US 45Z credit and imported UCO: what changed in 2026

What the law and the IRS say

Section 45Z was created by the Inflation Reduction Act and amended by section 70521 of Public Law 119-21 on 4 July 2025. The proposed regulations published in the Federal Register on 4 February 2026 restate a central condition: transportation fuel produced after 31 December 2025 must be exclusively derived from feedstock produced or grown in the United States, Mexico or Canada.

IRS Notice 2026-53 publishes the 2026 emissions rate table used with the credit. It lists US, Canadian and Mexican UCO separately from “other imported UCO”, which only applies to fuel produced before 1 January 2026. The 2025 amendments also exclude indirect land-use change emissions from the calculation and end the higher credit amount that had applied to sustainable aviation fuel.

The credit itself runs for clean transportation fuel produced in the United States after 31 December 2024 and sold by 31 December 2029. Eligibility is judged at the producer against statute, regulations and IRS guidance — not against a trader’s summary of where the vessel loaded.

The feedstock-origin line in plain terms

Before 2026, a US plant could in principle use imported UCO and still work within the 45Z framework subject to the emissions table and the rules then in force. After 31 December 2025, the feedstock gate narrows: only US-, Canadian- or Mexican-origin material counts for fuel seeking the credit. UCO collected in China, Malaysia, Indonesia or elsewhere and shipped to the Gulf or the West Coast does not meet that test for newly produced fuel, regardless of how competitive the freight is.

Canadian and Mexican UCO remain inside the fence. The June 2026 version of the 45ZCF-GREET model added these feedstocks so producers can calculate an emissions rate for qualifying pathways. That is technical work for the refinery’s tax team, but the exporter’s job is simpler: prove where the oil was generated and collected, not merely where the tanker called.

“Other imported UCO” surviving in the 2026 table for fuel produced before 1 January 2026 is a transitional line, not a loophole for new production. Contracts signed in 2026 should be read against production dates and feedstock origin, not against habits from 2024 flows.

What it means for UCO exporters

Asian and other non-North-American UCO lost one source of US value for fuel produced from 2026 onward. The cargo can still be imported and processed; the producer may still sell fuel under the Renewable Fuel Standard or state programmes with their own rules. Demand does not vanish because 45Z narrowed. What changes is how much margin a producer can attach to imported feedstock when the tax credit no longer supports it.

Trade flows react with a delay. Chinese customs data reported by trade press showed the United States still as the largest single destination for Chinese UCO in May 2026. Past routing is not a forecast. Some cargoes serve non-45Z pathways, inventory strategies or contracts written before the origin rule bit. New business should follow each buyer’s eligibility rules, not last year’s port statistics.

Exporters should expect more origin questions in diligence: collection records, self-declarations or certifications already used for EU markets, and clarity on whether the buyer’s plant model assumes 45Z. A low price offer tied to “US demand” without stating the programme is a conversation, not a term sheet.

What buyers and sellers should document

For a US producer, the origin of every feedstock lot is now a tax question. Contracts should state the country where the UCO was generated and collected, not only the loading port. Re-exported or aggregated oil needs a chain of custody that supports the origin claim. If the file shows collection in one country and sudden large volumes with no plausible network, the producer’s counsel will notice.

Commercial documents should tell the same story: invoice descriptions, bills of lading, inspection reports and any sustainability declarations used in parallel markets. A bill of lading from Singapore does not prove Singaporean origin if the oil was collected elsewhere. Misalignment between customs data and collection records is where disputes start.

For Canadian and Mexican UCO, keep collection tickets, delivery notes and operator records that tie each export lot to domestic points of origin. ISCC or other scheme papers used for European sales can help if they already document sources, but 45Z eligibility follows US tax law, not EU sustainability rules alone.

45Z is not the only US market

The Renewable Fuel Standard operates on a different logic: renewable identification numbers, obligated parties and EPA pathways. A feedstock can be relevant to RFS compliance while failing the 45Z feedstock-origin test for new production. State low-carbon fuel programmes add another layer with their own feedstock lists and carbon-intensity values.

Importers and traders should ask which programme the buyer’s margin assumes before fixing price. A producer buying for RFS-only use may still pay for imported UCO; one modelling 45Z on the same molecule will not. Turco & Co does not quote US tax outcomes; we align contracts and origin evidence with what the buyer states it needs.

When a deal spans Europe and the United States, split the files mentally. EU buyers may require ISCC EU and Union Database entries. US buyers may require North American origin for 45Z from 2026. The same vessel can carry oil that satisfies one set of rules and not another, depending on collection geography — not depending on the trader’s preference.

How to read offers after the rule change

Treat “US buyer” as insufficient description. Ask whether the intended fuel production date falls after 31 December 2025 and whether the buyer claims section 45Z. If the origin is outside the United States, Canada or Mexico, assume 45Z is off the table unless US counsel says otherwise for a specific transitional fact pattern.

Watch for mixed messages: a seller marketing ISCC EU traceability from Asian collecting points alongside a US destination name, without explaining the buyer’s pathway. Traceability and tax eligibility are related but not identical. Verify companies and certificates through independent channels, refuse advance document fees and tie payment to inspection and title — the same discipline that applies elsewhere in UCO, with a tax overlay for US plants from 2026.

Common questions

Sources and evidence

Primary references support the stated technical definitions. Procurement checklists are editorial guidance, not evidence of a specific lot, shipment or certification.

• Federal Register — Section 45Z proposed regulations (4 February 2026)
• IRS Notice 2026-53 — Section 45Z emissions rates
• Fastmarkets — China’s May 2026 UCO exports (GACC customs data) · Secondary source — medium confidence

Confirm laboratory methods, commercial terms and applicable requirements with the buyer and qualified advisers before contracting. No guide establishes stock availability or company certification.