US Ethanol Producers Rail Against Brazilian Taxes

The United States Renewable Fuels Association has written to US Trade Representative Ron Kirk requesting government action following a decision by the Brazilian state of Sao Paulo to introduce an ethanol import tax.

The Association said in its letter, sent on January 31, 2011, to Kirk that: “As you know, our nation's secondary tariff on imported ethanol, the sole purpose of which was to offset the benefit of the US ethanol blender's tax credit, expired on December 31, 2011. Prior to its expiration, we wrote to you to explain our concern about a number of unaddressed trade distortions affecting US ethanol exports to Brazil, including the impending expiration of Brazil's temporary waiver of its 20% import tariff [which was due to expire on January 1, 2012].”

The letter continues:

“As explained in our letter to you and in our meeting with Ambassador Siddiqui, we were concerned about allowing a WTO-compliant tariff to expire without, in return, securing commitments from Brazil that it would remove its own government-imposed barriers to trade. Specificially, we argued that if the US was willing to remove its own perceived barriers, our nation should first work to make sure that trade will be free on both sides of the trade relationship. we subsequently raised the issue with Congress, suggesting that before they allow the tariff to expire, they should engage with the US Trade Representative to allow it to use our tariff expiration as a way of eliminating barriers in Brazil, included the scheduled reinstatement of their 20% from January 1, 2012.”

“Like many, we were pleased to learn that Brazil's Chamber of Foreign Trade, CAMEX, decided to extend the temporary waiver of their ethanol import tariff to 2015. However... we remain concerned that the decision was not really transparent or binding.”

“To our dismay, we learned last week that, while the waiver of Brazil's 20% tariff would remain in place, the state of Sao Paulo was re-imposing its own discriminatory, 25% state VAT tax on all imports into the state, while at the same time waiting the tax for domestic products.”

“By imposing an arbitrary and discriminatory tax against imports, the state of Sao Paulo is essentially imposing a tariff on almost all the products entering the country from the US. This is significant since Port Santos in Sao Paulo is the main port of entry for ethanol from the US.”

Urging US government support to place pressure on Brazil to revoke the tariff, the Association underscored that one third of the US's USD2.5bn ethanol exports in 2010 were exported to Brazil.

The association concluded by stating: "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 US. It is no doubt that this recent decision will result in the erection of another significant barrier to US ethanol exports to Brazil.”

source: tax-news