European Commission Proposes Duties on Imports of US Biofuels

30 January 2013

The European Commission (EC) has proposed anti-dumping duties of 9.5 percent on US fuel ethanol imports for five years, following an internal investigation. The planned anti-dumping duty seeks to protect Europe's domestic bioethanol industry from low-priced imports by increasing the effective price of the imported ethanol. The duty - if adopted by the bloc's 27 member states - would be applied across the board to all US producers of ethanol exporting to the EU.

The EC report found that the surge in low-priced imports from the US stalled the European Union's bioethanol industry by decreasing profits and seriously affecting the industry's ability to raise capital and attract investment. "Exporters from the [US] managed to increase their market share by systematically undercutting European Union industry's prices," the Commission proposal said.

From October 2010 to end-September 2011 - the official period during which the EC investigated the possibility of imposing duties - imports of US ethanol catapulted from a 1.9 percent market share to 15.7 percent of the EU market. Volume grew ten-fold to 686,185 tonnes. The United States is the single largest foreign source of ethanol for the EU. The only other substantial supplier is Brazil, but during the investigation period their market share in the EU shrank from 30.3 percent to 4.5 percent.

The EC investigation began in October 2011 in response to a complaint lodged by ePURE, an association of European producers that together constitute more than 25 percent of the EU's total ethanol output.  ePURE complained that their prices and market share were eroding because of the growth in low-priced US ethanol imports.

The European Commission has recommended that the European Council adopt the proposal for implementing these duties no later than 22 February.

US, industry groups respond

"It is a positive outcome for the EU industry because European ethanol producers have been unfairly undermined by the dumping of US ethanol on the EU market," Rob Vierhout, Secretary General of ePURE, said in response to the European Commission plan.

The United States, meanwhile, has strongly objected to the proposed import duties.  "We are disappointed in this outcome," said Nkenge Harmon, a spokeswoman for the Office of the US Trade Representative (USTR).

"I will add that we have serious concerns about certain procedural and methodological aspects of the investigation," she continued in a statement to Agri-Pulse.

The Renewable Fuels Association, a US lobbying organisation that promotes the use of ethanol fuel, has also expressed dismay at the proposed duties.

"This decision is unprecedented. Not only does it fly in the face of over 30 years of consistent practice by the EC, but it also violates numerous provisions of the WTO's Agreement on Antidumping," Rob Dinneen, President of RFA, has said.

Long-standing tensions

However, this is not the first time Brussels has slapped duties on imports of US alternative fuel. In 2009, the EU imposed both anti-dumping and anti-subsidy duties on imports of US biodiesel for a period of five years. (See Bridges Weekly, 4 March 2009). At issue was a US tax credit of US$1 per gallon of biodiesel produced, which caused European producers to lose market share, according to the EC investigation.

The EC had also recently been conducting an anti-subsidy investigation into US ethanol imports, but concluded in December 2012 that the various American subsidy and tax credit schemes, many of them state programmes, were being phased out. Further, the subsidies that were still in place in the US were considered insignificant. The report concluded that, accordingly, no anti-subsidy measures would be initiated.  However, the EC left open the possibility for anti-subsidy duties to be implemented down the line if the US restarted its main subsidy scheme, a tax credit that expired in 2011.

As Washington and Brussels spar to bolster their respective biofuel industries, both countries have also been a target for criticism for their role in price spikes for food in the developing world. The US now devotes 40 percent of its corn crop to biofuel production.

These oft-criticised biofuel mandates are seen as a way to reduce reliance on foreign oil and reduce carbon emissions. Recent research suggests, however, that the once-touted environmental benefits of biofuels are negligible. Still, European vehicle fuels will need to contain 10 percent biofuel as a part of Brussels' 2020 targets.

This past October, in response to food security and environmental concerns, the EC proposed an amendment calling for a maximum of five percent - half of the target - to come from first-generation biofuels, ones made from food crops. (See Bridges Weekly, 19 September 2012) The other half would need to come from second-generation biofuels - ones that do not directly require cropland - such as those generated from feedstock or waste products.

ICTSD reporting; "USTR, U.S. Ethanol Groups Lash Out at EU Anti-Dumping Duty Plan," AGRI-PULSE, 24 January 2013; "Europe Needs Stable Legal Framework for Biofuels to Prosper," PLATTS, 22 January 2013; "UPDATE 1-U.S. 'disappointed' with proposed EU duties on ethanol," REUTERS, 23 January 2013.

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30 January 2013
30 January 2013
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