Brussels Launches Probe into US Bioethanol Imports

30 November 2011

On Friday 25 November, the European Commission announced that it had begun anti-dumping and countervailing duty proceedings for US bioethanol imports. The Commission's investigations - informed by applicable WTO agreements - follow a formal complaint that was filed by the EU bioethanol industry association, ePure, last month.

"The EU has initiated anti-subsidy and anti-dumping investigations into imports of bioethanol from the USA to establish if US imports of bioethanol have an adverse effect on the European bioethanol industry," EU trade spokesman John Clancy said in a statement.

According to sources in Brussels, the case has been in the works for a long time. Most analysts there believe that sufficient evidence will be found to justify the imposition of countervailing duties.

In its original complaint, ePure - also known as the European Producers Union of Renewable Energy Association - alleged that US tax credits allowed American exporters to cut their EU selling price by about 40 percent, thereby illegally dumping into the EU market.

The industry association also claimed that this led to a 500 percent rise in US exports to the EU between 2008 and 2010. ePure expects that these imports will, in 2011 alone, have doubled from their 2010 levels.

"This impressive trend is the direct result of US federal and sub federal subsidies, which allow US operators to adopt aggressive pricing practices on the European market," the industry group argued.

While the ethanol aid is set to expire at the end of this year, US import share is expected to rise even further as the 27-member EU bloc faces higher production costs and production shortfalls.

ePure, whose members produce 80 percent of Europe's bioethanol, explained in their statement that the subsidisation policy has allowed the US to become the world's largest ethanol producer. The unfairly low prices that the producers can adopt as a consequence have had a direct and negative impact on the EU industry, the association argued.

US industry group strikes back

The ePure claims led to a strong rejection from its US counterpart, the US Renewable Fuels Association (RFA). "RFA has neither discovered nor been provided any evidence by the EU that such ethanol trades are occurring," the group said in a 2 November statement.

The US group further argued that the EU complaint was misguided, since "domestic ethanol producers are not eligible for the tax incentive referenced by the Europeans."

RFA added that the "tax incentive is specifically made available to gasoline blenders, marketers and other end users. Therefore, US ethanol producers cannot nor should be the focus of any European action."

Nonetheless, the US industry group responded to the EU ethanol investigation by guaranteeing co-operation between US producers and the EU - an important requirement under the WTO anti-dumping agreement.

This requirement means to ensure that responding exporters - in this case, US manufacturers - cannot keep investigations hostage by refusing to submit relevant information for the investigations. Otherwise, the investigating authorities may have to rely on incomplete information, which could work to the disadvantage of the exporters.

Brazil, a main ethanol producer and exporter, is expected to welcome the move, sources told Bridges. Lately the South American country has lost much of its EU market-share to the powerful US industry.

The European Commission's announcement comes at a time where the EU has repeatedly found itself under fire for its biofuels import policy. The EU Renewable Energy Directive, in particular the incorporated sustainability standards, are considered discriminatory and unfair by a number of biofuel-producing countries.

These standards qualify which biofuels may be considered "sustainable," taking into account greenhouse gas emission savings and biodiversity conservation achievements. Only the sustainable fuels are considered renewable energy, making them eligible for certain financial support by EU member states.

Countries' individual threshold commitments for the overall share of renewable energy that has to come from renewable sources- the highest being 49 percent in Sweden - also provide a strong incentive to only use sustainable biofuels. Moreover, for some biofuels imported from outside the EU, the Commission has not provided a default value, putting them at a disadvantage with EU produced like-products.

Further analysis of the EU Renewable Energy Directive is available in this 2010 ICTSD information note. ICTSD is the publisher of Bridges Weekly.

Next steps

The European Commission now has 15 months to address the complaint of "material injury" to European producers. Provisional findings are due by 24 August 2012.

According to WTO rules, after a preliminary determination deems that the imports are causing an injury and that countermeasures would be necessary to prevent further damage during the course of the investigations, provisional anti-dumping and countervailing duties can be applied for six and four months, respectively.

The investigation could result in the imposition of five-year taxes on US bioethanol producers. Back in 2008, the EU imposed five-year duties on imports of biodiesel from the US; in the following year, Brussels extended these duties to Canada.

ICTSD reporting; "EU Opens Dumping, Anti-Subsidy Probes into U.S. Bioethanol," BUSINESSWEEK, 29 November 2011; "EU opens investigation into U.S. bioethanol subsidies," REUTERS, 25 November 2011.

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