Brazil extends TRQ on ethanol for 90 days

By Erin Voegele | September 14, 2020

The U.S. government on Sept. 11 announced that bilateral trade discussions on ethanol with Brazil will take place over a 90-day period starting on Sept. 14. During that time, Brazil will maintain a pro-rata tariff-rate quota (TQR) for ethanol proportional to the total annual volume of the TRQ that was in force on Aug. 30.

The TRQ in place as of Aug. 30 allowed duty-free energy of 750 million liters (198.13 million gallons) of ethanol annually, with seasonal restrictions. U.S. ethanol volumes above that TRQ were submit to a 20 percent tariff.

A statement issued by the Office of the U.S. Trade Representative on Sept. 11 explains the two countries have decided to conduct result-oriented discussions on an arrangement to improve market access for ethanol and sugar in Brazil and the U.S. The statement also said they will consider an increase in market access for corn in both countries.

“The two countries will also discuss way to ensure there is fair market access along with any increase in the consumption of ethanol, as well as to coordinate and ensure that the ethanol industries in both countries will be treated fairly and benefit from future regulatory changes on biofuels products in Brazil and the United States,” said the USTR in the statement. “The discussions should aim to achieve reciprocal and proportional outcomes that generate trade and open markets to the benefit of both countries.

The 90-day timeline for negotiations will conclude in mid-December, several weeks after the Nov. 3 U.S. election.

Emily Skor, CEO of Growth Energy; Ryan LeGrand, president and CEO of the U.S. Grains Council; Jon Doggett, CEO of the National Corn Growers Association; and Geoff Cooper, president and CEO of the Renewable Fuels Association, released a joint statement on Sept. 14 indicating they will use those 90 days to advocate that Brazil resume its former free trade posture on ethanol.

“The U.S. Grains Council, Growth Energy, the Renewable Fuels Association and the National Corn Growers Association believe the 90-day extension of the TRQ serves neither Brazil’s consumers nor the Brazilian government’s own decarbonization goals, especially while Brazil’s ethanol producers continue to be afforded virtually tariff-free access to the U.S. market,” said the ethanol and ag groups in their joint statement. “The extension falls during Brazil’s annual inter-harvest period when U.S. ethanol exports to Brazil are traditionally low, causing greater uncertainty for U.S. exporters looking to make selling decisions now for the traditionally higher Brazilian demand in the winter months. While the Brazilian ethanol market has not been fully reopened to imports, we appreciate the continued support and efforts of the U.S. government as we use this 90-day period to aggressively pursue an open and mutually beneficial ethanol trading relationship with Brazil.

“The U.S. ethanol industry actively sought, through repeated dialogue with local industry and government, to illustrate the negative impacts of tariffs on Brazilian consumers and the Brazilian government’s own decarbonization goals,” the said. “However, it seems Brazil’s government has left its own consumers to pay the price through higher fuel costs once again. While we would have preferred Brazil abandon its ethanol import tariffs entirely and resume its free trade posture on ethanol, which it held for several years before the TRQ, we view its decision to temporarily extend the TRQ on ethanol at the current level as an opportunity to continue discussions toward that end.

“The U.S. ethanol industry remains focused on expanding the global use of low-carbon ethanol, reducing barriers to trade and elevating its prominence in energy discussions,” the groups continued. “We remain eager to collaborate and cooperate with other nations that share in the vision of a free and open global ethanol market.”

The American Coalition for Ethanol has also weighed in on the tariff announcement. “While an extension is better than the flat 20 percent tariff on all U.S. exports, this merely kicks the can down the road past the election and can be added to the list of piling uncertainties facing our industry,” said Brian Jennings, CEO of ACE. We have been trying to restore demand at home and around the world and in a year like 2020, finding growth opportunities are of the utmost importance.

“Prior to the imposition of the TRQ, Brazil was the largest export destination for U.S. ethanol producers,” Jennings continued. “Our countries maintained a reciprocal policy of applying minimum or zero duties on ethanol imports for nearly a decade and we hope Brazil will put an end to its protectionist trade policies toward our U.S. ethanol industry. The TRQ unnecessarily limits our export potential and we hope further negotiations will ultimately make it easier for producers to pursue free and fair trade for ethanol in the future.”