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Renewable Fuels Association critical of small Brazilian ethanol quota

The Renewable Fuels Association’s legal expert says the weekend deal increasing the amount of U.S. ethanol allowed into Brazil without tariffs is nowhere near what it should be.  Ed Hubbard tells Brownfield getting a 40-million-gallon increase in the tariff quota is not much when compared to total sales. “When you are adding a 20% tariff on anything above 600-million liters annually, there’s significant product, more than a billion liters were taxed at the 20% tariff rate.”

Hubbard says with the previous two-year tariff rate quota expiring over the weekend, the U.S. was put in a situation where they had to accept Brazil’s last-minute offer to avoid immediate 20% tariffs on all American ethanol.  “It’s extremely challenging, one, like I said, when we were told this is only temporary, and two, when the volume of it is not increased to reflect actual trade flows that have been occurring more recently so ultimately, all you’re seeing is profit margins being transferred from the industry to Brazil’s treasury.”

Hubbard says Brazilian sugar producers in the north have pushed their government to maintain the 20% tariffs and want more access for sugar in the U.S. if ethanol tariffs are lowered.  He says sugar cane is to Brazil what corn is to the U.S. for ethanol production.

Hubbard is hopeful a more permanent tariff-free trade deal can be made soon.

“It is an increase, but it’s so far below what the previous estimate was. All that ultimately does is take away any sort of profit margins that we have and drive up prices for Brazilian consumers.”