Brazil launches campaign to remove ethanol tariff

By Anna Austin | August 04, 2008
The Brazilian Sugarcane Industry Association, known as UNICA, launched a campaign July 4, targeting U.S. Independence Day travelers to encourage Congress to revisit the 54-cent-per-gallon ethanol import tariff.

The "Are We There Yet?" movement suggested that the American public should convince the U.S. Congress to eliminate or lower the tariff in order to reduce the cost of gasoline. "Americans are being denied an opportunity to save money at the pump," said Joel Velasco, chief representative for UNICA. "Eliminating or even reducing the tariff on cane ethanol could provide immediate relief, particularly in states like California and Florida, where this form of fuel is already in use."

UNICA said that although the United States imported 189 million gallons of Brazilian sugarcane-based ethanol in 2007, consumers aren't seeing the benefits they should, as sugarcane-based ethanol is cheaper to produce than corn-based ethanol in the United States. The tariff was first imposed in 1980, and while subsidies to the U.S. ethanol industry were reduced from 51 cents per gallon to 45 cents per gallon in the 2008 U.S. farm bill, the ethanol import tariff remains at 54 cents.

U.S. Sens. Dianne Feinstein, D-Calif., and Judd Gregg, R-N.H., introduced a tariff reduction measure to legislation one month before UNICA's campaign launch. "This bill would essentially level the playing field and ensure that U.S. refiners are able to purchase cheaper and climate-friendly ethanol, no matter where it comes from," Feinstein said. Gregg made similar suggestions. "This legislation introduced today on a bipartisan basis offers a reasonable solution that lowers the tariff on ethanol, keeping prices more competitive for American consumers and steering us in the direction of more affordable energy alternatives," he said.

Coalitions of meat industry groups, and food and beverage manufacturers, have also sent letters to the Bush administration in support of suspending the tariff, with hopes of corn price reductions.

In opposing the campaign, a large number of commodity and ethanol leaders sent a letter to President George W. Bush, expressing disapproval of a removal or reduction of the tariff. "The 54-cent-per-gallon secondary tariff was enacted to offset any incentive for imported ethanol to benefit from the 54-cent-per-gallon tax credit for ethanol blended into motor fuel," the letter said. "This tax credit is taken by refiners who blend ethanol into motor fuel, not ethanol producers." The letter, which was signed by the American Coalition for Ethanol, Ethanol Producers and Consumers, the National Association of Wheat Growers, the National Corn Growers Association, the National Farmers Union, the National Sorghum Producers and the Renewable Fuels Association, stated that the purpose of the tariff is to protect American taxpayers from subsidizing foreign-produced ethanol and not to protect domestic ethanol.

RFA President Bob Dinneen added that removing the tariff wouldn't lower food prices. Instead, such an action would halt development of new ethanol technologies, and take the jobs and economic opportunity being generated by the domestic ethanol industry to foreign countries. "I strongly encourage President Bush to recognize that skyrocketing oil prices play a far greater role in the complex issue of food prices than ethanol and to reject the efforts to remove the secondary tariff."