South America Calling

US Ethanol Exports to Brazil Slapped with 20% Tariff

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The Brazilian government decided late on Wednesday to impose a 20% tariff on ethanol imports from the United States, according to a tweet by the nation's Minister of Agriculture, Livestock and Supply, Blairo Maggi.

The tariff will take effect after a 600-million-liter tariff rate quota, or about 158.5 million gallons, according to Maggi. The action was taken by CAMEX, Brazil's Chamber of Foreign Trade.

A number of ethanol and agriculture groups on Tuesday said the tariff rate would be in place for the next two years, "stymying access to a large and growing market for U.S. ethanol exports," according to a press statement from the U.S. Grains Council, the Renewable Fuels Association and Growth Energy.

The leaders of those groups, USGC President and Chief Executive Officer Tom Sleight, Renewable Fuels Association President and Chief Executive Officer Bob Dinneen and Growth Energy Chief Executive Officer Emily Skor, said in a joint statement the action is devastating to consumers in both countries.

"We are disappointed and discouraged to see the ruling out of Brazil today imposing a tariff on U.S. ethanol," the statement said.

"Given the tremendous volume of information we provided to Brazil that demonstrated how misguided a tariff would be, it seemed politics prevailed today and Brazilian consumers lost. Imposing tariffs on U.S. ethanol imports will hurt Brazilian consumers by driving up their costs at the pump. Additionally, this action goes against Brazil's longstanding view that ethanol tariffs are inappropriate and will effectively close off an open and bilateral trading relationship that benefits all sides.

"We strongly urge this recommendation to be reversed as soon as possible and will work to that end through all available pathways."

As of March, Brazil was the top export target for U.S. ethanol producers who shipped 36.7 million gallons that month, according to government trade data compiled by the Renewable Fuels Association. The March numbers, however, represent a 28% drop from February's record exports to Brazil.

The Brazilian Sugarcane Industry Association, or UNICA, had been pressing Brazil's government to place a 16% tariff on imported ethanol while other groups were calling for a tariff as high as 20%.

RFA's Dinneen and Joel Velasco, chief representative from 2007 to 2011 in North America of UNICA, Brazil's leading sugarcane trade association, used to knock heads on the merits of both countries' industries.

In a recent oped,… , Dinneen and Velasco said they both oppose the idea of a tariff.

"With all of this progress then, we two old warriors have to ask, why is Brazil contemplating a return to the anti-free-trade, anti-consumer, anti-cooperation policies of the past?" the letter said. "Why is Brazil's Camex contemplating imposing a 16% protectionist tariff on imported ethanol?

"The justification for rejecting such protectionist policies is as relevant today as it was a decade ago. There will be no winners, only losers. Consumers will pay more for ethanol-blended gasoline in Brazil. Farmers in both countries will suffer from lost markets. Carbon emissions will rise if U.S. ethanol is replaced by increased petroleum.

"Yes, U.S. ethanol exports to Brazil have been on the rise over the past two years, primarily because world sugar demand has encouraged Brazilian mills to prioritize sugar over ethanol, leaving domestic ethanol production short of supply. But the fact U.S. production can meet this temporary need is a good thing for Brazilian consumers, and should not be used as an excuse to resurrect a protectionist policy of a bygone era."

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