Vietnam Reduces MFN Tariff Rate On Ethanol, Boosting U.S. Competitiveness

Vietnam has revised the Most-Favored-Nation (MFN) tariff on ethanol, reducing it from 15 to 10 percent. The new tariff rate, issued in Decree 26/2023/ND-CP, went into effect on July 15, 2023. The new rate applies to both undenatured and denatured ethanol.

“This tariff rate reduction will immediately increase the competitiveness of U.S. ethanol in Vietnam,” said Chris Markey, U.S. Grains Council’s (USGC’s) assistant regional director for Southeast Asia & Oceania (SEA&O).

The previous 15 percent import tariff put U.S. ethanol on an uneven playing field relative to other octane boosters, such as methyl tert-butyl ether (MTBE) and benzene, and preblended gasoline – petroleum products with carbon intensity scores nearly 50 percent higher than U.S. corn ethanol.

The tariff rate reduction was the culmination of Council programming and coordination with the U.S. Department of Agriculture’s Foreign Agricultural Service (USDA’s FAS) over the past two years. Initially 20 percent for both denatured and undenatured ethanol, the MFN tariff was reduced to 15 percent in 2020 following close engagement with the government of Vietnam.

“Since 2018, U.S. ethanol, by supplementing domestic ethanol production, has played an important role in expanding ethanol use in Vietnam as the country moves to decarbonize its road transportation sector. We commend the government of Vietnam for continuing to support the expanded use of fuel ethanol, and for its commitment to freer and fairer trade,” Markey added.

A lower tariff rate will help further spur the expansion and use of fuel ethanol across Vietnam, particularly as Vietnamese motorists increasingly switch to higher octane gasoline grades and Vietnam’s government mulls a potential expansion of the current E5 RON92 mandate to all grades of gasoline. USGC, which in 2020 signed a memorandum of understanding (MOU) with the Vietnam Ministry of Industry and Trade to collaborate on expanding fuel ethanol use in the country, continues to work with the Vietnamese government on strategies to further promote the use of ethanol and develop the county’s biofuel industry.

Vietnam consumes roughly three billion gallons of gasoline per year, with consumption forecasted to grow at a double-digit rate until 2030. Approximately 17 million gallons of U.S. ethanol were shipped to Vietnam in 2022, predominantly via the transshipment point of South Korea. The Council is working closely with its Vietnamese counterparts to move toward an expansion of Vietnam’s current E5 RON92 mandate to all grades of gasoline, which would create a 95-million-gallon export market for U.S. ethanol.