RFA Pushes to Keep Import Tariff
Submitted by DTN Ethanol Blog
By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) — While U.S. Energy Secretary Sam Bodman said Tuesday that the U.S. ethanol industry was close to standing on its own and may no longer need import tariffs, one industry spokesman said the tariffs are still needed to keep the industry competitive with the likes of Brazil.
A Reuters story Tuesday reported that the president may propose changing the 54-cent-a-gallon tariff on U.S. ethanol imports as part of the White House’s 2009 budget.
Matt Hartwig, spokesman for the Renewable Fuels Association, the ethanol industry’s largest representative, said those people who want to remove the tariff are missing the point.
“I’m not sure what Secretary Bodman was talking about,” Hartwig said. “Anything having to do with the tariff must be addressed by Congress. The administration has absolutely no say in the matter.”
Brian Jennings, executive vice president of the American Coalition for Ethanol, said that eliminating the tariff could only make matters worse for a slumping U.S. economy.
“I don’t believe there is any real support in Congress to eliminate or reduce the tariff,” he said. “With the U.S. economy feeling the effects of a slowdown, eliminating the tariff would only serve to add to the jobless numbers here at a time when we can least afford it.”
Groups like the RFA and ACE are opposed to removing the tariff for fear that U.S. ethanol producers would not be able to compete with lower-cost producers in Brazil.
On average, Brazilian ethanol producers who use sugarcane as a feedstock pay 30 to 40 percent less to make ethanol than U.S. producers who use corn.
Hartwig said RFA is opposed to removing the tariff for two basic reasons.
First, he said the RFA doesn’t believe that “American taxpayers should be forced to subsidize” foreign ethanol industries, particularly in countries like Brazil which have provided a wide range of government supports for more than 30 years.
“Brazilian ethanol, for example, qualifies for the same (51-cent blender’s tax credit) as ethanol from Nebraska,” he said. “Congress put the tariff in place simply to reclaim that tax incentive. It is really that simple.”
Congress recently passed the 2007 Energy Act that mandates the use of 36 billion gallons of ethanol and other biofuels by 2022, including 21 billion gallons from cellulosic ethanol.
Some think that removing the import tariff would make it easier for ethanol blenders to meet the new mandate by providing ethanol volumes above and beyond what U.S. companies produce. The tariff on ethanol imports is scheduled to expire at the end of this year, while the blender’s credit is good through 2010. Some federal lawmakers have proposed cutting the 51-cent credit to 46 cents.
Hartwig said that by removing the tariff “we would be sending a signal to the investment community that we are not serious about a domestic industry that can realize its full potential. That includes large-scale production of ethanol from cellulosic feedstocks.”
Without the tariff, he said, investors might choose to spend money on projects in Brazil where “labor standards and deforestation are serious problems.”
Hartwig said it all comes down to how committed the U.S. is to developing a domestic renewable fuels industry. “And if we are not,” he said, “then this administration and members of Congress who support eliminating the tariff must explain to their constituents why they feel it’s necessary to send hundreds of millions of taxpayer dollars to the sugarcane fields of Brazil.”
Hartwig said the tariff has nothing to do with the U.S. ethanol industry being able to stand on its own.
“It’s a matter of a level playing field,” he said. “And when you are both competing with and selling into the nation’s well-heeled and established petroleum industry, it’s hardly a level playing field. The tariff issue has nothing to do with domestic ethanol production or its viability. It has to do with determining how we use U.S. taxpayer dollars.”
Hartwig said RFA — which is the industry representative in Congress for hundreds of U.S. ethanol producers — will be working with Congress and making the case as to why the tariff should remain.
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