ePURE requests investigation into U.S. ethanol exports to EU

By Holly Jessen | November 03, 2011

The European ethanol industry, represented by ePURE, has formally requested that the European Commission investigate trade practices of the U.S. ethanol industry. The European Producers Union of Renewable Ethanol said Nov. 2 that it was confident the investigation will “clearly establish the need to impose dissuasive duties on U.S. imports of fuel ethanol” and also requested that U.S. imports be registered so duties could be imposed retroactively.

When asked what was meant by “dissuasive duties” Rob Vierhout, secretary general of ePURE, clarified that the European ethanol industry was asking for additional import duties to “undo the effect of the competitive advantage” enjoyed by a subsidized U.S. ethanol industry. “Massive and sudden imports of U.S. ethanol, combined with unfairly low prices over the past few years, have seriously damaged the economic situation of European producers,” he said. “The unfair competition of U.S. imports is simply depriving the EU industry from the benefit of this positive evolution on its own domestic market,” he said, adding that it’s critical to resolve the situation as EU counties are rapidly increasing consumption of renewable fuels, resulting in a potentially bright future for EU producers.

Although there are other factors, the main concern is that 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. Although VEETC is widely expected to sunset at the end of the year, the investigation is not dependant on whether the tax credit expires or is extended. “The investigation will continue whatever happens with VEETC,” Vierhout told EPM.

The U.S. ethanol industry is the largest ethanol producer in the world thanks to government policies put in place to encourage its production and use. “This policy is legitimate as long as it does not prejudice the development of ethanol for fuel use in other countries,” ePURE said. With the U.S. market for ethanol at the blend wall, U.S. producers are exporting increasing amounts of their product to the EU. From 2008 to 2010, exports to Europe increased by 500 percent and 2011 exports are expected to be twice as high as 2010. “This impressive trend is a direct result of U.S. federal and sub federal subsidies, which allow U.S. operators to adopt aggressive prices practices on the European market,” ePURE said.

The Renewable Fuels Association responded quickly to news of the investigation. “Based upon our research and work with the International Trade Commission, the RFA has neither discovered nor been provided any evidence by the EU or any other entity that such ethanol trades are occurring,” the organization said in a statement.

RFA also pointed out that VEETC will expire at the end of 2011, meaning the alleged trading benefiting from that tax incentive won’t happen in the future. Secondly, VEETC isn’t a tax incentive for the U.S. ethanol industry, but rather a blenders credit for gasoline blenders, marketers and other end users. “Therefore, U.S ethanol producers cannot nor should not be the focus of any potential European action,” RFA said.

Finally, RFA said that all ethanol producing nations provide incentives, including nations of the EU. U.S. ethanol is the lowest cost, most cost effective ethanol on the market today, resulting in the dramatic increase in exports to Brazil, Europe, Asia, and the Middle East. “Those volumes, as reported by the ITC and the RFA are denatured and undenatured volumes that have not received any tax incentive,” RFA said. “To date, the RFA has not found nor been provided any evidence the alleged trades of ethanol blended with gasoline have occurred.” The organization further pointed out that it is the EU tariff schedule, which classifies E90 at a lower tariff rate, which encourages import of these blends.

A decision on whether to initiate a formal investigation should be reached by Nov. 25. “Based upon any claims made, the RFA will work with U. S. trade officials to take the appropriate steps,” the U.S. industry association said.