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US ethanol industry welcomes postponement of Brazilian import tax vote

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US ethanol industry welcomes postponement of Brazilian import tax vote

Montreal — A joint statement from the US Grains Council, the Renewable Fuels Association and Growth Energy issued Wednesday welcomed Brazil's decision to postpone the vote to reinstate the import tariff for 30-days.

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"We are encouraged to see Brazil's postponement on a decision regarding a pending proposal to impose tariffs on US ethanol imports," the statement said.

"This decision should not be taken lightly, as imposing tariffs on US ethanol imports will hurt Brazilian consumers by driving up their costs at the pump."

Additionally, this action on US ethanol imports would be contrary to Brazil's own longstanding view that ethanol tariffs are inappropriate and would harm the development of the global ethanol industry, the statement added.

The debate about the return of an import tariff in Brazil has caught the attention of US exporters because Brazil has become the main destination for US product over the past few months.

Kingsman, the agricultural analysis unit of S&P Global Platts, estimates that Brazil is likely to account for 43% of US exports in 2017, compared with 27% in 2016.

The vote, which had already been rescheduled twice, once from early May and another time from early July, was supposed to have taken place on Tuesday by Brazilian foreign trade board Camex.

The economy team of Camex asked for the vote to be delayed to study an alternative proposal from the Ministries of Agriculture and Development suggesting a quota of 500 million liters with zero tax. Imports above this amount would be subject to a 20% tax.

The import tax was suspended in October 2011 because Brazil was hit by an ethanol shortage due to crop problems. The tariff is currently suspended until 2019.

Brazilian ethanol producers have made strong appeals to the federal government to impose a 17% tariff to restrict imports because domestic ethanol was becoming less competitive after a surge in exports from the US throughout 2016 and in early 2017.

Related Capitol Crude podcast: 'Reset does not mean rescind': RFA's Dinneen on proposed RVOs, the RFS and US biofuels


Brazilian imports of ethanol surged in 2016, totaling 834.6 million liters, a 63% year-on-year rise. Roughly 90% of the imports entered the country through NNE ports, mainly in Paraiba and Maranhao states, where no local tax applies to imported ethanol.

In January-June, imports totaled 1.28 billion liters of ethanol, up more than fourfold on the year, according to customs data.

A rise in imports in May and June was expected by industry participants as importers have been worried the import tariff might be re-introduced and brought imports forward to pre-empt this.

The NNE region has a structural deficit of anhydrous ethanol because it only produces roughly 27% of local fuel and industrial demand.

In 2016, local anhydrous production represented only 30% of local demand.

In January-May, consumption of anhydrous ethanol, which is blended with gasoline at a 27% rate, rose 4% on the year to 1.32 billion liters, data from the National Petroleum Agency (ANP) showed.

For 2017, Kingsman has estimated that anhydrous ethanol fuel consumption will be 3.26 billion liters, up 3% on the year.

Estimates from Kingsman show that in 2017 imports from the US could make up 37% of the ethanol consumed NNE Brazil, up from 15% in 2016.

--Beatriz Pupo,

--Josh Pedrick,

--Edited by Jonathan Dart,