Brazil’s 20% tariff on ethanol devastating to US biofuel industry

By Erin Voegele | December 16, 2020

U.S. ethanol exports to Brazil are once again subject to a 20 percent tariff after the two countries failed to reach a trade agreement during a short-term extension of Brazil’s tariff-rate quota (TRQ) that expired this week.

The U.S. government on Sept. 11 announced that bilateral trade discussions on ethanol with Brazil would take place during a 90-day period starting Sept. 14. During that period of discussion, Brazil extended a TQR that was in force as of Aug. 30. The TQR allowed 750 million liters (198.13 million gallons) of ethanol to be imported duty-free on an annual basis. U.S. ethanol imports above that TQR were subject to a 20 percent tariff.

The two countries failed to reach an agreement on ethanol trade during the 90-day extension. With the TQR now expired, U.S. ethanol exports to Brazil are again subject to a 20 percent tariff.

Representatives of the ethanol industry have spoken out to criticize the Trump administration for failing to reach a trade agreement with Brazil.

A joint statement issued by Emily Skor, CEO of Growth Energy; Ryan LeGrand, president and CEO of the U.S. Grains Council; Geoff Cooper, president and CEO of the Renewable Fuels Association; and Jon Doggett, CEO of the National Corn Growers Association notes that U.S. ethanol exports to Brazil have fallen significantly this year, with less than 4 million gallons shipped to the country since May. Over the same time period, Brazil has exported nearly 96 million gallons of fuel ethanol to the U.S. The 20 percent tariff will only further this trade imbalance.

“Brazil’s decision to impose a 20 percent tariff on all U.S. ethanol imports is devastating for the U.S. ethanol industry, the future of cooperation and coordination between our nations,” they said in the statement. “Not only does this decision risk destroying the great progress our two nations have made as global leaders in ethanol production, it marks a dramatic turn in our bilateral trade relationship.

“Today, Brazilian ethanol receives unfettered access into the U.S. market, while U.S. producers are denied reciprocal market access due to a restrictive import tariff designed solely to make U.S. product less competitive. This unjust imbalance must be addressed. We urge the incoming Biden Administration to respond with strength, leveraging various U.S. government tools and authorities to make it clear that protectionist barriers are unacceptable. However, it seems clear from today’s decision that Brazil is more focused on keeping US ethanol out of Brazil than true two-way trade.

“Through repeated dialogue with local industry and government, the U.S. ethanol industry actively sought to illustrate the negative impacts of increased tariffs on Brazilian consumers and the Brazilian government’s own decarbonization goals. However, it seems Brazil is more focused on taxing imports to protect their national industry than reducing carbon emissions and developing a global industry.”

The American Coalition for Ethanol has also spoken out to criticize the tariff. “We were never big fans of Brazil’s TRQ, but at least it allowed some ethanol into the country tariff-free,” said Brian Jennings, CEO of ACE. “While our border remains completely open to imports from Brazil, their tariff virtually closes the door to us. It wasn’t that long ago that Brazil was the top export destination for U.S. ethanol. Now we are experiencing demand destruction at home and abroad. One of the most urgent priorities for USTR nominee Katherine Tai will be to sit down with her Brazilian counterparts to try and negotiate a much better outcome. Sanity must be restored to Brazil’s protectionist policy toward ethanol trade.”