Bloomberg News

EU Opens Dumping, Anti-Subsidy Probes Into U.S. Bioethanol

December 01, 2011

(Updates with comment from commission spokesman in second paragraph.)

Nov. 25 (Bloomberg) -- The European Union is threatening to impose duties on imports of bioethanol from the U.S., saying American sellers may be using trade-distorting government aid to sell in the EU below cost, a practice known as dumping.

“The EU has today initiated anti-subsidy and anti-dumping investigations into imports of bioethanol from the USA to establish if U.S. imports of bioethanol have an adverse effect on the European bioethanol industry,” said John Clancy, a spokesman at the European Commission in Brussels.

The probes, based on Oct. 12 complaints by the European bioethanol industry represented by the European Producers Union of Renewable Ethanol Association, or ePure, may result in extra taxes on U.S. producers such as Poet LLC, Archer Daniels Midland Co. and Valero Energy Corp. Provisional findings are due by Aug. 24, 2012, Clancy said.

Ethanol is a form of alcohol distilled from grain or sugar that boosts the oxygen content of fuel so it burns more thoroughly, reducing polluting emissions. The additive also enhances engine performance and extends fuel supplies.

“Generous” federal excise-tax and income tax credits and aid at “all levels of government” helped the U.S. become the top ethanol producer as output fell in Brazil, once the largest exporter, ePure said in a Nov. 2 statement. The lobby represents 21 ethanol producers including Sued-Chemie AG and Tereos Internacional SA’s French unit and 26 companies in the ethanol value chain such as DuPont Co. and Novozymes A/S.

EU Shortage

The U.S. is benefiting from higher costs and production shortfalls in Europe, where output is about 165 million gallons (625 million liters) short of the 2.45 billion gallons that drivers are mandated to use this year, according to Bloomberg New Energy Finance.

International traders are shipping ethanol blends to Europe to take advantage of the EU’s lower tariff and a U.S. tax incentive for ethanol blending, ePure said. U.S. exports of ethanol to Europe climbed more than 500 percent from 2008 to 2010 and probably doubled this year from last, ePure said.

Federal tax breaks for ethanol and other renewable fuels were worth $6.3 billion in 2010, according to the Congressional Research Service. While the ethanol aid is due to expire at the end of this year, manufacturers are set to thrive as a government mandate for increased use of the fuel may add $6.9 billion a year in sales.

Tax Break

The U.S. subsidizes the ethanol industry with a 45-cent tax break for every gallon added to fuel. The tax break makes it profitable to blend ethanol with wholesale gasoline when the margin is less than 45 cents.

The 209 ethanol refineries in the U.S., the biggest consumer and importer of the fuel, produced a record 13.2 million gallons last year, according to the Renewable Fuels Association. Daily production averaged 911,000 barrels, or 14 billion gallons on an annualized basis, in the week ended Nov. 4, the Energy Department said.

After the start of a probe, the commission can impose provisional anti-subsidy levies for four months and provisional anti-dumping tariffs for six months. The EU’s 27 national governments, acting on a commission proposal, can turn those measures into “definitive” five-year levies at the same or different rates.

--Editors: Randall Hackley, Alex Devine

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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