COMMISSION IMPLEMENTING REGULATION (EU) 2019/1344

of 12 August 2019

imposing a provisional countervailing duty on imports of biodiesel originating in Indonesia

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1), and in particular Article 12 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1. Initiation

(1) On 6 December 2018, the European Commission (the ‘Commission’) initiated an anti-subsidy investigation with regard to imports into the European Union (the ‘Union’) of biodiesel originating in Indonesia (the ‘country concerned’) pursuant to Article 10 of Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not member of the European Union (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (2) (the ‘Notice of Initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 22 October 2018 by the European Biodiesel Board (‘EBB’ or the ‘complainant’) on behalf of producers representing 32 % of total Union production. Producers representing 63 % of the total Union production of biodiesel supported the complaint.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of Indonesia (‘GOI’) that it had received a properly documented complaint, and invited the GOI for consultations in accordance with Article 10(7) of the basic Regulation. The GOI accepted the offer for consultations, which were held on 3 December 2018. During the consultations as well as subsequent exchanges with the GOI, due note was taken of the comments submitted by the GOI. However, no mutually agreed solution could be reached.

(4) After the publication of the Notice of Initiation, the Commission received comments regarding the initiation from the Wilmar Group, an exporting producer (‘Wilmar’). In its comments, Wilmar submitted that: (a) the complaint did not include sufficient evidence of subsidisation to warrant an opening of procedure; (b) the GOI has not put in place any subsidy scheme to the benefit of the biodiesel industry; and (c) even if a subsidy scheme of the GOI was to be found, Wilmar did not receive any subsidy under that scheme.

(5) The GOI similarly argued at the later stage of the investigation that the complaint did not include sufficient evidence of subsidisation to warrant an opening of procedure.

(6) With reference to the various subsidy schemes identified in the complaint, Wilmar preliminarily alleged that EBB failed to provide sufficient evidence of the existence of any subsidy and that therefore the complaint is unfounded.

(7) With particular reference to the export tax and levy imposed by the GOI on crude palm oil (‘CPO’), Wilmar submitted that the complainant failed to provide sufficient evidence of the required entrustment or direction of Indonesian CPO producers by the GOI.

(8) Furthermore, Wilmar submitted that none of the subsidy schemes identified in the complaint are export subsidies. In addition, according to Wilmar, the alleged subsidy schemes did not induce Indonesian biodiesel producers to sell biodiesel for export, rather they seek to reach out to the domestic Indonesian blending targets of biodiesel with mineral diesel (3).

(9) Finally, Wilmar submitted that the complaint failed to provide sufficient evidence of threat of material injury caused by Indonesian biodiesel imports into the Union and that, in any event, imports of Indonesian biodiesel did not create any such injury.

(10) Concerning the evidence of injurious subsidisation at initiation stage, the Commission made the open version of the complaint available and provided its analysis on the evidence available at that stage in the memorandum on sufficiency of evidence, on the basis of which the investigation was initiated. Therefore, contrary to what Wilmar alleged, the Commission considered and substantiated in the memorandum that there was sufficient evidence tending to show the existence of injurious subsidisation.

(11) On 19 June 2019 the Commission received a submission from Wilmar arguing inter alia that the Union industry was not under a threat of material injury from imports of Indonesian biodiesel.

(12) However, the Notice of Initiation specified that any information for the stage of provisional findings should be submitted within 70 days from the date of its publication. This deadline expired on 14 February 2019. Therefore, the part of the submission dealing with threat of injury could not be addressed at provisional stage and will be addressed instead at the definitive stage of the investigation. Moreover, section 5.2 of the Notice of Initiation specified that any comment on the complaint, including matters pertaining to injury and causality should be submitted within 37 days from the date of its publication. Interested parties having filed written submissions or provided any data after 14 February 2019 are invited to indicate together with their comments on the provisional measures whether they still consider those submissions relevant for the current investigation, indicating how such information should be taken into account for the definitive stage.

1.2. Investigation period and period considered

(13) The investigation of subsidisation and injury covered the period from 1 October 2017 to 30 September 2018 (the ‘investigation period’ or the ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2015 to the end of the investigation period (the ‘period considered’). Where appropriate, the Commission also examined post-IP data.

1.3. Interested parties

(14) In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers and the GOI, the known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(15) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

1.4. Sampling

(16) In its Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

1.4.1. Sampling of Union producers

(17) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the highest representative quantity of production, which could reasonably be investigated within the time available.

(18) The provisional sample consisted of three Union producers and represented a broad geographical spread. The sampled Union producers accounted for more than 18 % of the total production volume of the Union industry. The Commission invited interested parties to comment on the provisional sample.

(19) The Commission received comments on the provisional sample from Wilmar. Wilmar commented on the size of the sample, saying that three producers was not large enough a sample, and requested that another company group consisting of two producers, Biopetrol, be added to the sample of Union producers.

(20) The Commission considered that the sample with the three largest producers of biodiesel in the Union is representative (including geographically) and a larger sample could not be reasonably investigated within the time available. Therefore, the claim was rejected.

1.4.2. Sampling of importers

(21) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

(22) Two unrelated importers provided the requested information and agreed to be included in the sample. One of them imported negligible amounts and did not resell it during the IP, so the Commission only investigated the other unrelated importer. In view of the low number of unrelated importers that cooperated the Commission decided that sampling was not necessary.

1.4.3. Sampling of exporting producers in Indonesia

(23) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in Indonesia to provide the information specified in the Notice of Initiation. In addition, the Commission asked the authorities of Indonesia to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(24) Four exporting producers in the country concerned provided the requested information and agreed to be included in the sample. The responding companies or groups of companies accounted for 100 % of exports to the Union during the investigation period. Due to the limited number of exporting producers and the high level of cooperation, the Commission decided not to carry out sampling but rather to investigate all Indonesian exporting producers.

1.4.4. Questionnaire replies and verification visits

(25) The Commission sent questionnaires to the GOI, to the four exporting producers, to the three sampled Union producers, and to two unrelated importers of biodiesel.

(26) The Commission received questionnaire replies from the GOI, all groups of exporting producers, all sampled Union producers and both unrelated importers.

(27) The Commission sought and verified all the information deemed necessary for a determination of subsidy, resulting injury (including threat of injury) and Union interest. A verification visit took place at the premises of the GOI, the Ministry of Trade of the Republic of Indonesia in Jakarta, during which officials from other relevant ministries also participated.

(28) Verification visits under Article 26 of the basic Regulation were carried out at the premises of the following companies: Union producers and related companies: — Masol Iberia Biofuel, S.L.U., El Grao (Castellón) and Campa Iberia S.A.U., Barcelona, Spain — Saipol, Grand-Couronne, France — Verbio Vereinigte BioEnergie AG, Leipzig, Germany Unrelated importer: — Gunvor BV, Geneva, Switzerland (4) Exporting producers in Indonesia and related companies: — Wilmar Group: — PT Wilmar Nabati Indonesia, Medan — PT Wilmar Bioenergi Indonesia, Medan — Wilmar Trading Pte. Ltd., Singapore — Musim Mas Group: — PT Intibenua Perkasatama, Medan — PT Musim Mas, Medan — Inter-Continental Oils & Fats Pte. Ltd., Singapore — Campa Iberia S.A.U., Barcelona, Spain — IM Biofuel Italy S.R.L., Milan, Italy — PT Ciliandra Perkasa, Jakarta, and First Resources Trading Pte. Ltd., Singapore — Permata Group: — PT Pelita Agung Agrindustri, Medan — PT Permata Hijau Palm Oleo, Medan — Virgoz Oils & Fats Pte. Ltd., Singapore

(29) Following the reply to the questionnaires, the deficiency letters and the verification visits, and as further explained in recitals (219) to (227) below, the Commission observed that the GOI and Wilmar did not fully cooperate with the investigation. More precisely: (a) PT Perkebunan Nusantara (‘PTPN’), a CPO producer wholly owned by the GOI, did not respond to Appendix B to the GOI's questionnaire within the stipulated deadline, albeit being one of the undertakings that have been requested to reply; and, (b) Wilmar did not provide a complete answer to Table 2 of the Deficiency Letter, and particularly provided the requested data only partially.

(30) The Commission therefore issued an Article 28 letter to both the GOI and Wilmar Group, limited to the specific information they did not provide. Hence, the Commission used facts available with respect to the missing information.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(31) The product concerned is fatty-acid mono-alkyl esters and/or paraffinic gasoils obtained from synthesis and/or hydro-treatment, of non-fossil origin, commonly known as ‘biodiesel’, in pure form or as included in a blend, originating in Indonesia (the ‘product concerned’).

(32) The investigation indicated that biodiesel produced in Indonesia is primarily palm oil methyl ester (‘PME’), which is derived from palm oil. Biodiesel produced in the Union is instead mainly rapeseed methyl ester (‘RME’) but made also from other feedstock, including waste oils as well as virgin oils.

(33) PME and RME both belong to the category of fatty-acid mono-alkyl esters. The term ‘ester’ refers to the transesterification of vegetable oils, namely, the mingling of the oil with alcohol, which produces biodiesel and, as a by-product, glycerine. The term ‘methyl’ refers to methanol, the most commonly used alcohol in the process. Fatty-acid mono-alkyl esters are also known as ‘fatty-acid methyl esters’ or FAME.

(34) Although PME and RME are both fatty-acid mono-alkyl esters, they also have partially different physical and chemical properties, and notably they have a different cold filter plugging point (‘CFPP’). The CFPP is the temperature at which a fuel will cause a fuel filter to plug due to the crystallization or jellification of some fuel components. For RME, the CFPP can be – 14 °C while for PME it is about 13 °C. The market often describes biodiesel at a particular CFPP as FAMEX, such as FAME0 or FAME5.

(35) The product concerned is currently falling under CN codes ex 1516 20 98 (TARIC codes 1516209821, 1516209829 and 1516209830), ex 1518 00 91 (TARIC codes 1518009121, 1518009129 and 1518009130), ex 1518 00 95 (TARIC code 1518009510), ex 1518 00 99 (TARIC codes 1518009921, 1518009929 and 1518009930), ex 2710 19 43 (TARIC codes 2710194321, 2710194329 and 2710194330), ex 2710 19 46 (TARIC codes 2710194621, 2710194629 and 2710194630), ex 2710 19 47 (TARIC codes 2710194721, 2710194729 and 2710194730), 2710 20 11, 2710 20 15, 2710 20 17, ex 3824 99 92 (TARIC codes 3824999210, 3824999212 and 3824999220), 3826 00 10 and ex 3826 00 90 (TARIC codes 3826009011, 3826009019 and 3826009030).

2.2. Like product

(36) The investigation showed that the following products have the same basic physical, chemical, and technical characteristics as well as the same basic uses: (a) the product concerned; (b) the product produced and sold on the domestic market of Indonesia; (c) the product produced and sold in the Union by the Union industry.

(37) The Commission decided that, for the purpose of this investigation, those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

3. SUBSIDISATION

3.1. Subsidies and subsidy programmes within the scope of the current investigation

(38) On the basis of the information available, including information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaire, the Commission investigated the alleged subsidisation by the GOI through the following subsidy programmes: (a) direct transfer of funds, such as direct subsidies granted through the Biodiesel Subsidy Fund; (b) government support to the biodiesel industry including through the provision of CPO for less than adequate remuneration; (c) government support to the biodiesel industry including through revenue forgone or not collected such as income tax benefits for listed investments, industrial estate subsidies, pioneer industry tax benefits, import duty facility and tax exemption on VAT; (d) provision of export financing and guarantees on preferential terms by the Indonesian Eximbank.

3.2. Government support to the biodiesel industry through direct transfer of funds via the ‘Biodiesel Subsidy Fund’

3.2.1. The complaint and the subsidy scheme

(39) The complainant claimed that the GOI supports the biodiesel industry by providing grants to the Indonesian biodiesel producers in the amount of the difference between the GOI's reference price for biodiesel and the price at which oil companies purchase biodiesel, namely the reference price for diesel oil.

(40) The investigation established that the ‘Biodiesel Subsidy Fund’, which is part of the Oil Palm Plantation Fund (‘OPPF’), was established in 2015 by Presidential Regulation No. 61/2015.

(41) Presidential Regulation 61/2015 entrusted an agency, the Oil Palm Plantation Fund Management Agency (the ‘Management Agency’) to collect export levies on the exportation of palm oil commodities by virtue of Minister of Finance Regulation No. 133/PMK.05/2015.

(42) The money collected by the customs authorities through the export levies on palm oil products constitutes the funds of the OPPF and the latter is formally controlled by the Management Agency.

(43) The higher in the value chain each specific product is, the higher the export levy: the export levy on CPO during the investigation period was set at 50 USD/tonne while on derivatives, including biodiesel, at 20 USD/tonne.

(44) By Presidential Regulations 24/2016 and 26/2016, the GOI clarified that the mandate of the Biodiesel Subsidy Fund includes the procurement and utilization of biodiesel on the domestic market. Particularly, the GOI stipulates that the OPPF shall be used to support purchases of biodiesel by entities appointed by governmental bodies.

(45) More precisely, Presidential Regulation 26/2016 stipulates in its Article 9(1) that ‘[t]he Director General of EBTKE shall appoint the Petrofuel Entity which shall carry out the procurement of biodiesel as meant in Article 4 in the framework of financing by the Fund Management Agency by observing the policy of the Steering Committee of the Fund Management Agency’ and in the following Article 9(8) that ‘[b]ased on the approval from the Minister as meant in paragraph (7), the Director General of EBTKE on behalf of the Minister shall appoint: a. the biodiesel producers which are going to participate in the procurement of biodiesel; and b. the allocation of volume of biodiesel for each biodiesel producer’. Moreover, the Steering Committee of the Management Agency is composed exclusively of officials of various ministries of the GOI.

(46) The biodiesel producers which choose to participate and have been allocated a quota pursuant to that regulation are under the obligation to sell the monthly amount of biodiesel to the so-called ‘Petrofuel Entity’. So far, the GOI has appointed the following as Petrofuel Entity: (a) PT Pertamina (‘Pertamina’), a State-owned oil and gas company, and (b) PT AKR Corporindo Tbk (‘AKR’), a private oil and gas company.

(47) The OPPF envisages a specific payment mechanism, whereby Pertamina (and for some small volumes, AKR) pays biodiesel producers the diesel reference price (as opposed to the actual biodiesel price which, during the IP. would have been higher), whereas the difference between such diesel reference price and the biodiesel reference price is paid to the biodiesel producers out of the OPPF by the Management Agency.

(48) The reference price for diesel and biodiesel is determined by the Minister of Energy and Mineral Resources, as per Article 19 of Presidential Regulation 61/2015, in a following way: (a) The diesel reference price is based on prices reported by Platts Singapore for oil (MOPS) (5) and the production cost of diesel in Indonesia. (b) Pursuant to Decree of the Minister of Finance No 2026/2017, the biodiesel reference price is based on the CPO domestic price, to which transformation costs are added (of 125 USD/MT until 5 May 2017, and since then, of 100 USD/MT). During the verification visit, the GOI explained that the amount of transformation costs added to the CPO domestic price is subject to an yearly review, which however does not necessarily result in a change in that amount. The GOI in fact explained that if the annual review indicates that the amount of transformation cost is still appropriate, no change is made.

(49) More precisely, each biodiesel producer – including all the exporting producers – invoices Pertamina (or AKR, as the case may be) the volume of biodiesel which the buyer is required to use under the blending obligation, and Pertamina (or AKR) pays to the producer the diesel reference price for that period. The investigation revealed that the vast majority of the sales by the biodiesel producers were made to Pertamina and a small portion to AKR. Moreover, the sales to AKR were fully identical to the ones made to Pertamina in terms of prices and all other conditions attached. Consequently, the Commission focused its analysis below on the sales to Pertamina.

(50) The producer of biodiesel, in order to obtain reimbursement of the price difference between the price paid by Pertamina and AKR (based on the diesel reference price) and the reference price for biodiesel, shall then send an additional invoice for the same volume to the Management Agency, enclosing a list of documents. Once the Management Agency has received the invoice, and after verification of the elements contained therein, the Management Agency shall pay to the relevant biodiesel producer the difference between the reference price for diesel (paid by Pertamina or AKR, as the case may be) and the reference price of biodiesel set for that period.

(51) In this investigation, the Commission examined whether the set of measures adopted by the GOI to support the Indonesian biodiesel industry through the payments by the Management Agency amount to a countervailable subsidy.

(52) In order to establish the existence of a countervailable subsidy, three elements must be present: (a) a financial contribution or income/price support; (b) a benefit, and (c) specificity (Article 3 of the basic Regulation).

3.2.2. Analysis

3.2.2.1. Financial contribution

(53) At the outset, the Commission observed that during the investigation period all the exporting producers chose to participate in the procurement of biodiesel and thus were under the obligation to sell biodiesel to Pertamina and AKR. The Commission also observed that during the investigation period the reference price for biodiesel was higher than the reference price for mineral diesel. As a result, during the investigation period all the exporting producers received payments from the OPPF.

(54) Article 3(1)(a)(i) of the basic Regulation states that there is a financial contribution by the government where the government practice involves a direct transfer of funds. In line with the provision of the WTO Agreement on Subsidies and Countervailing Measures (the ‘SCM Agreement’), Article 2 of the basic Regulation stipulates that ‘government’ means a government or any public body within the territory of the country of origin or export.

(55) The WTO Appellate Body in the Report on the US-Anti-Dumping and Countervailing Duties (China) found that the term ‘public body’ means an entity that ‘possesses, exercises or is vested with governmental authority’ (6).

(56) The Commission observed that the OPPF has been created by an act of the GOI and the Management Agency has been explicitly entrusted by the GOI with the duty to make payments to biodiesel producers.

(57) First, Article 11 of Presidential Regulation 66/2018 defined the remit of the OPPF by broadening it as follows: ‘(1) The collected Fund shall be used for: a. development of Oil Palm Plantation human resources; b. Research and development of Oil Palm Plantation; c. Promotion of Oil Palm Plantation; d. rejuvenation of Oil Palm Plantation; and e. Oil Palm Plantation facilities and infrastructures. (2) The use of Fund collected for the interests as referred to in paragraph (1), including for the fulfilment of Oil Palm Plantation products for the need of food, Oil Palm Plantation downstream industry development, and procurement and use of biodiesel.’

(58) Second, in its Article 18(1), that regulation expressly stipulates that ‘the use of fund for provision and utilization of biodiesel referred to in Article 11 paragraph (2) is purported to cover the difference between market index price of diesel and the market index price of biodiesel.’

(59) Hence, the Commission observed that the legal acts implementing the OPPF expressly confirm that its funds are used for the benefit of the biodiesel producers.

(60) For that purpose, pursuant to Article 1(4) of Presidential Regulation 61/2015 the GOI granted the Management Agency the right to use the export levies and export taxes imposed on palm oil and its derivatives and imposed the duty to procure and use biodiesel. The collection is however practically carried out by the customs authorities. The Commission therefore took the view that the Management Agency possesses, exercises or is vested with governmental authority.

(61) Consequently, the Commission concluded that the legal framework set out above effectively grants the Management Agency the exercise of governmental functions with respect to the biodiesel sector. The Commission therefore concluded that the Management Agency acts as a public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(62) With regard to the required ‘direct transfer of funds’, the investigation established that after having received an invoice from the biodiesel producers together with all the appropriate documentation (7) and carried out appropriate verifications, the Management Agency directly pays the amount due (i.e. the differential between the diesel reference price and the biodiesel reference price) to the biodiesel producers. The Commission further noted that it was undisputed by both the GOI and all the exporting producers that the Management Agency made direct cash/bank transfers to those producers selling biodiesel to Pertamina and AKR to cover for the difference between the reference price for mineral diesel paid by Pertamina and AKR and the reference price for biodiesel. Hence, the Commission took the view that the grants made by the Management Agency amount to a ‘direct transfer of funds’ within the meaning of Article 3(1)(a)(i) of the basic Regulation.

(63) In this regard, the argument put forward by the GOI that the financial resources employed by the Management Agency to pay out the biodiesel producer were entirely privately sourced and that therefore there was no financial contribution must be rejected. The Commission in fact observed that the basic Regulation, in line with the SCM Agreement, does not take into account the origin or nature (public or private) of the funds transferred by the government. Rather, an evaluation of the existence of a financial contribution involves consideration of the nature of the transaction through which something of economic value is transferred by a government. In other words, what matters is that the transfer of funds is attributable to the State (as opposed to private funds used at the discretion of private operators) (8). A wide range of transactions falls within the meaning of ‘financial contribution’ in Article 1.1(a)(1). According to paragraphs (i) and (ii) of Article 1.1(a)(1), a financial contribution may be made through a direct transfer of funds by a government, or the foregoing of government revenue that is otherwise due (9). As already explained, the Management Agency, as a public body, made direct transfer of funds to the biodiesel producers from the OPPF, which is nurtured from the compulsory collection of export levies and export takes on public and private operators, and therefore fully complied with the definition of financial contribution of the Appellate Body.

(64) In addition to the above, the Commission further observed that the funds available to the OPPF originate from the collection of the export levies and export taxes imposed on CPO and its derivatives. The GOI during the verification visit explained that the export levy is collected by the customs authorities before exportation of the goods and, despite its claim that it is collected exclusively for the purposes of financing the OPPF, could not prove that it is collected outside the specific accounts of the GOI's budget. Absent any evidence to the contrary, the Commission concluded that the levy is collected as part of the general budget of the State. The fact that the levy is then directed to the OPPF is just the manner how the GOI uses the public revenue collected from the export levies and export taxes. In any event, the OPPF consists of funds which are collected by means of export levies and export taxes imposed by the GOI and the funds are controlled by the Management Agency. Therefore, they amount to public resources, regardless of whether they are an integral part of the State's budget.

(65) As regards the GOI's argument that the transfer of funds from the OPPF to biodiesel producers does not confer any benefit to the recipients as biodiesel producers paid more into the OPPF than what they received, the Commission observes the following. First, the remit of the OPPF is wider than supporting the biodiesel industry. Rather, the OPPF is an expression of a wider policy of the GOI encompassing the whole palm oil value chain. All exporters of CPO (and processed goods) in fact pay the levy into the fund when their product is exported. CPO can be used in a wide variety of application, such as food consumption, cosmetics and the chemical industry. The export levies collected for the OPPF are therefore not exclusively linked to transfer of funds to the biodiesel industry and no automatic offset can be done.

(66) Second, and as already explained above in recital (64), the funds used by the Management Agency derive entirely from the general budget of the GOI (which are allocated to the OPPF). The collection of the export levy is carried out by customs and the levies are paid into the general budget of the State. The funds used are therefore not equivalent to voluntary payments made by biodiesel producers, which are then used entirely for the benefit of the biodiesel producers (without any discretion by the biodiesel producers, who do not have any saying on how the OPPF is used). The funds are collected by the GOI through compulsory export levies and export taxes, some paid by biodiesel producers, by also CPO producers and other producers of associated CPO products. The GOI then decides to use such resources for the benefit of biodiesel producers through the OPPF.

(67) The Commission also observed that in their responses to the questionnaire, the exporting producers indicated that most of the CPO utilised in the production of biodiesel is locally sourced, and therefore not subject to neither export tax nor export levy. The Commission therefore assumed that the exports of CPO for which the exporting producers (or, more precisely, their related CPO producers) paid export taxes and levies concerned value chains other than the biodiesel value chain.

(68) The Commission therefore concluded that the export taxes and levies collected by the GOI from such exports are therefore not linked to the biodiesel industry as such, so that the GOI's argument that the OPPF does not confer any benefit to the recipients as biodiesel producers paid more into the OPPF than what they received is rejected. In fact, contrary to the GOI's allegation, for the biodiesel value chain the exporting producers were better off in the sense that they received from OPPF more than they have paid into it.

(69) In light of the foregoing, the Commission concluded that the disbursements made by the Management Agency to the biodiesel producers qualify as ‘financial contribution in the form of a direct transfer of funds from a government’ pursuant to Article 3(1)(a)(i) of the basic Regulation. It is undisputed that in the purchases by Pertamina and AKR of biodiesel pursuant to the blending requirements the Management Agency covered the difference between the price paid by Pertamina and AKR (on the basis of the reference price for mineral diesel) and the (higher) reference price for biodiesel. In this respect, the biodiesel producers received a grant from the GOI amounting for such difference (10).

3.2.2.2. Benefit

(70) For the reasons set out below, the Commission took the view that the direct transfers made by the Management Agency confer a benefit to the exporting producers.

(71) Indeed, the exporting producers are put in a better situation than they would be absent the scheme. To put it simply, the transfer of funds made by the Management Agency amount to grants and the market does not provide for free grants. Those grants place the biodiesel producers in a better position than they otherwise would have been in the marketplace (11). Absent the scheme the biodiesel producers would only obtain the payment from Pertamina and AKR at the price of mineral diesel.

(72) In light of the above, the Commission considered that the money paid by the Management Agency to the biodiesel producers for the biodiesel sold in order to cover the difference between the diesel reference price paid by Pertamina and the biodiesel reference price is a benefit in their favour in the sense of Article 3(2) of the basic Regulation.

3.2.2.3. Specificity

(73) First, the Commission observed that the OPPF is available for a limited number of industries, all relating to the CPO value chain. This limitation originates directly from the applicable legislation. First, the support of the palm oil value chain is the main explicit aim of Presidential Regulation 61/2015 establishing the OPPF. In its preamble, it is stated that the OPPF is needed ‘to ensure the continuous development of oil palm plantation, it requires a national strategy supported by management of fund for continuous development of oil palm plantation’. In its article 1 that legislation further specifies that ‘Oil Palm Plantation means all activities of management of natural resources, human resources, production facility, equipment and machinery, cultivation, harvest, processing, and marketing related to Oil Palm Plantation’.

(74) In Article 11 it is then stipulated that ‘The collected Fund shall be used for: a. development of Oil Palm Plantation human resources; b. Research and development of Oil Palm Plantation; c. Promotion of Oil Palm Plantation; d. rejuvenation of Oil Palm Plantation; and e. Oil Palm Plantation facilities and infrastructures’.

(75) The Commission therefore concluded that the OPPF is de jure specific pursuant to article 4(2)(a) of the basic Regulation as the legislation pursuant to which the granting authority operates, explicitly limits access to the subsidy to certain enterprises, namely those active in the CPO value chain.

(76) In any event, even if there would be no de jure specificity, the Commission took the view that the GOI directs the Management Agency to support only de facto the biodiesel industry. The evidence collected in the course of the investigation in fact and referred to in paragraph (122) below indicates that the vast majority of money paid by the Management Agency is devoted to paying biodiesel producers the differential between the MOPS and the biodiesel reference price.

(77) The Commission therefore took the view that the GOI's manages the OPPF in such a way that makes it de facto specific. According to Article 4(2)(c) of the basic Regulation, a subsidy can be de facto specific if certain criteria are met, such as, the ‘use of a subsidy programme by a limited number of certain enterprises; predominant use by certain enterprises; the granting of disproportionately large amounts of subsidy to certain enterprises; the manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy’. In this case the Commission observed that the behaviour of the OPPF perfectly fits in this list. Particularly, as explained above, the fund is predominantly used by the biodiesel industry and the granting authority exercised its discretion in doing so.

(78) This finding is also in line with the WTO case law. In EC and certain Member States – Large Civil Aircraft, the Panel explained that ‘The ordinary meaning of the word “predominant” includes “constituting the main or strongest element; prevailing”. Thus, “predominant use {of a subsidy programme} by certain enterprises” may be simply understood to be a situation where a subsidy programme is mainly, or for the most part, used by certain enterprises’ (12). In that decision, the Panel further explained that ‘where a subsidy programme operates in an economy made up of only a few industries, the fact that those industries may have been the main beneficiaries of a subsidy programme may not necessarily demonstrate “predominant use”. Rather, use of the subsidy programme by those industries may simply reflect the limited diversification of economic activities within the jurisdiction of the granting authority. On the other hand, the same subsidy programme operating in the context of a highly diversified economy that is used mainly, or for the most part, by only a few industries would tend to indicate “predominant use”’ (13). In the case at hand the subsidy is available for the palm oil value chain only, but within that industry for a wide array of applications. However, if the reasoning of the Panel is applied to the facts of this case, the Commission considered that the fact that the most part of the OPPF is used to finance the biodiesel payments qualifies as ‘predominant use’ as defined above since the biodiesel industry is the main beneficiary. The Commission further observes that the biodiesel industry is one of the many industries in a diversified economy (14) and that the OPPF has been supporting almost exclusively the biodiesel industry since its setting up.

(79) In light of the above, the Commission therefore concluded that the GOI's set of measures were directed to benefit the domestic biodiesel industry. In addition to being de iure specific under Article 4(2)(a) of the basic Regulation, they are also de facto specific under Article 4(2)(c) of the basic Regulation.

3.2.3. Conclusion

(80) The Commission provisionally found that through a set of measures the GOI provided support to the biodiesel industry including through direct transfer of funds via the ‘Biodiesel Subsidy Fund’. The GOI conferred a benefit to the recipients which is specific, thus amounting to a countervailable subsidy.

3.2.4. Calculation of the subsidy amount

(81) In accordance with Article 5 of the basic Regulation, the Commission calculated the amount of countervailable subsidy for each exporting producer in terms of the benefit conferred on the recipient found to exist during the IP. The Commission assessed the benefit as being the total amount of grant received from the OPPF during the IP. In accordance with Article 7(2) of the basic Regulation, the Commission allocated those subsidy amounts over the total turnover generated by the sales of biodiesel of the exporting producers during the investigation period.

(82) The subsidy rate provisionally established with regard to this set of measures during the investigation period for the exporting producers amounts to: Company Subsidy rate PT Ciliandra Perkasa 7,91 % PT Intibenua Perkasatama and PT Musim Mas (Musim Mas Group) 11,83 % PT Pelita Agung Agrindustri and PT Permata Hijau Palm Oleo (Permata Group) 12,76 % PT Wilmar Nabati Indonesia and PT Wilmar Bioenergi Indonesia (Wilmar Group) 12,23 %

3.3. Government support to the biodiesel industry including through the provision of palm oil (CPO) for less than adequate remuneration

3.3.1. The complaint and the subsidy scheme

(83) The complaint contended that the CPO prices are distorted in Indonesia because of the GOI's intervention. In particular, the complaint indicated that the GOI has implemented a policy of imposing high export taxes on CPO. CPO is the main raw material used for the production of biodiesel in Indonesia, and represents around 85 % of total production costs of biodiesel. According to the complaint, in doing so the GOI is ensuring that the price of raw materials for the production of biodiesel remains significantly lower than global prices, to the benefit of the Indonesian biodiesel producers.

(84) Moreover, according to the complaint, the GOI introduced in May 2015 an export levy of USD 50 per tonne on CPO and lower on downstream processed palm oil products, the specific rate depending on the product.

(85) The complainant claimed that by imposing high export taxes and levies on CPO, the GOI has a depressing effect on the domestic palm oil price in Indonesia, conferring a discernible benefit to biodiesel producers. It also encourages private CPO producers to sell their products to Indonesian biodiesel producers. By consequence, the complainant alleges that the GOI entrusts or directs Indonesian palm oil producers to provide CPO to biodiesel producers for less than adequate remuneration.

(86) The investigation showed that indeed the GOI imposes both an export tax and an export levy on CPO.

(87) The export tax was first implemented in 1994. Since its introduction, it has been amended a number of times. In the latest version (Decree No 140/PMK.010/2016), the export tax consists of a progressive tariff schedule on crude palm oil as well as on 22 other products, including biodiesel (which is consistently given a lower rate than CPO). Indonesian exporters pay a sliding tax linked to the GOI's reference price for CPO exports. So when the GOI's reference export price increases, so does the export tariff.

(88) When the reference price is below USD 750 per tonne, the applicable export tax rate is 0 %. During the investigation period, the CPO price remained below the USD 750 per tonne threshold and therefore no export tax was payable.

(89) In addition to the export tax, during the investigation period the GOI imposed an export levy on CPO and the downstream products. The export levy during the investigation period was set at USD 50 per ton for CPO and at USD 20 per ton for biodiesel.

(90) In addition to the export tax and levy on CPO and downstream products, the GOI also intervenes in the CPO market by de facto controlling, through the State owned company PTPN, the domestic CPO prices, ensuring that CPO is sold at an artificially low level. Moreover, the GOI provides subsidies to CPO producers in order to ensure that they comply with the policy of providing CPO at artificially low prices.

3.3.2. The application of the provisions of Article 28(1) of the basic Regulation

(91) The Commission informed the GOI that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged support granted to the biodiesel industry including through the provision of CPO for less than adequate remuneration.

(92) At initiation, the Commission requested the GOI to forward Appendix B attached to the anti-subsidy questionnaire (questionnaire for palm oil suppliers) to all producers and distributors of palm oil, which have provided palm oil to the exporting producers. Appendix B consisted of a word document (‘Appendix B_Input supplier Palm Oil’) and an excel file (‘Mini questionnaire intended for Suppliers’). Following a request of the GOI, given the significant number of companies providing the main input for the product concerned, in the spirit of good cooperation and in order to collect at least some relevant data for the investigation, the Commission by email of 7 January 2019 agreed to limit the scope of its request asking the GOI to forward Appendix B and the mini-questionnaire to the ten biggest CPO suppliers in terms of volume per exporting producer.

(93) The Commission, in its deficiency letter to the GOI of 1 March 2019, took note of the fact that it had not received any reply to Appendix B of the questionnaire from the palm oil suppliers of PT Musim Mas, PT Intibenua Perkasatama, PT Pelita Agung Agrindustri and PT Permata Hijau Palm Oleo. In particular, the Commission underlined that it had not received a reply even from the state-owned CPO suppliers including PTPN. Other CPO suppliers, including those related to the exporting producers, complied with that request.

(94) In the reply to the deficiency letter, the GOI stated that it had fulfilled its obligation to communicate Appendix B and mini questionnaires to the relevant Indonesian CPO suppliers. As evidence the GOI submitted the postal record showing delivery receipts to relevant Indonesian CPO suppliers. No other evidence of the GOI's attempts to contact these providers, in particular PTPN, was provided. A similar explanation was provided during the verification visit at the GOI. Notwithstanding the above, PTPN never submitted a duly completed Appendix B to the Commission.

(95) Consequently, with regard to the alleged government provision of CPO for less than adequate remuneration, the GOI did not provide the necessary information and evidence as requested by the Commission in its questionnaire and during the verification visit.

(96) The absence of sufficient cooperation did not allow the Commission to collect all the information it considered relevant for its findings in this investigation. More specifically, the Commission could not obtain from the GOI information on the palm oil market based on direct information provided by CPO suppliers nor does it have complete information regarding PTPN's role on this market with regard to the biodiesel industry.

(97) The GOI claimed that it had provided aggregate data concerning PTPN, which would also include the data requested in Appendix B of the questionnaire. In this respect, the Commission observed that the GOI provided data with regard to PTPN in response to the questionnaire, which included information on its management structure, annual reports and transaction data. However, the Commission noted that it did not receive any of the detailed information which it requested in the Appendix B of the questionnaire which would have allowed it to acquire a complete understanding of the role of PTPN on the palm oil market and of the other relevant producers.

(98) After having received the letter informing the GOI of the possible application of Article 28 of the basic Regulation, the GOI submitted a reply to the Appendix B for PTPN on 30 June 2019. The Commission however observed that the reply was submitted long after the deadline for the submission of that information (12 March 2019, extended by the Commission to 14 March 2019) and after the verification visit at the GOI's premises had taken place. The Commission therefore considered that the submission was not submitted in good time, was not verifiable and the GOI has not acted to the best of its ability in accordance with Article 28 of the basic Regulation.

(99) In the absence of information to the contrary received from the GOI, the Commission partially relied on facts available for its findings regarding those aspects of the investigation in accordance with Article 28 of the basic Regulation.

3.3.3. Analysis

(100) In order to establish the existence of a countervailable subsidy, three elements must be present: (a) a financial contribution or income/price support; (b) a benefit, and (c) specificity (Article 3 of the basic Regulation) (15).

(101) For the first element, the Commission analysed if the set of measures adopted by the GOI lead to a financial contribution in the form of government's provision of CPO for less than adequate remuneration to the Indonesian biodiesel exporting producers, following Article 3(1)(a) of the basic Regulation, and/or whether the set of measures adopted by the GOI falls under the category of income/price support of the biodiesel industry, following Article 3(1)(b) of the basic Regulation.

3.3.3.1. Financial contribution

(102) At the outset, the Commission observed that all exporting producers purchased CPO domestically from either related or unrelated companies to process into refined bleached deodorized palm oil and then biodiesel.

(103) Article 3(1)(a)(iv), second indent, of the basic Regulation states that a financial contribution exists if a government: ‘entrusts or directs a private body to carry out one or more of the type of functions illustrated in points (i), (ii) and (iii) which would normally be vested in the government, and the practice, in no real sense, differs from practises normally followed by governments’. The type of functions described by Article 3(1)(a)(iii) of the basic Regulation occurs where ‘a government provides goods or services other than general infrastructure, or purchases goods…’. Those provisions mirror paragraphs (iii) and (iv) of Article 1.1(a)(1) of the SCM Agreement and should be interpreted and applied in the light of the relevant WTO case law.

(104) The WTO panel in US – Export Restraints (16) ruled that the ordinary meaning of the two words ‘entrust’ and ‘direct’ in Article 1.1(a)(1)(iv) of the SCM Agreement require that the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction). It rejected the US ‘cause-and-effect-argument’ and asked for an explicit and affirmative action of delegation or command.

(105) However, in a subsequent case (17), the Appellate Body held that the replacement of the words ‘entrusts’ and ‘directs’ by ‘delegation’ and ‘command’ is too rigid as a standard. According to the Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body.

(106) In both cases, the government uses a private body as proxy to effectuate the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’. At the same time, paragraph (iv) of Article 1.1(a)(1) of the SCM Agreement does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’. Rather, entrustment and direction implies ‘a more active role of the government than mere acts of encouragement’.

(107) Moreover, the WTO did not consider that ‘leaving discretion to a private body is necessarily at odds with entrusting or directing that private body […] (18). While there may be cases where the breadth of discretion left to the private body is such that it becomes impossible to properly conclude that that private body has been entrusted or directed (to carry out a particular task), this is a factual/evidentiary matter to be addressed on a case-by-case basis.’

(108) In line with those WTO rulings, not all government measures capable of conferring benefits equate to a financial contribution under Article 3 of the basic Regulation and Article 1.1 (a) of the SCM Agreement. There must be evidence of a government policy or programme to promote the industry under investigation (in this particular case the biodiesel/biofuels industry), by exercising authority over or giving responsibility to public or private bodies (here the CPO producers) to provide CPO for less than adequate remuneration to the biodiesel industry.

(109) In a nutshell, the relevant WTO rulings provide that: (i) the determination of whether there is a ‘financial contribution’ under Article 1.1(a)(1) of the SCM Agreement should focus on the nature of the government action, rather than on the effects or the results of the government action (19). In other words, it is well-acknowledged that governments intervene in the market as regulators and, when so doing, they cause effects on the market and its operators. In this sense, e.g. a government may impose export taxes legitimately in order to generate revenue in case of a very competitive commodity in the international markets. In contrast, there is no such legitimate imposition of export restrictions when it becomes evident that the use of such instrument together with other mechanisms to keep commodities domestically and force suppliers to sell below market prices is part of a broader scheme engineered by the government to support a particular industry or set of industries to boost their competitiveness. Thus, the nature of the government action, including its context, object and purpose, is relevant in assessing the ‘financial contribution’ element; (ii) ‘entrustment’ or ‘direction’ would involve an explicit and affirmative action addressed to a particular party in relation to a particular task or duty, this being very different from the situation in which a government intervenes in the market in some way, which may or may not have a particular result given the factual circumstances and exercise of free choice by the actors in that market. Ultimately, the key question behind the concepts of entrustment or direction is whether the conduct in question, i.e. the financial contribution in the form of provision of goods for less than adequate remuneration, can be attributed to the government or still is the free choice of the private operators in view of market considerations, such as regulatory constraints (20); (iii) Article 1.1(a)(1)(iv) of the SCM Agreement is, in essence, an anti-circumvention provision and, thus, a finding of entrustment or direction requires that the government gives responsibility to a private body or exercises its authority over a private body in order to effectuate a financial contribution. In most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement, which could, in turn, serve as evidence of entrustment or direction (21). However, governments are likely to have other means at their disposal to exercise authority over a private body some of which may be ‘more subtle’ than a command or may not involve the same degree of compulsion (22); (iv) There must be ‘a demonstrable link’ between the government act and the conduct of the private body (23). There is no reason why a case of government entrustment or direction should not be premised on circumstantial evidence (such as implicit and informal acts of delegation or command), provided that such evidence is probative and compelling (24). In this respect, evidence of the government's intention to support the downstream industry (for example, through publicly stated policies or government decisions, or other governmental actions), or the existence of other government measures ensuring a particular result on the market (e.g. an export restraint together with a government measure preventing operators subject to those restraints from stocking their products), may be relevant to determine the existence of a ‘financial contribution’ under Article 1.1(a)(1)(iv) of the SCM Agreement (in particular as an indirect manner for the government to provide goods, as provided in sub-paragraph (iii)). In some circumstances, ‘guidance’ by a government can constitute direction (25). The presence of particular effects in the market (such as reduction of prices) may also be a factor to be taken into account together with all other available evidence, including the possibility of anticipating those effects in a particular context. Finally, depending on the circumstances, a private body may decide not to carry out a function with which it was so entrusted or directed, despite the possible negative consequences that may follow. This does not show, however, on its own, that the private body was not entrusted or directed (26).

(110) In line with that case-law, the Commission has reviewed very carefully the nature of the GOI's intervention, i.e. whether the GOI's intervention involves the entrustment of or direction to CPO producers, the nature of the entrusted bodies, i.e. whether the CPO producers are private bodies within the meaning of Article 3(1)(a)(iv) of the basic Regulation, and the action of the entrusted or directed bodies, i.e. whether the entrusted or directed CPO producers provide CPO to the Indonesian biodiesel industry for less than adequate remuneration and hence act as a proxy for the GOI. Moreover, the Commission has verified whether the function carried out would normally be vested in the government, i.e. whether the provision of CPO for less than adequate remuneration to biodiesel producers in Indonesia is a normal government activity, and whether such function does not, in real sense, differ from the practices normally followed by governments, i.e. whether the actual provision of CPO by producers, in real sense, differs from what the government would have done itself.

3.3.3.2. Entrustment or direction of CPO producers by the GOI

(111) In view of the WTO case-law referred to in recitals (104) to (109), the Commission analysed first whether the GOI's support to the Indonesian biodiesel industry is effectively an objective of a government policy and not merely a ‘side effect’ of the exercise of general regulatory powers. The investigation examined in particular whether the price distortions found were part of the government's objectives, or whether the lower prices of CPO were rather an ‘inadvertent’ by-product of general governmental regulation.

(112) The support to the biodiesel industry is achieved by a number of measures, and mainly through the export tax and levy imposed on CPO and the biodiesel subsidy fund.

(113) The export tax regime on CPO was first introduced by the GOI in 1994 and has undergone, since then, several significant changes.

(114) Originally, the purpose of the export tax was to secure local demand for, and to ensure price stability of cooking oil. In Regulation 128/PMK.011/2011 the objective was to protect domestic supply of cooking oil and to develop manufacturing industries downstream. The legislation specifically stated the following: ‘in the context of supporting the downstream efforts of the palm oil industry to increase added value downstream it is necessary to restructure Export Duty tariff’.

(115) The Indonesian export tax regime has undergone several changes since 1994, including changes to the minimum CPO price for which the export tax would be active, rate alterations, and changes to the way the rate is calculated from a percentage of sales prices to a nominal amount. The export tax was, in fact, originally introduced by Ministry of Finance's Decree 439/KMK.017/1994. In July 1997, Decree No. 300/KMK.01/1997 changed the calculation methodology of the export tax and CPO exports were subject to a tax ranging between 7,5 % and 22,5 % depending on the GOI's reference price. In September 2007, the export tax calculation methodology was further revised through Decree No. 94/PMK.011/2007 and Decree No 128/PMK.011/2011. In the latest Regulation No 13/2017, applicable during the IP, the Ministry of Finance defines a progressive export tax tariff ranging from USD 0/tonne - when the international crude palm oil (CPO) price is below USD 750 - up to USD 200/tonne when the CPO price is above USD 1 250.

(116) During the investigation period, and pursuant to Decree No. 13/2017, export taxes on CPO and other palm oil products are expressed in USD instead of a percentage of the price. Moreover, Indonesia's export tax will kick in when the government's reference price exceeds a certain level of price. Consequently and as submitted by the GOI in the context of the US investigation (27), ‘higher export prices command higher tariff rates’. As a result, the GOI linked the export system directly to international CPO prices, and not to other concerns, such as production levels or environmental impact. It follows that the effects on prices paid by the exporting producers is not incidental but the direct and intended result of the measures designed by the GOI (28). According to the legislation applicable during the investigation period, the applicable rate of export tax on CPO was the following: Table 1 Export tax on CPO Price range USD New system USD/ton < 750 0 750-800 3 800-850 18 850-900 33 900-950 52 950-1 000 74 1 000 -1 050 93 1 050 -1 100 116 1 100 -1 150 144 1 150 -1 200 166 1 200 -1 250 183 > 1 250 200 Source: The Complaint

(117) As explained above, in 2015 the GOI also introduced an export levy on CPO and its derivatives. The rate of export levy during the investigation period was USD 50 per tonne on CPO and USD 30 per tonne on refined products. The introduction of the export levy coincided with a period where Indonesian prices were nearly identical to world prices. The introduction of the export levy allows biodiesel producers to purchase CPO at lower prices than would otherwise be available. In fact, domestic consumption significantly increased in 2016 compared to 2015 (see Table 2).

(118) A number of documents show that the GOI explicitly pursued the support and development of the biodiesel industry as a policy objective, in particular by seeking to reduce the domestic price of the input materials (CPO) and thereby providing a financial contribution to the producers of biodiesel.

(119) In this respect, the GOI made public statements indicating that support to the biodiesel industry is indeed the objective, or one of the main objectives, of the export tax regime. The Indonesian Directorate General for Customs and Excise has publicly explained that ‘the aims of export duties, (which) is to ensure the availability of raw materials and to spur the growth of the domestic downstream palm oil industry’ (29). The Commission therefore took note that the export tax system was devised and enacted precisely to support the downstream industries which use palm oil, of which biodiesel manufacturing is an integral part.

(120) This finding is also supported by other public sources, which have analysed the export tax system put in place by the GOI. For example, the WTO in its latest trade policy review on Indonesia concluded that ‘The policy objectives regarding export taxes on commodities include price stabilization, fostering the development of downstream processing facilities, and reducing the rate of depletion of non-renewable resources in mining.’ In its report, the WTO further remarked that ‘according to the [GOI's] authorities, export taxes on primary commodities can be used to reduce the domestic price of primary products in order to guarantee supply of intermediate inputs at below world market prices for domestic processing industries. In this way, export taxes provide an incentive for the development of domestic manufacturing or processing industries with higher value-added exports.’

(121) The OECD also reached the same conclusion in its 2010 report on the economic impact of export restraints on raw materials finding that ‘export taxes on palm oil were imposed in Indonesia and Malaysia in order to support the development of biodiesel and cooking oil industries’ and the European Parliament found that ‘Indonesia and Thailand also used export taxes to reduce the domestic price of palm oil and rice, respectively’ (30).

(122) With regard to the export levy, as explained above in recitals (64) to (65) the GOI, without being able to provide any evidence supporting this claim, explained that it is collected to fund the OPPF. The Commission however considered it to be is in essence a support mechanism for the biodiesel industry. Although the OPPF remit is broader than just supporting the biodiesel industry, as explained in recital (77) the Commission found evidence that de facto this was the OPPF's main activity during the investigation period: the vast majority of the OPPF's money was in fact used to support the biodiesel industry.

(123) In light of all the above considerations, the Commission took the view that the objective of the export restraints system put in place by the GOI is indeed to directly and indirectly support the biodiesel industry and that this is not merely a ‘side effect’ of the exercise of general regulatory powers. Far from being a regulatory measure with a government revenue purpose, the export restraints were designed, introduced and monitored by the GOI with the specific purpose of keeping CPO prices at lower level for the benefit of the downstream industries (31).

(124) In addition to the export restraint system put in place by the GOI, the GOI further intervenes in the market in order to de facto control CPO prices through the State-owned company PTPN.

(125) The GOI claims that PTPN acts as a rational market operator when selling CPO on the domestic market and that it operated independently on the market. However, the evidence available to the Commission shows that PTPN acts under strong influence of the GOI when selling CPO on the domestic market, acting de facto as a price setter.

(126) As a preliminary remark, as already explained in recitals (93) to (96), the Commission pointed out that PTPN did not cooperate with the investigation and has not submitted the information requested. Representatives of PTPN were, however, present during the verification visit at the GOI. On that occasion, both PTPN itself and the GOI gave some explanations concerning PTPN's functioning, but without providing any supporting evidence to their claims. Therefore, the Commission based its analysis on facts available.

(127) The Commission sought information about State ownership as well as formal indicia of government control in PTPN. It also analysed whether control had been exercised in a meaningful way. For this purpose, the Commission had to partially rely on facts available due to the refusal of the GOI and PTPN to provide evidence on the decision making process within the structures of PTPN.

(128) PTPN is a 100 % state owned group of companies which produces different commodities, including CPO. In addition, the Commission found that the GOI directly controls PTPN. During the verification visit, the GOI and PTPN explained that the former appoints all of the latter's corporate bodies. More precisely, the GOI and PTPN explained that: (a) The GOI directly appoints PTPN's the entire Board of Directors; (b) The Board of Directors is subject to the supervision of a ‘Board of Commissioners’, appointed exclusively by the GOI as well; and, (c) Ultimately, all corporate bodies report to the GOI.

(129) In addition to the above, the investigation also showed that the Board of Directors is responsible for all relevant decisions taken by PTPN's group companies, including decision on pricing strategy for the sale of CPO as well as accepting the offers for CPO in the context of the auctioning system further described in recital (132). In light of the corporate governance system outlined above, the Commission therefore concluded that the GOI effectively directs all the decision making process of PTPN, therefore exercising decisive influence on the latter.

(130) On the basis of available information, the Commission therefore concluded that PTPN is under the control of the GOI.

(131) The investigation further obtained evidence that the GOI exercised meaningful control over PTPN when setting and accepting CPO prices, and that PTPN acts as a price setter for the Indonesian domestic CPO prices.

(132) Indeed, PTPN organises daily auctions for its CPO. To have access to the online platform, companies need to register. The evidence collected in the course of the investigation indicates that the only requirements that companies have to comply with in order to register are of financial nature in order to guarantee their solvency. The Commission concluded that the price at which CPO is sold in these auctions is set by the GOI and does not reflect undistorted market conditions.

(133) The Commission took this view because of the decision making process of PTPN. Particularly, the GOI explained that PTPN, before launching the daily bidding process, identifies a ‘price idea’ for the day. The Commission, however, verified that PTPN is not under the obligation to reject offers below the ‘price idea’. Contrary to that, when the price offered by prospective buyer is below that ‘price idea’ the matter is referred to the Board of Directors which can decide to accept the offer. The Commission confirmed during the verification visit that these acceptances take place on a regular basis. In any event, the fact that the decisions on prices are taken by PTPN's management board where the GOI is solely represented indicates that the GOI exercises meaningful control over PTPN and its conduct relating to pricing decisions.

(134) In light of the fact that PTPN's Board of Directors is appointed by and reports to the GOI, the Commission concluded that the latter effectively sets the price of CPO on the domestic market.

(135) The investigation also showed that as a result of the meaningful control of the GOI PTPN does not act as a rational operator on the market. Based on the information available, it appears that PTPN, by following the GOI directives, has been loss making in the past years. Any rational operator, even more so a rational operator with such a pivotal importance on the CPO market, acting rationally would have maximised its profit rather than being loss making.

(136) The investigation also showed that, by imposing an export tax and an export levy on CPO, the GOI further puts PTPN into an economically irrational situation, inducing it to sell CPO domestically for a lower price than it could have obtained in the absence of those export restraints. PTPN is therefore deprived of a rational choice and induced to comply with the policy objective behind the export tax and levy.

(137) In light of all the above, the Commission therefore concluded that PTPN is a public body (32). The evidence available indicates that PTPN is exercising governmental functions when selling CPO on the market and indicating the price to be followed by all other CPO suppliers on the market, which is consistently and systematically followed. As explained in recital (142) below, the investigation indeed showed that no CPO supplier to the exporting producers sold at prices higher than the price set by PTPN. This price setting is in line with the scope and content of GOI's policies relating to the CPO and biodiesel sectors. Since CPO suppliers failed to provide sufficient information to the contrary, the Commission concluded that they aligned their prices to those set by PTPN in order to comply with the stated policy objectives of keeping CPO artificially low.

(138) In any event, were PTPN to be considered as a private body, the same evidence would indicate that at the very least PTPN has been entrusted or directed by the GOI to fix CPO prices at an artificially low level in the sense of Article 3(1)(a)(iv) of the basic Regulation.

(139) Additionally, the investigation indicated that the daily domestic market price of CPO closely reflected the award price of the daily auctions of PTPN.

(140) The Commission observed that the tender data are publicly available to all companies registered within the PTPN informatics system, regardless of whether they have participated in individual tenders and whether they have been successful in their bids. The Commission could verify that PTPN publishes the result of the daily tender on its online platform always at 15:30h on the day of the tender, indicating the exact award unit price for CPO.

(141) All exporting producers confirmed that they have daily negotiations for the purchase of CPO with non-state-owned supplier, and that those negotiations are generally carried out once the results of the PTPN tenders are available, and the starting price of the negotiation is the PTPN daily prices. Exporting producers also explained that price differences between the PTPN prices and the price negotiated with the independent CPO supplier are mainly due to different logistic costs. In this respect, the exporting producers explained that PTPN tenders are issued for deliveries mainly in Dumai (on the island of Sumatra) and Belawan, which is ideally located for logistics. Other independent suppliers may be located in more remote areas, such as, for example the island of Borneo, and therefore logistics costs increase. Hence, the exporting producers explained that the PTPN price takes into account an adjustment for transport costs.

(142) The Commission could verify that the unit price paid by the exporting producers to non state-owned CPO producers was during the IP always the same or lower than the PTPN price for that day.

(143) Hence, and on the basis of all the available evidences, the Commission concluded that, de facto, all independent CPO suppliers in Indonesia, irrespective of their size, align their prices to the daily PTPN prices and that any deviation therefrom mainly derives from logistic costs.

(144) WTO case law explained the concept of direction of a private body as the exercise of authority by a government over a private body. The Appellate Body in US – Countervailing Duty on DRAMS, explained that direction entails indeed an exercise of authority by the government, but also clarified that an interpretation of ‘direction’ limited to ‘command’ would be too narrow as ‘(…) governments are likely to have other means at their disposal to exercise authority over a private body. Some of these means may be more subtle than a ‘command’ or may not involve the same degree of compulsion’.

(145) The Commission took the view that by organising a transparent price setting mechanism, the GOI is exercising one of those more subtle means of direction of the Indonesian CPO suppliers referred to by the Appellate Body. Based on the available evidence, the Commission considered that by making public the daily unit price of CPO, the GOI effectively sets a maximum price at which the commodity will be sold on that specific day. The existing transparency in the market allows buyers to align their behaviour in practice by not purchasing CPO from suppliers that request a price higher than the one set by the GOI.

(146) Also, the investigation indicated that in terms of negotiating power the market is significantly imbalanced in favour of CPO buyers. The market for CPO is in fact rather fragmented, with 40 % of the supply coming from individual farmers, between 6 % to 9 % from PTPN and the remaining part coming from ‘larger’ suppliers (compared to the individual farmers) but still having modest market shares. Contrary to that, and particularly with respect to the biodiesel industry, purchasers are larger undertakings with a need for significant volumes of raw materials that they generally cannot entirely fulfil with their in-house supply. In this context, any purchaser will have a significant degree of buying power, such that it can resist any attempt from its supplier to ask for a price higher than that set by the GOI. Hence, the Commission concluded that by communicating transparently the daily CPO prices, the GOI is, through PTPN, effectively setting the maximum daily CPO prices in Indonesia. Such a reference price amounts to the guidance for CPO suppliers to sell CPO in Indonesia in line with the pursued public objectives.

(147) Additionally, the Commission considered that by imposing an export tax and an export levy on CPO, the GOI puts Indonesian CPO producers into an economically irrational situation, which induces them to selling their goods domestically for a lower price than they could obtain in the absence of those export restraints. They are therefore deprived of a rational choice and induced to comply with the policy objective behind the export tax and levy.

(148) Although the export tax was not due during the investigation period, the export levy was. This resulted in CPO suppliers being restricted in their behaviour as by imposing that levy, the GOI effectively restricts the freedom of action of CPO suppliers by de facto limiting their business decision at what price to sell their product and where. Absent the export levy, CPO producers acting rationally would have tried to maximise their profit, by selling even more volumes of CPO on the export market rather than sell it domestically.

(149) By imposing those restraints, the GOI therefore prevents CPO suppliers from maximising their income that they would be able to get in the absence of the export levy.

(150) In line with the conclusion of the Appellate Body in US – Countervailing Duty on DRAMS, the Commission took the view that the GOI directs CPO suppliers within the meaning of article 1.1(a)(iv) of the SCM Agreement. In that case, in fact the Appellate Body concluded that ‘it may be difficult to identify precisely, in the abstract, the types of government actions that constitute entrustment or direction and those that do not. The particular label used to describe the governmental action is not necessarily dispositive. Indeed, as Korea acknowledges, in some circumstances, “guidance” by a government can constitute direction. In most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement, which could, in turn, serve as evidence of entrustment or direction. The determination of entrustment or direction will hinge on the particular facts of the case’. In this case the Commission, also supported by the available evidence, concluded that the GOI created a system that induces suppliers to sell CPO at a specific price, thereby directing them to do so. As explained in recitals (168) to (169) below, the Commission established that the price published by PTPN constitutes the maximum price on the domestic market of Indonesia and is de facto followed by all CPO and biodiesel producers on the market. Finally, with reference to the requirement of some sort of government's participation, it must be recalled that PTPN is a public body and therefore its activity can be considered as the GOI's activity on the market and PTPN's activity clearly qualifies as that ‘demonstrable link’ between the policy and the conduct of private bodies involved, which are acting as a proxy for the GOI to carry out its policy.

(151) Therefore, through those measures the GOI induces the CPO suppliers to keep CPO in Indonesia as they cannot sell at better prices which would prevail in Indonesia absent those measures.

(152) In this sense, the input producers are ‘entrusted’ or ‘directed’ by the GOI to provide goods to the domestic users of CPO, and notably biodiesel producers, for less than adequate remuneration. The CPO producers are given the responsibility to create an artificially low-priced domestic market in Indonesia.

(153) In other words, when applying the set of measures described, the GOI knows how the CPO suppliers will respond to the measures and what consequences will result from them. The Commission also found evidences that the GOI is proactively intervening in the CPO market in order to encourage private CPO suppliers to comply with the mandate imposed on them. One press article for example explained that ‘The Indonesia Government continues its support for the sustainable management of oil palm plantations through the disbursement of IDR 6,35 billion in replanting funds to 135 Asian Agri partnered smallholders’. In that article, the president director of the OPPF stated that ‘Oil palm is a top sector that contributes significantly to the Indonesian economy. After 25 years, we need to rejuvenate the palm oil industry to ensure high productivity according to industry needs, sustainable development, and improved welfare for smallholders and communities’ (33). This statement clearly show how the GOI is supporting the CPO producers essentially for the benefit of the biodiesel producers.

(154) Additionally, another press article indicates that ‘Indonesia currently runs a subsidized palm replanting program for small farmers to help boost yields without expanding plantation size. The government aims to replant 2,4 million hectares of palm cultivation area by 2025’ (34) further indicating how the GOI is subsidising the CPO producers to induce them to abide to the policy objectives.

(155) While the CPO supplier may lower their domestic production slightly to respond to the export taxes and other restrictive measures, the production did not stop, nor did it significantly decrease. Contrary to that, and save for 2015, Indonesian CPO production consistently increased by over 5 % per year, and in 2018 reached 41 500 Mt. In this regards, press article indicate how ‘In addition to rebalancing public finances, the B20 programme also aims to boost domestic consumption of palm oil, on the back of a decline in prices this year’ (35) providing evidence that the GOI, in order to guarantee that CPO suppliers comply with the mandate they have been imposed, supports them by artificially increasing their sales.

(156) The Commission concluded that this is the result of the GOI entrusting and directing the CPO producers to provide CPO for less than adequate remuneration.

(157) In this respect the Commission took the view that the sole fact that export taxes and/or levies as such are not explicitly mentioned in Article 3(1)(a) of the basic Regulation does not exclude them from having the potential nature of a financial contribution and would therefore fall within the definition of a subsidy under the basic Regulation and the SCM Agreement. The Commission provided ample evidence that the export tax and levy on CPO was used as a tool to induce CPO producers to comply with the state policy objectives in a manner amounting to a countervailable subsidy as specified under Article 3(1)(a) of the basic Regulation.

3.3.3.3. Entrustment or direction of private bodies within the meaning of Article 3(1)(a)(iv) of the basic Regulation

(158) The Commission then assessed whether the CPO producers in Indonesia are private bodies entrusted or directed by the GOI within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(159) The investigation showed that, a part PTPN, all CPO producers in Indonesia are either independent farmers or private corporations not connected to the GOI. Independent CPO producers represent more than 90 % of the market and all exporting producers sourced a proportion of their CPO needs from them.

(160) Therefore, the Commission considered that, on the basis of the information available, all CPO producers are private bodies which were entrusted by the GOI within the meaning of Article 3(1)(a)(iv) of the basic Regulation to provide CPO for less than adequate remuneration.

3.3.3.4. Provision of CPO for less than adequate remuneration

(161) In the next step, the Commission verified whether the CPO producers actually carried out the Indonesian governmental policy to provide CPO for less than adequate remuneration. That necessitated a detailed analysis of the market developments in Indonesia against an appropriate benchmark.

(162) Through the set of measures, the GOI induced the CPO producers to sell locally at lower prices than otherwise, i.e. absent those measures, the producers would have exported the CPO at the higher world market price or simply they would have adjusted their supply and prices to the market constraints.

(163) The Commission also considered that notwithstanding the fact that the GOI claims that the price set by PTPN for its CPO is fair because the price idea is based on the Malaysian CPO index, domestic prices in Indonesia are lower than market prices. To reach this conclusion, the Commission compared the Indonesian domestic CPO prices with the Malaysian prices. The outcome of this exercise indicated that the Indonesian domestic CPO prices are consistently lower than the Malaysian CPO prices and the average price of CPO during the investigation period was USD 540 per tonne in Indonesia against USD 599 per tonne in Malaysia.

(164) In that respect, the GOI in its reply to the questionnaire provided historical data concerning the development of domestic CPO prices compared to international prices.

(165) The Commission has not verified the CIF adjustment methodology used by the GOI to produce the above table. However, the data provided clearly indicates that Indonesian domestic prices have constantly been lower than international market prices, even if in the event the applied methodology would be favourable to the GOI.

(166) A similar finding can also be obtained by comparing the development of the domestic CPO prices during the investigation period with the development of the price of the CPO exported from Indonesia.

(167) The Indonesian domestic CPO prices, based on the information provided by the GOI, during the investigation period were by approximately 10 % consistently lower than the Indonesian CPO export prices, based on the Indonesia Export Statistics.

(168) With respect to CPO prices charged by non-state owned suppliers, the investigation has also indicated that all CPO purchases in Indonesia are carried out at the daily PTPN prices, adjusted to transport costs. Hence, especially for spot purchases, the PTPN price represented de facto the maximum price of CPO for that day. The information provided by the exporting producers in their replies to the questionnaire confirmed this finding. The Commission verified a number of transactions, and for all of them it observed that the price per unit paid to the relevant independent supplier was lower or the same of the daily PTPN price. In no instance of the verified transactions, the Commission could observe a price higher than the PTPN price for that day.

(169) Hence, the Commission took the view that the actions of the GOI directs the CPO suppliers to provide CPO at less than adequate remuneration to, inter alia, biodiesel producers by de facto setting a maximum price on the Indonesian domestic CPO market.

3.3.3.5. The function which would normally be vested in the government and the practice, which, in no real sense, differs from practices normally followed by governments

(170) With respect to the ‘normally vested’ criterion, which had not been further clarified by the Panel yet, the Commission considered that the provision of raw materials located within a country to national companies is a function which is normally vested in the government. Under general international law, States have sovereignty over their natural resources. While they enjoy large discretion how to organise the exploitation of their natural resources, their sovereignty normally translates into a regulatory governmental power to do so. In this respect, it is irrelevant whether or not a government would habitually engage in this function. The Commission therefore found that the provision of CPO located on Indonesian soil to the Indonesian biodiesel industry is a function which is normally vested in the government.

(171) As regards the ‘in no real sense differs’ criterion, the Commission observed that the language originated in the 1960 report of the Panel on Review Pursuant to Article XVI:5, in which similar language was used in respect of producer-funded levies that were deemed not to differ, in any real sense, from government practices of taxation and subsidisation. Against that background, this criterion requires an affirmative finding that the provision of goods by the entrusted private bodies does not, in any real sense, differ from the hypothesis that the government had provided such goods itself. The Commission considered this to be the case. Rather than providing the inputs directly to the biodiesel industry in order to achieve the GOI's public policy objectives of boosting the development of the biodiesel industry, including its export potential, the GOI through a set of measures induces private entities to do so on its behalf. Moreover, to the extent that such provision of goods by the government involves some revenue expenditure (such as the provision of subsidies to the inputs or the sacrifice of income by providing goods for less than adequate remuneration), such an action should be understood as the typical functions normally vested in the government (36).

3.3.3.6. Conclusion

(172) In light of the above, the Commission concluded that the set of measures adopted by the GOI lead to a financial contribution in the form of government's provision of CPO for less than adequate remuneration to the Indonesian biodiesel exporting producers under Article 3(1)(a)(iv) of the basic Regulation.

3.3.3.7. Price or income support

(173) In addition to the above, and for the reasons set out below, the Commission considered that the set of measures taken by the GOI intervening in the CPO market could also qualify as an income and price support granted by the GOI in favour of the Indonesian biodiesel producers in the sense of Article 3(1)(b) of the basic Regulation.

(174) Indeed, the categories of ‘financial contribution’/‘income or price support’ are not mutually exclusive. In fact, the Appellate Body has confirmed that the ‘range of government measures capable of providing subsidies [under “financial contribution”] is broadened still further by the concept of “income or price support” in paragraph (2) of Article 1.1(a)’ (37). This interpretation is also consistent with the object and purpose of the SCM Agreement, which is ‘to increase and improve GATT disciplines relating to the use of both subsidies and countervailing measures’ (38). Therefore, a finding that a measure amounts to a financial contribution does not prevent that the same measure could also be qualified as income or price support. Similarly, a finding that a measure does not meet the necessary requirements to be qualified as entrustment or direction in the sense of Article 3(1)(a)(iv) of the basic Regulation may well fall under the broader category of income or price support under Article 3(1)(b) of the basic Regulation.

(175) The origin of the terms ‘income or price support’ are found in Article XVI of the GATT, the provision to which Article 3(1)(b) of the basic Regulation cross-refers to. Article XVI of the GATT refers to ‘any subsidy, including any form of income or price support, which operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into, its territory’. In this sense, income or price support is another form of subsidisation (39).

(176) The terms ‘any form’ indicate the broad scope of this category, in the sense that it includes all forms chosen by the government that result in providing income or price support. In this sense, the dictionary meaning of ‘form’ refers to ‘one of the different modes in which a thing exists or manifests itself; a species, kind, or variety’ also a ‘manner, method, way’ (40). Thus, ‘any form’ includes any way or manner in which the government provides income or price support to someone (41).

(177) ‘Support’ denotes ‘the action of contributing to the success or maintaining the value of something’ (42). The term ‘support’ is often used in the context of agriculture, as referring to government support programmes (43). Thus, the meaning of ‘support’ in Article 3(1)(b) of the basic Regulation refers to the action of the government that contributes to the success or maintaining the value of prices or of the income received by someone.

(178) The Commission acknowledges that any action by government may have incidental side-effects of random magnitude on the income of someone or may result in prices being supported somehow (44). For such a support to fall under Article 3(1)(b) of the basic Regulation, there must be a demonstrable link between the government actions and the resulting effects of income or price support to someone. Such a link should be established on the basis of the totality of the evidence available, including the nature, design and expected operation of the measures taken by the government.

(179) Finally, the reference ‘in the sense of Article XVI of the GATT 1994’ implies all forms of income or price support that directly or indirectly increase exports of ‘any product’ from a WTO Member's territory or reduce imports of this product within its territory. This effect, potential or actual, is explicitly contemplated in Article XVI:1 of the GATT 1994: ‘…including any form of income or price support, which operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into, its territory’.

(180) In sum, Article 3(1)(b) of the basic Regulation, similarly to Article 1.1(b) of the SCM Agreement, covers government measures of any form that result in the provision of income or price support to someone and that has as an effect, potential or actual (45), increasing exports of any product from a WTO Member's territory or reducing imports of this product within its territory.

(181) In line with this interpretation, in addition to examining whether the set of measures adopted by the GOI could be characterised as ‘financial contribution’, the Commission also analysed whether the GOI's set of measures could also be characterised as income or price support falling under Article 3(1)(b) of the basic Regulation. In so doing, the Commission first examined whether the GOI intends to support the creation and development of the biodiesel industry; second, what kind of measures the GOI adopted to support the biodiesel industry; and third, whether those measures qualified as ‘any form of income/price support’ in the sense of Article XVI of GATT 1994. In sum, the Commission will examine whether the GOI intended as a declared policy objective to support the development of the biodiesel industry, the instruments used by the government for such purpose and whether those instruments or actions by the GOI could be characterised as income or price support in the sense of Article XVI of the GATT 1994.

(a) The GOI's intention to support the domestic biodiesel industry as a public policy objective

(182) The GOI, by means of Presidential Regulation 66/2018, has an explicit policy to support the development of the domestic biodiesel industry. Some public statements of the GOI already reported above in para (119) indicate that the GOI's intends to control CPO prices for the benefit of the biodiesel producers: ‘The policy objectives regarding export taxes on commodities include price stabilization, fostering the development of downstream processing facilities (…)’ or ‘the aims of export duties, (which) is to ensure the availability of raw materials and to spur the growth of the domestic downstream palm oil industry’

(183) The Commission also found evidence that the GOI has had over the years a clear policy of fostering and supporting the expansion of the biodiesel industry. In a press article, the Director General for renewable energy stated that Indonesia aims to make the use of biodiesel blended fuels compulsory for all vehicles and heavy machinery from 1 September 2018. In that press article it is further stated that ‘Indonesian fuel stations will not be allowed to sell unblended diesel fuel once the new rules apply, adding that companies found selling unblended fuel will be fined’ (46). In that regard, another press article explains that ‘Indonesia plans to require all diesel fuel used in the country contain biodiesel starting next month [September 2018] to boost palm oil consumption, slash fuel imports, and narrow a yawning current account gap’. (emphasis added) (47)

(184) In another press article, it was further explained that ‘In Indonesia, the Jakarta Post reports that the government is pulling out all the stops in trying to boost demand for palm oil biodiesel, now exploring the conversion of state-owned power provider PLN's diesel-based facilities to biodiesel. It is also looking at the possibility of allowing privately-owned power providers who are using biodiesel rather than fossil diesel to produce electricity to see that power directly to PLN. The government has already boosted the amount of biodiesel blended by railroads and heavy machinery in addition to road transportation’ (48).

(185) The above aim to support the biodiesel industry was further confirmed by public statements made by the deputy minister for food and agriculture. In a press article he declared that ‘Indonesia's biodiesel production could grow by 40 % to hit 7M tonnes in 2019, up from an estimated 5M tonnes this year [2018], as a result of a new programme to boost local biodiesel consumption’. (emphasis added) (49)

(186) The GOI has explicitly announced its support to the biodiesel industry through the set-up of the OPPF whose policy remit is de facto to solely support the biodiesel industry. This support has continued until after the investigation period, as during that period and until August 2018 the OPPF paid out money to biodiesel producers. This objective of the OPPF was also clearly spelled out in public statements. In a press article, the OPPF stated that it is ‘confident that it can shoulder additional subsidies paid out to producers under the government's new biodiesel policy for the rest of the year’ and the president director of the fund further stated that ‘the fund has collected Rp 6,4 trillion from the palm oil export levy in the first half of 2018, which is nearly 60 percent of this year's Rp 10,9 trillion target, most of which is used as incentives to support renewable energy production’. In that same article it was also explained that ‘But the policy [the blending mandate] will also swell the subsidies paid to 19 biofuel producers, including Wilmar and the Sinar Mas Group. The fund, also known as BPDPKS, estimates that the policy would double biofuel demand in the second half of this year to 2,1 million kilolitres’ (50).

(187) Therefore, the Commission concluded that the GOI's intention to support the creation and development of the Indonesian biodiesel industry is manifest.

(b) Government actions for the development of the biodiesel industry

(188) Through several instruments, the GOI intervenes in the CPO market in order to boost the development of the biodiesel industry. First, the GOI has a system of export restraints in place (through export taxes and export levies) which is used as a tool to depress CPO prices in Indonesia to the benefit of the downstream industries, including biodiesel producers. Second, the GOI, through the State-owned company PTNP, de facto sets the CPO prices at artificially low levels prices, which other CPO suppliers follow in accordance with the stated policy to support the development of the biodiesel industry. The GOI also uses other measures, such as direct subsidies to CPO producers, to ensure that CPO producers comply with the policy objectives.

(189) All these actions have to be understood in the broader context of encouraging the development of the biodiesel industry, such as through mandatory blending requirements as well as the set-up of the OPPF for the benefit of biodiesel producers. Indeed, the GOI has established a system, which artificially creates a high demand for biodiesel through the blending mandate. The GOI has implemented the so-called B20 blending mandate (51). Under this programme, for a number of applications, such as for example public transport, operators are under the legal obligation to use as fuel a blend of mineral diesel and biodiesel which contains at least 20 % of biodiesel. This blending mandate is bound to increase to 30 % in the near futur