materials.

• Enhanced Global Competitiveness: Reducing UCO exports will increase the overall raw material costs for overseas competitors, thereby boosting the global competitiveness of UCO-based bioenergy produced in China.

• Promotion of Domestic Demand: With more UCO available in the domestic market, bioenergy companies in China will have a more stable raw material supply, improving their production capacity and market competitiveness.

International Comparison

Indonesia has also increased export taxes on waste oils, reflecting a global trend of policies encouraging the domestic utilization of waste oils. Since September 21, 2024, Indonesia has raised export taxes on palm oil mill effluent (POME) and UCO to 7.5% and 6%, respectively. This demonstrates that multiple countries are using policy measures to promote the circular utilization of waste oils domestically.

Conclusion

The cancellation of the UCO export tax rebate policy will have profound effects on UCO exports and the domestic bioenergy industry. It is expected to enhance the competitiveness and stability of China’s bioenergy sector while aligning with global trends in sustainable resource utilization.