The European Union (EU) has launched an investigation into allegations of Indonesian biodiesel avoiding EU duties by going via China and Britain, Reuters reported.

As Indonesia’s third-largest destination for palm oil products, the EU is also an important market for its biodiesel, which is made from palm oil, according to the 18 August report.

Indonesia is the world’s leading palm oil producer.

The EU’s probe followed an initial request from the European Biodiesel Board (EBB), an association of European producers, Reuters wrote.

“The request contains sufficient evidence that the existing countervailing measures on imports of the product concerned are being circumvented by imports of the product under investigation,” the European Commission (EC) was quoted as saying in the EU’s official journal.

“A change in the pattern of trade involving exports from Indonesia and the People’s Republic of China and the UK to the EU has taken place following the imposition of the existing countervailing measures,” it added.

The Indonesian government would monitor the investigation and take steps if there were things that did not comply with World Trade Organization (WTO) rules, Djatmiko Bris Witjaksono, director general of international trade negotiations at Indonesia’s trade ministry, told Reuters on 18 August.

Earlier in August, Indonesia had requested WTO dispute consultations with the EU over the EU’s imposition of countervailing duties on biodiesel imports from Indonesia, the report said.

When asked about the situation, an EC spokesperson was quoted as saying that the EU was confident its duties on Indonesia were in full compliance with WTO rules and that the EU was ready to discuss the matter with Indonesia.

Trade relations between the EU and Indonesia have been strained by the bloc’s move to limit imports of commodities linked to deforestation, which is expected to curb EU imports of palm oil from top suppliers Indonesia and Malaysia, according to the report.

Welcoming the European Commission's investigation, the EBB said it estimated that imports circumventing duties could have cost the EU around €221M (US$241M) last year.

The association was also working with EU authorities to address allegations of fraudulent biodiesel imports from China, the association added in its 17 August statement.

“Operators should be aware that any attempt to circumvent the existing EU duties, or to bypass our rules and systems, can be investigated and remedied in the same way, in accordance with WTO regulations and with retroactive financial implications for the companies involved,” EBB president Dickon Posnett said.

Earlier this year, Germany had asked the EC to investigate shipments from China amid industry concerns that imported biodiesel declared as based on recycled feedstock could contain cheaper oils, Reuters wrote.