EU draft regulation would close E90 import loophole, ePURE says

By Holly Jessen | October 18, 2011

The European Union’s Customs Code Committee recently approved a draft regulation to classify E90, any blend of 70 percent ethanol or more and 30 percent gasoline or less, as denatured ethanol.

This clarifies a customs procedural issue that Rob Vierhout, secretary general of ePURE, the European Producers Union of Renewable Ethanol, told Ethanol Producer Magazine about back in January. In some cases, E90 was subject to lower import duties because it was incorrectly being classified as a chemical. “We think that in certain countries—it wasn’t happening everywhere—but in certain countries of the EU, this particular blend of ethanol and gasoline was not classified in the right way,” he told EPM Oct. 18. “This was a correction to make sure everyone in the EU is classifying this particular blend in the proper way.”

Presently, E90 classified as a chemical is subject to a 6.5 percent import duty assessed on the price of the product. If and when the regulation is approved, all E90 would be classified as undenatured ethanol and would be subject to a flat rate of Euros 102 (about $140) per cubic meter.

The draft regulation, which was approved by the committee Oct. 12, will be published for review and approval by the member states in about 10 days, Vierhout said. If at least 14 member states do not approve of the regulation, it will be blocked. If the regulation is not blocked it becomes law 20 days after publication. Traders or importers with binding tariff agreements can continue to import E90 under their BTI for an additional 90 days, he said.

Critics say the decision could result in increased prices for renewable fuels because imported ethanol will be less attractively priced. However, Vierhout countered that this regulation simply serves to force all customs in all EU countries to classify E90 correctly. Yes, import duties for E90 will increase in some countries, where E90 was previously classified incorrectly as a chemical.  That will lower the margins for some traders that were benefiting handsomely. “This was a kind of gold rush for those that were trading the products,” he said. “They made a nice margin on the trade and they will lose that margin. But I am pretty sure the consumer will not see anything out of this—not a lower price, not a higher price.” E90 is primarily imported to the United Kingdom, with some sent to countries such as Finland, the Netherlands, Czech Republic and Sweden.

Should the draft regulation become law, ePURE will chalk it up to a win for the European ethanol industry. That doesn’t mean the industry can rest, however. The “battle of the loopholes” is likely to continue, Vierhout said, anticipating that traders’ next move will be to add a chemical to E90 so it can be argued it is indeed a chemical product. The hitch in that plan, however, is that E90 is used exclusively for fuel and vehicle engines do not tolerate the addition of a chemical. Regardless of that fact, he expects there will be those that try. “Traders will not give up easily,” he said.

Another example of battling loopholes happened in Germany, where ethanol must be certified as being produced in a sustainable way. There was a case of that sustainability certificate being transferred from U.S. ethanol to European-produced ethanol that did not have the proper certification, he said. The European ethanol was stored in the same warehouse as the U.S. sustainably certified product but was not the same product and was never physically in the same tank. The motivation, Vierhout said, was the premium price paid in Germany due to the country’s sustainability requirements. Now, that legislation has been tightened to prevent sustainability certificates being transferred to non-sustainably produced ethanol. 

Another issue of concern in the past was E90 being blended with E100 until the hydrocarbon content was lowered to perhaps 1 percent. There was one instance of ethanol intended for human consumption that was contaminated with hydrocarbons. “I think that was just a slip of the tongue,” he said. “I haven’t heard of any more cases of that happening.”

Finally, there’s the issue of whether a formal investigation will be launched into U.S. trade practices for exporting U.S. ethanol to the EU. The organization has been looking into whether U.S. ethanol is benefiting from the U.S. Volumetric Ethanol Excise Tax Credit, or the 45 cents a gallon blenders credit, and then entering the EU, something ePURE feels is a violation of subsidy rules and shouldn’t be allowed. Although it’s widely accepted that VEETC will sunset at the end of the year Vierhout said ePURE would continue to look into the issue as it is not yet known for sure if VEETC will expire or not. “We are still studying that,” he said.