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UK to impose tariffs on bioethanol imports in no-deal Brexit

London — The UK government said Tuesday it will impose a tariff on imports of bioethanol "to retain support for UK producers" in the event of "no-deal" Brexit.

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In a statement, the government said it would "adjust tariffs on bioethanol to retain support for UK producers, as the supply of this fuel is important to critical national infrastructure."

It is unclear what the adjustment would be, although several market participants see no change from the tariff published in March.

The government had previously announced in March a temporary tariff regime in the event of a no-deal Brexit that would apply for up to 12 months while a full consultation and review on a permanent approach to tariffs is undertaken. At the time, the tariff specified was Eur192/cu m ($208/cu m) for undenatured ethanol and Eur102/cu m for denatured ethanol. Under WTO rules, default tariffs would apply on trade with all countries unless there is a special separate agreement.

The UK is a regular importer of bioethanol -- made from agricultural feedstock such as sugar, corn and wheat -- and currently there is no duty on imports from other EU countries. By applying the same tariff as to the rest of the world, the EU would lose its competitive advantage making the US the most competitive origin for imports into the UK. This is unlikely to affect the current market position of UK producers, though, with higher US imports likely to displace EU-origin product.

Challenging market conditions have already resulted in the shutdown of a major UK ethanol producer, while a second has been going through intermittent closures and restarts, last reported running at low rates until further clarity on the policy framework.

UK monthly bioethanol demand peaked at 70 million liters in June 2017 and has been edging lower since. UK bioethanol demand averaged 61.25 million liters from January to August this year compared with 63.2 million liters in 2018, according to HM Revenue & Customs.

The UK government published a revised temporary tariff regime that tweaked duties on lorries and clothing as the risk of a no-deal Brexit grows. It said that 88% of total imports will escape tariffs under a no-deal Brexit.

-- Eklavya Gupte, eklavya.gupte@spglobal.com

-- Chrysa Glystra, chrysa.glystra@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com