Used Cooking Oil Import Surge Persists

Concerns persist over the surge in Chinese exports of used cooking oil (UCO) to the United States, with allegations suggesting the oil may be blended with virgin oils, such as palm oil or soybean oil, from third countries.

These claims point to potential exploitation of regulatory loopholes, raising environmental and economic alarm.

Environmental and Regulatory Risks

The issue has drawn parallels to the European Union’s decision to impose anti-dumping duties on Chinese UCO imports in 2023. EU regulators flagged concerns that the imports, potentially containing virgin palm oil, undercut domestic industries and contributed to deforestation. Similar fears are now taking hold in the U.S., where the Environmental Protection Agency (EPA) has begun auditing UCO feedstocks, both domestic and foreign, to ensure compliance with sustainability standards.

Market data highlights a potential mismatch in China’s domestic UCO supply and its soaring export volumes. Analysts suspect China may be importing virgin oils from countries such as Malaysia and Indonesia—major palm oil producers—relabeling them as waste-based UCO, and re-exporting them to the U.S. [12402]

Economic Implications and Incentives

The surge in imports has been driven in part by the Inflation Reduction Act (IRA), which incentivizes low-carbon fuels but does not require domestic sourcing of feedstocks. This has allowed Chinese UCO imports, which now make up over half of all U.S. UCO imports—up from less than 1% in 2022—to dominate the market. These imports compete directly with U.S.-grown feedstocks like soybeans and corn, leaving American farmers at a disadvantage.

In Late Spetember,  Sherrod Brown (D-OH) introduced bipartisan legislation to block taxpayer money from being used to subsidize biofuels produced using imported foreign feedstocks such as Chinese used cooking oil and Brazilian ethanol. The bill would also extend the 45Z Clean Fuel Production Credit.

U.S. farmers, who have invested heavily in crops for biofuels such as soybeans and camelina, are struggling as soybean prices fall and the delayed implementation of IRA tax credits deepens economic strain. Legislative efforts to restrict tax credits to U.S.-grown feedstocks have bipartisan support, with lawmakers arguing that taxpayer dollars should benefit domestic industries.

Critics and Uncertainty

Critics, including biofuel producers, warn that restricting feedstock sources could limit supplies to a burgeoning green energy industry, potentially delaying the transition to cleaner fuels. However, farmers argue that the influx of foreign UCO undermines the environmental and economic objectives of the IRA. Concerns over potential fraud, including claims that some Chinese UCO contains virgin palm oil linked to deforestation, further complicate the issue.

Adding to the uncertainty, the Treasury Department has yet to finalize rules for IRA tax credits, which are set to begin in January. Moreover, the prospect of a Trump administration repealing the IRA altogether casts doubt on the future of these incentives. Without clarity, farmers risk missing the opportunity to benefit from the tax credits by 2025.

Browwn's bill is co-led with Senator Roger Marshall (R-KS) and co-sponsored by Senators Senator Pete Ricketts (R-NE), Amy Klobuchar (D-MN), Deb Fischer (R-NE), Tammy Baldwin (D-WI), and Tina Smith (D-MN). Representatives Tracey Mann (R-KS-01) and Marcy Kaptur (D-OH-09) introduced companion legislation in the House of Representatives.  Full text of the legislation can be found HERE.