Removal Of Brazilian Ethanol Import Duty Likely
Thursday, February 11, 2010
The Brazilian Sugarcane Industry Association (UNICA) is optimistic that the country’s
20% import duty on ethanol will be dropped by July 2010 despite Brazil's Chamber
of Foreign Trade (CAMEX) deferral of the decision.
In a statement released on February 9, UNICA
described CAMEX's decision as little more than a “bureaucratic
delay". UNICA President and CEO, Marcos Jank, explained: "We are very encouraged
by the statement from Brazil's Agriculture Minister, Reinhold Stephanes, who
said after the meeting that it is 'highly probable' that the tariff on imported
ethanol will be dropped as of July."
The Association has been putting pressure on the government to remove the tariff
in the hopes that the move would be reciprocated by the United States. In order
to speed up this process, Jank has urged the government to make an announcement
as soon as possible, even if the measure is to only become effective in July.
UNICA originally asked CAMEX to remove the import duty in a letter sent in
October of last year. UNICA believes free trade is a two-way street and Brazil,
as the largest producer of cane ethanol and largest exporter of ethanol in the
world, with 60% of the global market, should lead by example. "We should
eliminate barriers, which would then allow Brazil to pursue similar measures
from countries that keep their markets heavily protected," Jank explained.
The United States imposes two duties on ethanol imports: a 2.5% ad valorem
tariff plus an additional ‘other duty or charge’ of USD0.54 per
gallon. According to data from the US International Trade Commission (ITC),
the combined duties have amounted to about a 30% tariff on ethanol imports,
compared to the practically zero import duty applied to fossil fuels. Moreover,
the ITC's own analysis last year recognized that reducing the duty on ethanol imports
would lead to a net gain for the US that could reach USD356m annually, UNICA said.
As noted in a UNICA statement on January 21, the current Brazilian tariff has
never been an inhibiting factor for imports. However, the existence of this
tariff is often criticized abroad, in the course of discussions to open up ethanol
markets, especially in the United States. UNICA expects the elimination of the
20% Brazilian tariff, formally requested on October 30, 2009, to become an important
ingredient in these discussions to open markets and expand the use of fuel ethanol,
transforming it into a global energy commodity.
UNICA officials have pointed out that the association's request to CAMEX last
year has no connection with the possibility of eventual ethanol imports into
Brazil because of current domestic fuel prices.
"This request was made months ago and has nothing to do with current
market situations, and everything to do with promoting global free trade in
clean energy," concluded Jank.