Congress Extends Ethanol Tariff

The Omnibus Tax bill passed by both the U.S. House of Representatives and the U.S. Senate on Dec. 8 contained legislation extending the 54-cent/gal. U.S. tariff on imported ethanol until 2009.

The tax was set to expire in October 2007, but will continue to be imposed until January 2009, U.S. Sen. John Thune, R-SD, tells the Associated Press.
Thune says the tariff encourages domestic ethanol production, discourages dependence on foreign energy and keeps other countries from competing with U.S. production.

“They can already get a certain amount in. But this at least will ensure there will not be a huge flood of imported ethanol coming in from Brazil or someplace else when we're trying to nurture this industry,” Thune tells the AP.

Brazil is a leading producer of ethanol and presumably would be the source of more U.S. imports, although Brazil has its own gasoline supply concerns and it's uncertain how much additional fuel it would be able to provide.
Republican and Democratic farm state members of Congress who pushed for the tariff extension went against the wishes of President George W. Bush, who earlier this year supported at least a temporary reduction of the import tax on ethanol in order to ensure sufficient U.S. ethanol supplies.

According to a column that ran in the Dallas Morning News Dec. 6, Under Secretary of State Nicholas Burns says the administration wanted to drop the tariff on ethanol as one way of improving relations with Brazil.
Thune says the problem isn't a shortage of ethanol but of transportation. “I don't think there's going to be a supply issue. The one thing we have to develop is the distribution system,” he says.

The ethanol industry applauded the tariff extension. “Congress has delivered a clear and powerful message that it is in the best interest of the United States to continue supporting the domestic ethanol industry,” says Brian Jennings, Executive Vice President of the American Coalition for Ethanol, a non-profit organization representing the ethanol industry.

“Removing this tariff offset would have paved the way for U.S. dollars to be wired to Brazil, with American taxpayers subsidizing already-subsidized foreign ethanol,” Jennings adds in a news release. “In addition, abandoning the tariff would indicate to lenders and investors that the U.S. is abandoning its commitment to a domestic ethanol industry. Such a move would have sharply curtailed the growth of an American renewable fuels industry that has the potential for enormous benefits to the nation’s economy, environment and energy security.”

Editor’s note: Richard Brock, The Corn And Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.