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Brazil’s tax on imported ethanol sparks investigation cry

The Brazilian state of Sao Paulo is imposing a 25 percent tax on all imported ethanol. Port Santos in Sao Paulo is the main port of entry for U.S. ethanol exports to Brazil, which accounted for an estimated 400 million gallons in 2011.

The Renewable Fuels Association (RFA) wrote to U.S. Trade Representative Ambassador Ron Kirk urging him to investigate the news that the Brazilian state of Sao Paulo was imposing a 25 percent tax on all imported ethanol.  Port Santos in Sao Paulo is the main port of entry for U.S. ethanol exports to Brazil, which accounted for an estimated 400 million gallons in 2011.

“Because ethanol produced in Sao Paulo is tax exempt, ethanol imported into Sao Paulo from the United States and other areas is at a substantial economic disadvantage,” wrote RFA President and CEO Bob Dinneen.  “We believe this action is discriminatory and may severely—and immediately—restrict the exportation of U.S. ethanol to Brazil.”

In early December, the nation of Brazil extended a temporary suspension of a 20 percent federal tariff on imported ethanol.  While the RFA welcomed that news, it cautioned that the decisions surrounding Brazil tariffs are neither permanent nor transparent and additional trade barriers could be constructed at any time.  The actions of the state of Sao Paulo are such an example.

“This action not only effectively reinstates the tariff on U.S. exports, but increases it by 5 percent,” wrote Dinneen.  “Moreover, we believe the action taken by the state of Sao Paulo is in violation of Article III:4 of the Generalized Agreement on Tariffs and Trade (GATT) and possibly Article 2.1 of the World Trade Organization’s (WTO) Technical Barriers to Trade Agreement.”

This year, exports of U.S. ethanol shattered previous records, reaching  more than 1 billion gallons in volume and some $2.5 billion in value. More than one-third of U.S. ethanol exports to Brazil in 2011; and, prior to this action, prospects for increased shipments to Brazil in 2012 were bright.

“These exports have helped to sustain the industry’s growth and profitability as we work to remove artificial barriers to the consumer market for ethanol in the U.S.  It is no doubt that this recent decision will result in the erection of another significant barrier to U.S. ethanol exports to Brazil.  We are hereby seeking your assistance in addressing this and other persisting trade distortions in Brazil,” wrote Dinneen.

A copy of the letter can be read here.

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