Brazil Ends Tariff on Imported Ethanol Drawing Applause from Sugarcane Industry

Brazilian ethanol Reacting to the Brazilian government’s announcement that it has unilaterally eliminated its tariff on imported ethanol, the Brazilian Sugarcane Industry Association (UNICA) called it a major step forward in building a global biofuels marketplace.

“UNICA believes that 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, will lead by example and eliminate barriers to renewable, clean fuels. We hope this move will encourage other countries around the world to develop open, free markets for clean, efficient renewable fuels such as ethanol,” said UNICA President & CEO Marcos Jank.

The Brazilian Chamber of Foreign Trade (CAMEX) has announced the temporary elimination of the 20% tariff charged by Brazil on ethanol imports, effective as soon as it is published in Diário Oficial, the government’s official daily record, which should happen in a couple of days. According to CAMEX, the ethanol tariff will remain at the new level (zero) until the end of 2011.

UNICA stated that it hopes the tariff reduction is permanent, particularly should other countries, namely the United States, reduce their trade tariffs on ethanol imports. Unless the U.S. Congress decides otherwise during the course of 2010, the current U.S. tariff on imported ethanol expires at the end of this year.

“The question now is whether the U.S., as the world’s number-one ethanol producer, will follow suit. Consumers win when industries compete. Brazilian ethanol producers are willing to compete for consumers. What about American producers?” asked UNICA’s Chief Representative for North America, Joel Valasco.

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.

“The best way to cut energy costs and reduce global dependence on oil is to give consumers more choices and make providers of different energy sources compete in open markets,” said Velasco. “Ethanol is an essential part of the energy mix for a growing number of countries, and that’s why Brazil is taking this important step towards establishing ethanol as a freely traded, global commodity,” he added.

Brazilian tariff has never been an inhibiting factor for imports, but the existence of this tariff is often criticized abroad, in the course of discussions to open up ethanol markets, especially in the United States.

The Brazilian sugarcane industry expects the elimination of the 20% Brazilian tariff, formally requested on October 30, 2009, to become an important ingredient in discussions to open markets and expand the use of fuel ethanol, transforming it into a global energy commodity.

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