USTR report discusses barriers to US exports of ethanol, DDGS

By Erin Voegele | May 07, 2020

The Office of the U.S. Trade Representative recently issued its 2020 National Trade Estimate, an annual report detailing foreign trade barriers faced by U.S. exporters of goods and services and USTR’s efforts to reduce those barriers. Fuel ethanol is among products addressed in the report.

The report addresses ethanol tariffs currently in place in Brazil. It explains that Brazil implemented an annual 24-month tariff rate quota (TRQ) on ethanol imports in September 2017 whereby imports above 600 million liters were subject to a 20 percent tariff. “While a 20 percent above-quota tariff is below Brazil’s WTO bound tariff rate of 35 percent, any quantitative limit restricts the robust bilateral trade of ethanol between the world’s largest ethanol consumers and producers, which existed before the quota was imposed,” said the USTR in the report. When the two-year TRQ was set to expire on Aug. 31, 2019, the Brazilian government established a new, 12-month TRQ, which allows, with seasonal restrictions, duty-free entry of 750 million liters of ethanol. Imports above that level are subject to a 20 percent tariff. “The United States continues to press Brazil to return to the conditions for the trade of ethanol that existed prior to implementation of the TRQ in September 2017,” said USTR in the report.

The report also addresses restrictions in the Indian market, noting India currently prohibits the import of ethanol for fuel use. The country released a national policy on biofuels in 2018, setting a target of 20 percent blending of ethanol with gasoline. India’s fuel penetration levels in 2019, however, were far below the target level.

Within the report, the USTR addresses ethanol trade issues with several other countries, including Japan, which agreed in early 2020 to staged tariff elimination for ethanol and several other goods.

The report also discusses issues related to distillers dried grains (DDGs) exports, including potential negative impacts in the European Union. The report explains that there have been extensive EU approval delays of genetically engineered (GE) corn products. As a result, members of industry have continued to express concerns that exports containing a low-level presence (LLP) of unapproved GE crops are at risk. While the U.S. continues to export DDGs to the European Union, the USTR notes that shipments could be disrupted any moment by an LLP incident.

In addition, the report calls attention to unclear regulatory requirements on distillers dried grains with solubles (DDGS) in India. “In July 2018, the GEAC formed the Sub Committee on Guidelines for Imports of Animal Feed (SCGIAF) to establish procedures for applications related to the imports of animal feeds, including DDGS and soybean meal,” said the USTR in the report. “During the past two years, GEAC has received 11 applications to import U.S. DDGS from Indian importers. Local feed companies, along with the U.S. government continue to advocate that DDGS be exempted from further regulatory requirements, noting that DDGS are a processed product that are not living, and therefore pose no risk to the environment. To date, GEAC has not officially confirmed that they will not regulate DDGS as living modified organisms.” In addition, the USTR said unclear jurisdiction for the approval process for DDGS continues to complicate the process.

Following release of the report, the U.S. Grains Council released a statement noting it has contributed comments for the report for more than a decade focusing on trade barriers specific to U.S. coarse grains, coproducts and ethanol.

“We believe that resolution of the broad range of barriers outlined in this report could bring about a correction in the coarse grain trade trends of the last decade, restore market access and allow U.S. producers and agribusinesses to effectively explore and capture new markets and business opportunities,” the Council wrote in comments submitted in October 2019. “The Council has worked cooperatively with USTR on a number of these issues. We look forward to continued collaboration.”

A full copy of the report can be downloaded from the USTR website.