Brazil "temporarily" lifts ethanol tariff, baits trade hooks

In a gesture to improve biofuel trade relations with the U.S. and other countries, Brazil's Council of Ministers of the Board of Foreign Trade (MDIC) has temporarily lifted the country's tariff on imported ethanol, changing the tax rate from 20 percent to zero percent. The tariff will be lifted through the end of 2011.

Marcos Jank, President and CEO of The Brazilian Sugarcane Industry Association (UNICA) said removing the tariff was a major step forward in building a global biofuels marketplace:

UNICA believes that free trade is a two-way street and Brazil, as the largest producer of cane ethanol and largest exporter of ethanol in the world, with 60% of the global market, will lead by example and eliminate barriers to renewable, clean fuels. We hope this move will encourage other countries around the world to develop open, free markets for clean, efficient renewable fuels such as ethanol.

So why is the world's largest producer of ethanol trying to make it easier for other countries to sell ethanol within its borders? The answer lies within the United States' trade policy.

UNICA has made it clear to the Brazilian government it hopes the tariff reduction is permanent, particularly should "other countries" reduce their tariffs on ethanol imports. The Brazillians are quite aware that the hefty U.S. tariff on imported ethanol expires at the end of this year. So it appears they're opening up their market in the hopes the US will do the same.

The United States imposes two duties on ethanol imports: a 2.5 percent ad valorem tariff plus an additional "other duty or charge" of $.54 per gallon. According to data from the US International Trade Commission (ITC), the combined duties have amounted to about a 30 percent tariff on ethanol imports. Anybody wanna guess what the tariff is on imported oil? According to numbers on the website for the United States International Trade Commission, its about $1.05 per barrel.

[SOURCE: Green Car Congress]