Brazil raises quota on US ethanol to 750 million liters

By Erin Voegele | September 03, 2019

The government of Brazil announced Sept. 2 it has raised the quota on U.S. ethanol imports under the tariff rate quote (TRQ) to 750 million liters (198.13 million gallons), up from 600 million liters per year. The new quota means 750 million liters of U.S. ethanol can be imported into Brazil without triggering the 20 percent tariff. According to the Brazil Ministry of Agriculture, the new quota is already in effect and will be valid for 12 months. According to the ministry, 99.7 percent of Brazilian ethanol imports last year came from the U.S.

UNICA, the Brazilian sugarcane industry association, released a statement Sept. 2 calling the new import quota a major victory for the Brazilian government. UNICA indicated the decision to increase the quota is a step toward a more open trade market, including bilateral ethanol trade and the opening of the U.S. sugar market to Brazilian exports.

In a tweet, President Trump said “Brazil will allow more American ethanol to enter the country without tariffs, a decision that Brazilian mils are celebrating. The seemingly counter-intuitive reaction stems from the tone of ongoing negotiations between the South American nation and the U.S. for a trade agreement…Making great progress for our farmers. Approved E15 year round. Big additional lit to be submitted and approved within two weeks. Will be even better for ethanol, and we save our small refiners.”

The U.S. Grains Council, Renewable Fuels Association released statements expressing disappointment that Brazil did not fully remove its tariff on U.S. ethanol.

“We are very disappointed Brazil did not fully consider the vast information we and the U.S. government provided them showing the detrimental and negative impact this TRQ has on Brazilian consumers by raising prices at the pump,” said Ryan LeGrand, president and CEO of the USGC. “We will actively encourage review of this policy, which inhibits trade between our countries and hinders the development of a robust global ethanol marketplace.  Free and reciprocal fair trade between the world’s two largest ethanol producers should be a model for other countries to follow.  Instead Brazil is showing other countries a path to construct barriers to trade, which will hurt all consumers in the short, medium and long terms.”

“Brazil’s decision to maintain its protectionist trade barrier against U.S. ethanol is extremely disappointing and represents a major setback in our relationship with the Brazilian sugar and ethanol industry,” said Geoff Cooper, president and CEO of the RFA. “The token increase in the quota does nothing to provide relief to Brazilian consumers who face higher fuel prices because of Brazil’s discriminatory policy. Not only is the U.S. market wide open to ethanol imports from Brazil, but our Renewable Fuel Standard actually incentivizes imports by characterizing sugarcane ethanol as an advanced biofuel. But there is nothing ‘advanced’ at all about the unfair and unlevel playing field created by Brazilian trade barriers. In light of Brazil’s action, it may be time for U.S. policymakers to reconsider our open-door trade policy regarding sugarcane ethanol.”

“We appreciate the U.S. government’s efforts to raise the TRQ, however we are disappointed that Brazil did not remove their tariff completely to allow a fully open market,” said Emily Skor, CEO of Growth Energy. “Brazilian ethanol continues to have virtual tariff-free access to the U.S. and puts U.S. ethanol producers at a disadvantage at a time when they need it most. We will continue working with U.S. government officials, the Brazilian government, and our allies to truly open the ethanol market and build a strong trade relationship for decades to come.”