The USDA has reported that China’s decision to end the export duty exemption on Used Cooking Oil (UCO) is a significant step in curbing the "palm oil fraud." This fraud involved the repackaging of virgin palm oil as UCO, which was then exported under tax exemptions.

Previously, China provided a 13% duty exemption on UCO exports, which incentivized such fraudulent practices.

The Chinese government ended this exemption on November 15, 2024, effective September 1, 2024, to support the local biodiesel industry and stop the misuse of the policy. 

The withdrawal of the exemption is expected to reduce the incentive for fraud and increase the availability of raw materials for producing recycled diesel and sustainable aviation fuel.

As a result, UCO prices have dropped, and exports of UCO are facing challenges, as the re-imposition of the duty has made it less competitive in the global market.

The Chinese authorities are also investigating the alleged misuse of the export duty exemption, where importers had reportedly mixed palm oil acid with UCO to benefit from tax breaks.

This policy change is set to affect the broader UCO market, with immediate consequences for prices and trade dynamics.