KUALA LUMPUR — The tax stays at eight percent. That is the seventh month in a row. Malaysia’s crude palm oil export duty will not budge for July 2021, the Royal Malaysian Customs Department confirmed on June 20. The reason is simple: the market price blew past RM3,450 per tonne. Once it does, the sliding scale hits its ceiling.
The reference price for July came in at RM4,668.15 per tonne. That is well above the threshold. The eight percent rate first kicked in on January 1, 2021, and it will apply from July 1 through July 31. No change. No surprise. The system is mechanical: prices between RM2,250 and RM2,400 per tonne trigger a three percent duty. Above RM3,450, you pay the maximum. Malaysia, the world’s second-largest palm oil producer and exporter, has been at that max since January.
But the futures market did not wait for the announcement. On Thursday, June 17, the July 2021 contract dropped RM16 to RM3,566 per tonne, according to Bernama. August fell RM29 to RM3,464. September lost RM34 to RM3,404. October slid RM46 to RM3,387. Those are not catastrophic declines, but they are declines. The market was already moving before the customs circular landed on the Malaysian Palm Oil Board’s website.
The production picture is murky. The Malaysian Palm Oil Council expects exports to hit 5.5 million metric tons in 2021 — a 24.4 percent jump from 2020. Council CEO Wan Zawawi Wan Ismail said Malaysian CPO has become more competitive globally. That is the official view. Optimistic.
Then there is Dorab Mistry. He is a director at Godrej International Ltd and a veteran vegoil analyst. His forecast is cautious. “If Malaysia is fortunate, it could arrive at 20 million tons,” Mistry said. That is a big “if.” He added that the government needs to deliver more work grants for foreign workers. Labor is the bottleneck. Palm oil plantations rely on migrant workers. Without them, production stalls. The pandemic made things worse. Borders closed. Workers went home. Some never came back.
So the tax stays at eight percent, but the real story is underneath. Prices are high enough to keep the duty at the max. Exports are forecast to rise. But production might not keep pace. Mistry’s 20 million tons is not a guarantee. It is a conditional hope. The government can set the tax rate. It cannot set the weather, the labor supply, or the global demand that drives the reference price.
For now, the sliding scale does its job. No discretion. No debate. Price above RM3,450, tax at eight percent. That is the rule. It has been the rule for seven months. It will be the rule for one more. After July, the cycle starts again. The customs department will check the reference price. If it stays above RM3,450, the rate stays. If it drops, the tax drops with it. Simple. Mechanical. Unchanged.
