California Air Resources Board

Dear CARB personnel,

I had submitted comments earlier today, but left out one reference. This is in regards to a controversial UCO cargo that was to be delivered to Diamond Green. I don't have additional information to ascertain if this shipment eventually was discharged to DGD or not. I would like to submit this as an additional data point about the potential fraud issues for Asian-sourced UCO. I don't have access to source file for this article, so will submit the article text in quotes. Apologies. Happy Holidays!

Regards,
Josh Kehoe

2023-05-11 11:33:56 EDT
***Mystery Surrounds Chinese Used Cooking Oil Cargo Unable to Discharge

A shipment of used cooking oil from China earmarked for Diamond Green Diesel has been stranded on a vessel in U.S. waters for weeks, unable to discharge its cargo, according to sources.

The vessel has been "sitting upriver in the Mississippi ... since early to mid-April," a trader told OPIS, adding that it's possible that the cargo "can't discharge for some reason because of documentation."

The trader said he believes Targray imported the material with an intent to sell it to the DGD joint venture between Darling Ingredients and Valero Energy Corp. for renewable diesel production.

Another source said that he is "well aware of" the situation.

"This is just kind of what everybody's saying in the market about it," he added. "The ship has been there for weeks. There's an assumption that the UCO is blended with palm oil.

"I don't know what's going to happen or if the U.S. is going to let it in or they're going to work it out. I've heard that it is going to be sorted out and that it's not going to be sorted out. That will wash out in the next week or so maybe."

The source speculated that the delay stems from U.S. Customs.

"My thought is that the only reason anybody would prevent anything coming in and saying, 'Hey, we don't think this is what it is,' is because people want to claim government incentives in the programs that are out there. So, it's the government saying, 'Well, if you're going to claim tax incentives and programs that we have, it had better be a legit cargo [in order] to file for those rights.'"

The trader raised similar issues.

This isn't the first time that shipments from China have come under scrutiny. In April, the International Sustainability and Carbon Certification said it would begin implementing mitigation measures to address concerns over a surge of advanced Chinese biodiesel into Europe.

ISCC said its requirements were strengthened and it would be making unannounced audits into cargos.

Jeffrey Quiñones, public affairs specialist with U.S. Customs and Border Protection, would provide details on the ship's status.

"That information would need to be provided by the importer," he said, adding only that the importer "needs to comply with the regulations that the U.S. government sets to be able to enter a foreign source's product to the country."

The vessel in question could be the Cayman Islands-flagged Snow Ploeg, which has been anchored just upstream on the Mississippi River from the DGD refinery, ship tracking data showed.

PIERS U.S. Customs bill of lading details show the tanker arrived in the New Orleans region on April 15 from Fangcheng, China, with a UCO cargo. The parties listed on the Customs information showed C and D Group along with DGD.

One bill lists an estimated value of $3.625 million. Another lists an estimated value of about $3.69 million, while a third lists $2.9 million and a fourth lists $725,000.

Neither Valero nor Darling responded to queries regarding the situation.

On a Wednesday earnings call to discuss first-quarter results, Darling Chief Executive Officer Randy Stuewe said his company doesn't supply 100% of the feedstock to DGD because the facility is too large.

"Our system has the ability globally to supply up to about half if we want to, if we don't have better markets. It's not near that today," he added.

Darling executives on the call on several occasions said the size of the feedstock market -- long considered a potential obstacle to growth of renewable diesel and sustainable aviation fuel production -- is much larger than they expected.

"As prices have gone up over time, that's brought about more fats and oils around the world that are available to us. One of the nice things that we're seeing out of Asia is that there are low-[carbon intensity] fats, that there are ISCC fats, and that's a real benefit to us."

U.S. imports of fats and oils available for biofuel production have surged this year, reaching an all-time high of nearly 400 million lbs in January, U.S. Census data shows.

--Reporting by Michael Schneider, mschneider@opisnet.com and Eric Wieser,ewieser@opisnet.com; Editing by Jordan Godwin, jgodwin@opisnet.com and Jeff Barber, jbarber@opisnet.com"