The announcement by the Brazilian Chamber of Foreign Trade (CAMEX) to postpone a decision to reduce Brazil’s ethanol import duty from 20% to zero means it will take a bit longer for the move to be announced, but not for its impact to take effect once the decision is made.
That’s how the Brazilian Sugarcane Industry Association (UNICA) says it views what it describes as little more than a “bureaucratic” delay.
According to UNICA President and CEO, Marcos Jank, the government should still make its announcement as soon as possible, even if the measure only becomes effective in July:
“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.”
UNICA originally asked CAMEX to remove the import duty in a letter sent in October of last year. According to Jank, 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,” he added.
The United States imposes two duties on ethanol imports: a 2.5% ad valorem tariff plus an additional “other duty or charge” of US$ 0.1427 per liter (US$ 0.54 per gallon). According to data from the U.S. 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, ITC’s own analysis last year recognized that reducing the duty on ethanol imports would lead to a net gain for the U.S. that could reach US$ 356 million annually.
On January, UNICA had already noted that 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 says not that it 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.
They also point 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. “The 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.
