Brazil Agrees to Extend US Ethanol Quota for 90 Days

by Bill Tomson (Agri-Pulse) The U.S. and Brazil have agreed to revive for 90 days the expired tariff rate quota that allows some U.S. ethanol to flow to the South American country duty free, the two countries said in a joint statement Friday night.

It’s a stopgap deal that takes effect Monday and gives the two countries time to negotiate a more permanent deal and pushes the deadline for the politically sensitive issue past the U.S. presidential election in November.

The TRQ, which allowed 198 million gallons of U.S. ethanol to avoid Brazil’s 20% tariff annually, expired on Aug. 31. It will be reinstated as a pro rata TRQ “for ethanol proportional to the total annual volume of the TRQ that was in force on August 30, 2020.”

U.S. farm and fuel groups had been pushing for an expansion of access to Brazil’s market and expressed disappointment with the 90-day extension. U.S. ethanol exports to Brazil are traditionally stronger at the end of the year, the U.S. Grains Council, Growth Energy, Renewable Fuels Association and National Corn Growers Association said in reaction to the deal. The short-term fix will cause “greater uncertainty for U.S. exporters looking to make selling decisions now for the traditionally higher Brazilian demand in the winter months.”

The ethanol tariff question put Brazilian President Jair Bolsonaro in a difficult situation. His administration has been wooing the U.S. for tighter trade and investment ties as his personal relationship with President Donald Trump has strengthened. While a rift over ethanol trade created new tension between the two governments, Bolsonaro has also been under pressure domestically from the powerful sugarcane lobby that is demanding the TRQ be scrapped and the 20% tariff remain in place. READ MORE

Excerpt from Renewable Fuels Association, Growth Energy, National Corn Growers Association, U.S. Grains Council: After expiring on August 31 and a 20 percent tariff was temporarily applied to all U.S. ethanol, Brazil’s tariff-rate quota (TRQ) has been extended for a further 90 days starting on Sept. 14. The following is a joint statement from Geoff Cooper, President and CEO of the Renewable Fuels Association, Ryan LeGrand, President and CEO, U.S. Grains Council; Emily Skor, CEO, Growth Energy; and Jon Doggett, CEO of the National Corn Growers Association:

“The Renewable Fuels Association, U.S. Grains Council, Growth Energy, and the National Corn Growers Association believe the 90-day extension of the TRQ serves neither Brazil’s consumers nor the Brazilian government’s own decarbonization goals, especially while Brazil’s ethanol producers continue to be afforded virtually tariff-free access to the U.S. market. The extension falls during Brazil’s annual inter-harvest period when U.S. ethanol exports to Brazil are traditionally low, causing greater uncertainty for U.S. exporters looking to make selling decisions now for the traditionally higher Brazilian demand in the winter months. While the Brazilian ethanol market has not been fully reopened to imports, we appreciate the continued support and efforts of the U.S. government as we use this 90-day period to aggressively pursue an open and mutually beneficial ethanol trading relationship with Brazil.

“The U.S. ethanol industry actively sought, through repeated dialogue with local industry and government, to illustrate the negative impacts of tariffs on Brazilian consumers and the Brazilian government’s own decarbonization goals. However, it seems Brazil’s government has left its own consumers to pay the price through higher fuel costs once again. While we would have preferred Brazil abandon its ethanol import tariffs entirely and resume its free trade posture on ethanol, which it held for several years before the TRQ, we view its decision to temporarily extend the TRQ on ethanol at the current level as an opportunity to continue discussions toward that end.

“The U.S. ethanol industry remains focused on expanding the global use of low-carbon ethanol, reducing barriers to trade and elevating its prominence in energy discussions. We remain eager to collaborate and cooperate with other nations that share in the vision of a free and open global ethanol market.” READ MORE

Excerpt from Renewable Fuels Association: The Renewable Fuels Association yesterday called on President Trump to move forward in seeking reciprocity and fairness in ethanol trade policy with Brazil. In a letter to the president, the association highlighted his August pledge to consider reciprocity with respect to Brazilian ethanol imports and reminded him of a commitment from the U.S. Trade Representative in September to “ensure that the ethanol industries in both countries will be treated fairly.”

“Unfortunately, it does not appear that any further progress is being made toward elimination of Brazil’s protectionist ethanol trade policies and restoration of the previous free and fair ethanol trade relationship we enjoyed with Brazil,” wrote RFA President and CEO Geoff Cooper. “Instead, it appears likely that Brazil will allow its temporary tariff-free quota to expire again on December 14, at which time a 20 percent (or higher) tariff could be applied to all ethanol imports from the United States.”

RFA says it has become clear that Brazil no longer shares the American industry’s desire for free and open biofuel markets. Thus, the association is urging the administration to move forward with reciprocal tariffs on ethanol imports from Brazil.

“The impacts of the unlevel playing field for ethanol trade have become painfully apparent in recent months,” RFA President and CEO Geoff Cooper wrote. “U.S. imports of Brazilian ethanol have surged, with new shipments appearing at U.S. ports in nine of the past 12 weeks. Year-to-date imports of Brazilian ethanol exceed the same period in 2019 by 15 percent and are at a seven-year high.” The surge of ethanol imports from Brazil shows no signs of slowing down in the remaining months of 2020, Cooper said. Meanwhile, no U.S. fuel ethanol has been shipped to Brazil since May.

RFA concluded by thanking the president for his efforts to pursue a level playing field and reciprocal treatment with respect to ethanol trade, noting that the association stands ready to work with him and his administration to secure fair and equal trade with Brazil. READ MORE