USGC provides comments on ethanol trade barriers to USTR

By Erin Voegele | November 17, 2020

The U.S. Grains Council on Nov. 5 submitted comments to the Office of the U.S. Trade Representative highlighting significant trade barriers facing exports of U.S. coarse grains, ethanol and co-products.

In its comments, the USGC describes several specific barriers to ethanol exports, including those in Colombia, Peru, Brazil, the European Union, China, India, Indonesia, Thailand and Vietnam.

Colombia initiated a countervailing duty (CVD) investigation against U.S. ethanol imports in January 2019. “Under the U.S.-Colombia FTA, U.S. ethanol faces zero duties,” the USGC wrote. “The initiation of a CVD case is not in the spirit of the FTA and is viewed as a protectionist measure by the U.S. ethanol industry.”

Following the completion of questionnaires and hearings, the Columbian government established a preliminary duty of 9.36 percent in May 2019. That duty expired after 120 days. Local industry advocated for a 22 percent to 32 percent final duty. In May 2020, the Colombian government issued a final rule placing a $0.066/kg duty (10-12 percent ad valorem) for two years, the USGC wrote.

Peru initiated an investigation on a countervailing duty case against U.S. ethanol on behalf of a Peruvian single monopoly ethanol company in May 2019, according to the USGC. A final duty of 14.8 cents per gallon was established in November 2018. The USGC said the case is currently under appeal by all parties. If the decision is upheld, the duty will remain in place until November 2023.

The U.S. enjoyed a duty-free trade relationship for ethanol with Brazil from 2012-2017. In 2017, however, Brazil imposed a 2-year 600 million liters per year tariff rate quota (TRQ), with any volumes above the 150-million-liter quarterly allocation subject to a 20 percent tariff. In September 2019, Brazil raised the quota on U.S. ethanol imports under the TRQ to nearly 750 million liters per year. A final decision on the expiration of Brazil’s TRQ remains unresolved, with it currently in place through December 2020.

In the EU, the USGC said tariffs for fuel ethanol differ depending on the ethanol content level. In addition, the EU has a number of trade preferences for individual countries, regional blocs and trade development programs. In its comments, the USGC urges the administration to secure free trade negotiations with the EU and secure elimination of the existing ethanol tariffs and other trade preferences for individual countries, regional blocs and trade development programs.

While the USGC in its comments applauds the structural reforms achieved as part of the U.S.-China Phase One Agreement that went into effect in February 2020, it stresses that a number of barriers remain that continue to inhibit trade, particularly with ethanol and distillers grains. If market access barriers with China are addressed, the USGC said China could represent a 3 billion gallon export market for U.S. ethanol.

In India, the USGC notes that India had a total domestic demand for 5.5 billion liters of ethanol in 2019-’20. Total domestic supplies were only 3.2 billion liters, creating a deficit of 2.3 billion liters. In its comments, the USGC urges the administration to close pending negotiations with India to provide access for distillers grains and fuel ethanol.

Indonesia has mandated an ethanol blending program to achieve a E10 blend by 2020. That goal, however, is not being met. Th country currently imposes a 30 percent duty on fuel ethanol despite granting low tariffs of 5 percent or less on fossil fuel products, such as aromatics and gasoline. According to the USGC, the U.S. ethanol industry recognizes the potential that Indonesia has an as export market should it decide to allow imports to meet its stated policy goals.

Thailand currently places a 28 cent per gallon import tariff on U.S. ethanol. Distiller grains are subject to a 9 percent tariff. The USGC notes that the Thai Department of Agriculture issued a complete suspension of distillers grains imports in December 2019 due to the importation of a quarantine pest. As a result of intense cooperation with domestic importers and other allies, the USGC said a temporary fumigation protocol was reached. However, a final fumigation protocol is still under discussion and needs to be resolved.

Vietnam has placed aggressive tariffs of 17 percent for 99 percent pure ethanol from the U.S. and 20 percent for 100 percent pure ethanol from the U.S. The USGC said such a tariff structure deters imports of ethanol from the world’s most cost-competitive supplier and limits the ability of Vietnam to meet its E10 blend goal. The USGC in June 2020 was able to secure a 5 percent reduction in ethanol import tariffs.

The USGC had it has contributed comments on trade barriers to the USTR for more than a decade, detailing constraints the organization works to address in its export market development activities and recommending complimentary U.S. government action.

A full copy of the USGC’s comments can be downloaded from the USGC website