Grassley asks administration to clarify stance on ethanol tariff; White House responds

By Erin Voegele | July 08, 2009
Report posted July 29, 2009 at 2:20 p.m. CST

Sen. Chuck Grassley, R-Iowa, recently sent a letter to Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk seeking clarification of the administration's position on maintaining the U.S. tariff on imported ethanol. Grassley's letter was issued in response to a comment made by Thomas Shannon Jr. during a July 8 Senator Foreign Relations Committee hearing regarding Shannon's nomination to become the Ambassador to Brazil.

During that hearing Shannon was asked if thought that the U.S. and Brazil would each benefit from the removal of the tariff. In response, Shannon stated that neither country is currently producing enough biofuels to meet its own market demands. "Obviously, as we look forward to advancing our energy relationship with Brazil, how we deal with the ethanol tariff - and especially how our congress deals with that tariff - could either promote or impede further cooperation," he said. "And, so I think this is an issue that needs to be looked at very carefully. Its removal at this moment would not have an immediate impact on Brazil's ability to enter the U.S. market, but its removal could create a long term opportunity for the United States and Brazil to enhance our cooperation."

Shannon was then asked to clarify his response regarding the removal of the tariff in light of new logistical structures that would likely need to be put in place in order for Brazilian producers to export ethanol to the U.S. under the second stage of the renewable fuels standard. "I personally believe that it would be beneficial, sir," said Shannon. "But, I recognize that especially in the U.S. Congress, there are differing views at this point in time."

According to Grassley's letter, Shannon's stance on the ethanol tariff is at variance with that of Congress. The letter states that by creating, maintaining and extending the tariff in recently years, Congress has recognized the important role that the tariff plays in reducing U.S. dependence on foreign energy sources.

"The view expressed by Mr. Shannon calls into question the current position of President Obama on the ethanol tariff," states Grassley in the letter. ‘Mr. Shannon met with my staff this month to discuss his nomination. During the meeting, he stated that, if confirmed, he would advocate the policies of the United States, including those set by congressional prerogative such as the ethanol tariff. Nonetheless, I remain concerned that his view on removing the ethanol tariff, which has already appeared in the Brazilian press, could send the wrong signal to Brazil regarding U.S. policies on ethanol imports. In addition, Mr. Shannon's statement has caused concern among domestic biofuels producers who are now left to wonder if President Obama supports repealing the import tariff."

The White House released a statement regarding the tariff on July 28. According to that statement, the Obama Administration is committed to developing the U.S. biofuels industry, and to helping the international market for biofuels grown. "Biofuels are an important renewable energy resource, which will help diversify our energy matrix and reduce our dependence on imported oil," said the statement. "Regarding the U.S. tariff on Brazilian ethanol, the administration has no plans to change it."

In response, Growth Energy CEO Tom Buis said his organization applauds the Obama Administration for reinforcing its commitment to homegrown ethanol. "Keeping the tariff on Brazilian ethanol will ensure the development of a domestic renewable fuel industry, which creates green collar jobs, reduces our dependence on foreign oil, strengthens our national security, and improves the environment," said Buis. "We look forward to our continued work with the Obama administration and Congress to address our nation's economic and energy challenges."