Since August 2017, the U.S. ethanol industry has been in intense discussion with the Brazilian government about the country’s ethanol tariff rate quota (TRQ). On Dec. 14, 2020, the trade relationship became bitter when Brazil applied a 20 percent duty on all U.S. ethanol imports as a measure to protect the domestic industry after a difficult year of limited demand due to COVID-19 mobility restrictions.
Following the tariff imposition, the U.S. Grains Council undertook several strategies to reverse the decision, including approaching possible in-country partners that could share trade interests. The Council found a strategic ally in the Brazilian Association of Fuel Importers (ABICOM), which represents 85 percent of the fuel supply market.
After various meetings, ABICOM agreed to work with the Council to develop a formal request to the Brazilian Foreign Trade Chamber (CAMEX) to drop the 20 percent duty on U.S. ethanol imports as the best solution to alleviate supply shortages and the resultant price inflation in the north and northeast regions of Brazil.
ABICOM believed that by zeroing the duty, the country would guarantee a reduction of R$ 0.18 per liter ($0.15/gallon) in the gasoline prices at the pump. Once presented with the plea to the CAMEX, the Council helped the association reach the ministries involved in the decision to present its arguments, supported by its close relationship with key contacts in the Brazilian government. As a consequence, the Ministry of Economy performed its own analysis of the information provided, confirming the reductions in price ($0.16/gallon) and driving the Brazilian government to eliminate the duty on all ethanol imports until Dec. 31, 2022, as a measure to reduce inflation in the country.
Brazil is one of the largest ethanol export destinations for the U.S. ethanol industry, with 76 million gallons of ethanol purchased in 2021, valued at $153 million. With the elimination of the duty, it is expected that import levels will grow by 20 percent in 2022 over 2021 import levels.
In the past five years, the Council has invested $43,146 of USDA Market Access Program (MAP) funds and $116,431 of Agricultural Trade Promotion (ATP) program funds to support increased U.S. ethanol exports of $125.2 million, creating a return on investment (ROI) of $958 for every $1 invested.
About The U.S. Grains Council
The U.S. Grains Council develops export markets for U.S. barley, corn, sorghum and related products including distiller’s dried grains with solubles (DDGS) and ethanol. With full-time presence in 28 locations, the Council operates programs in more than 50 countries and the European Union. The Council believes exports are vital to global economic development and to U.S. agriculture’s profitability. Detailed information about the Council and its programs is online at www.grains.org.