Indonesia’s palm oil downstream industry is developing faster than technical regulations, prompting POPSI to call for an accelerated update of Minister of Industry Regulation No. 32/2024 and a more responsive product classification mechanism.
PALMOILMAGAZINE, JAKARTA — Indonesia’s palm oil downstream industry is developing faster than the country’s technical regulatory framework, prompting the Indonesian Palm Oil Farmers Organization (POPSI) to call for an accelerated update of Minister of Industry Regulation No. 32 of 2024 on the classification of palm oil-derived commodities.
POPSI warned that a widening gap between product innovation, regulatory classification and trade procedures could create export bottlenecks. The organization said the impact could extend beyond downstream manufacturers to oil palm smallholders if disruptions affect the industry’s ability to absorb fresh fruit bunches (FFB).
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POPSI Chairman Mansuetus Darto said the government needs a faster mechanism to test, identify and classify newly developed products based on their characteristics and technical specifications.
“We are not asking for every new product to be automatically exempt from regulatory requirements. What we are calling for is a faster government mechanism to test, identify and classify products based on their characteristics and specifications,” Darto said in an official statement received by PalmOilMagazine on Saturday (Sept. 26, 2026).
Downstream Products Are Evolving Faster Than Regulations
POPSI said Indonesia produced around 200 downstream palm oil products in 2024, while historical data cited by the organization indicate that Malaysia has at times had as many as 300 products.
The figures illustrate the continued diversification of palm oil-based products, including in the oleochemical sector.
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The regulatory challenge arises when newly developed by-products, residues, refined products or fractions are not adequately accommodated under Minister of Industry Regulation No. 32/2024.
The regulation already covers several further-processed palm oil products, including methyl esters and fatty matter. However, POPSI said advances in processing technology continue to generate new product variants, fractions, intermediates, further-refined products and by-products.
As a result, the organization argues that the classification system needs to become more responsive to technological developments in the industry.
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POPSI also pointed to Malaysia as a comparison. Through the Malaysian Palm Oil Board (MPOB), Malaysia has developed testing capabilities and analytical methods to determine the quality profiles and technical specifications of new oleochemical products, including cases where an official testing method is not yet available, according to the organization.
Product Classification Could Delay Exports
The issue becomes more significant when a product can already be manufactured commercially and has buyers in the market but does not have an appropriate regulatory classification.
POPSI said this creates a gap between technological innovation, regulation and international trade.
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To address the issue, the organization has proposed that the Directorate General of Customs and Excise be able to conduct laboratory testing of new products when necessary. Such testing could help establish the appropriate classification based on a product’s characteristics and technical specifications.
“Products should not be ready for production, with buyers already available, only for exports to be held up because the nomenclature or classification has not been updated,” Darto said.
Downstream Bottlenecks Could Reach Smallholders
POPSI stressed that regulatory challenges in the downstream sector cannot be viewed in isolation from the upstream palm oil supply chain.
If trade flows are disrupted, pressure could build on storage capacity and inventories. This, in turn, could affect refineries and palm oil mills and their ability to absorb raw materials.
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For smallholders, weaker FFB absorption could result in longer queues at mills, the need to find alternative mills farther away and higher transportation costs.
A POPSI policy brief referenced in its statement identified these issues alongside declining FFB prices, mill queues and storage-tank capacity pressures at several mills.
“If the pressure reaches refineries and palm oil mills, their ability to absorb smallholders’ FFB could also be disrupted. This is what we mean by an upstream-downstream issue within a single palm oil ecosystem,” Darto said.
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POPSI is therefore calling on the government to accelerate revisions to Minister of Industry Regulation No. 32/2024, including the incorporation of new products that have undergone technical verification.
The organization also called for a review of technical parameters, laboratory testing where necessary, and closer coordination among the Ministry of Industry, the Ministry of Trade and the Directorate General of Customs and Excise.
POPSI said Indonesia needs a faster classification-update mechanism so that product innovation does not outpace the regulatory cycle.
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For the farmers’ organization, the downstreaming policy should also account for its impact across the broader palm oil ecosystem, including mills’ capacity to absorb FFB and the economic position of smallholders. (P2)
