USGC successfully defeats threat to Peruvian ethanol market

By U.S. Grains Council | April 19, 2022

In 2017, the Peruvian National Institute for the Defense of Free Competition and the Protection of Intellectual Property (INDECOPI) initiated a countervailing duty (CVD) investigation against U.S. ethanol on behalf of a single Peruvian ethanol company, which held a monopoly over the local market. On Nov. 6, 2018, INDECOPI ruled in favor of the domestic industry and imposed a $0.15/gallon countervailing duty on all imports of U.S. ethanol. This presented a potential loss of U.S. market access in the country and opened the door for other trade partners to pursue additional CVD cases against U.S. ethanol exports.

Peru is one of the top 10 export markets for U.S. ethanol. In 2020, the U.S. ethanol industry exported approximately 39 million gallons to Peru, representing an 80 percent market share worth more than $65 million.

In response to INDECOPI’s decision, the Council used $13,600 Agricultural Trade Promotion and $45,000 Market Access Program funds to send several fact-finding delegations of to Peru to meet with government and industry in order to prepare the legal defense. The Council, in coordination with Growth Energy and the Renewable Fuels Association, then launched a coordinated legal defense, arguing at hearings in both the initial investigation and the appeal on behalf of the U.S. ethanol industry. The legal defense expenses were paid through strictly with industry funds ($571,500) contributed by U.S. Grains Council members.

On January 29, 2021, as a result of the Council’s efforts, INDECOPI Tribunal announced that the U.S. ethanol industry and the U.S. government won its appeal, reversing the previous decision and removing the $0.15/gallon duty on U.S. ethanol. This will allow U.S. ethanol to remain competitive compared with the domestic product and will pave the way for market development activities that seek to increase imports as Peru’s demand grows. The Council’s future work with Peruvian authorities and stakeholders will include urging an increase of Peru’s ethanol blend rate beyond 7.8 percent.

The successful defeat of this case against U.S. ethanol exports to Peru means that the U.S. industry will maintain a 39 million gallon ethanol export market valued at more than $65 million per year. The Council invested $13,600 Agricultural Trade Promotion and $45,000 Market Access Program funds in a successful defense, generating a return on investment of $1,109 per $1 of FAS funds invested.