EU Plans to Lower Group II Quota

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EU Plans to Lower Group II Quota
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The European Commission plans again next year to narrow an import duty exemption for API Group II base oils from nations that do not have free trade agreements with the European Union.

The commission intends to reduce its quota on Group II imports for the first half of 2022 from the current level of 150,000 metric tons per six months, a spokesperson told Lube Report last week, but it has yet to settle on a new number.

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The quota has its biggest impact on suppliers from the United States, the bloc’s largest Group II source without a free trade agreement.

The bloc previously withheld a 3.7% import duty from the first 200,000 tons of Group II imported every six months, but the quota was reduced to 150,000 for the first half of this year.

Trade organizations like the Union of the European Lubricants Industry and companies they represent are lobbying for a higher quota and a longer transition phase based on the view that demand for Group II base oil in Europe will rebound as the coronavirus pandemic abates and economic activities increase.

This sentiment was echoed by Chevron, the largest American Group II supplier to the EU.

“The European lubricants industry has benefited in recent years from consistent access to imported Group II base oils,” a Chevron spokesperson told Lube Report EMEA recently.

She added that while the industry tries to manage the business challenges of the global pandemic, it is imperative that European blenders can obtain stable and adequate supplies of Group II base oils. 

The current quota of 150,000 tons to December 31 applies to Group II base oil grades 150 neutral, 220N and 600N.

Some industry insiders contend that the higher cost for imported Group II would disproportionately affect small and medium-sized blenders. The regulation was a subject of controversy when adopted in 2019, supported by ExxonMobil, which opened Europe’s first large Group II plant in Rotterdam, Netherlands, early that year. It was opposed by importers and industry groups.

The reduction and eventual removal of the quota would mainly affect imports from the U.S. Other major Group II exporters, including Singapore, South Korea, Canada and Japan, have free trade agreements with the EU.

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