Washington, DC 20510
Dear Senator Reid:
We respectfully request that Congress continue the tariff on imports of ethanol which expire at the end of this year. Congress is considering reforming the ethanol industry and there have been several bills introduced which would include removing the tariff.
The tariff is vital to our industry. Our industry was created by the Caribbean Basin Initiative (CBI) and has been heralded by the US International Trade Commission as the success story of the CBI in their reports on the impact of the CBI on the US economy. Also, it has been extremely beneficial to the fragile economies in the Caribbean Basin.
Our industry consists of eight plants in the region located in Jamaica, Trinidad, El Salvador, Costa Rica and the US Virgin Islands. Some have substantial American investment and ownership. There has been more than $200 million invested in this industry and done in response to the policy of the US Congress and successive administrations encouraging the region to diversify its economies by offering tariff free treatment on their exports. We have shipped more than 1 billion gallons of our advanced bioethanol to long standing customers in the United States. Our advanced biofuel helps bridge the shortfall between still emerging domestic production and the RFS 2 mandate for this type of biofuel; without threatening the domestic ethanol industry.
Without the tariff, which provides us a level playing field with Brazil, our industry would literally collapse and disappear. Nearly 700 million gallons of production capacity, thousands of jobs and millions of dollars of foreign exchange would be wiped out. This is because Brazil, with its ethanol subsidies, would ship directly to the US market and we no longer would have the source of raw material necessary for our plants. Unlike the Brazil government, Caribbean Basin governments provide no subsidies to their ethanol industry. The tariff is WTO compliant despite Brazil’s objections; according to the US Special Trade Representative.
The ethanol industry in the United States would also be hurt by the elimination of the tariff. A study done last year for a coalition of U.S. ethanol producers by the University of Missouri concluded that eliminating the tariff would weaken the US economy and cause “extreme job losses”. It concluded that “if the tariff onforeign ethanol is allowed to lapse, billions of dollars in economic activity would be lost” with 28 states being the hardest hit across the manufacturing, finance and agriculture sectors. The study found year-to-year job losses go from 39,506 in the first year after the tariff lapses to 161,384 in the third year and continue year after year. The decline in economic activity after the tariff lapses would start at $9.2 billion in the first year, reach $36.7 billion the third year and remain in double digits.
For these reasons, the CEO of a coalition of American ethanol producers, in a letter to Congress said, “we urge Congress to move rapidly to maintain the tariff.” The coalition of Caribbean Basin ethanol producers also urges Congress to maintain the tariff to preserve our industry as well as the integrity of the Caribbean Basin Initiative and CAFTA.
USDA Secretary Vilsak urged Congress in testimony earlier this month to keep the tariff.
The tariff provides revenue. It is not a cost to the U.S. taxpayer. Tariff revenue from ethanol imports was more than $450 million during the recent period, 2006 to 2009; according to US Department of Commerce trade data. Although most of this was rebated under the jet fuel duty drawback scheme, millions of dollars stayed in the US Treasury.
Legislation pending in Congress would extend the tariff in full for another five years. Section 301 of S.559 (Securing Americas Future with Energy and Sustainable Technologies Act) introduced by co sponsors Klobuchar and Johnson on March 11 of this year would extend the tariff through January 1, 2016. Likewise, HR 4940 (Renewable Fuels Reinvestment Act) introduced last year in the House Ways & Means Committee would extend the tariff through January 1, 2016. Earlier this year, Senators Feinstein, Collins and Webb introduced S. 530 which would extend the tariff for advanced biofuels. Ethanol from the Caribbean Basin is classified by EPA as an advanced biofuel per Sec 211(o) of the Clean Air Act. Our greenhouse gas emissions are 61% less than gasoline.
Since Congress will be considering a bill to reform the ethanol tax credit, we request this bill include a provision to continue the tariff. We suggest the same language contained in Section 301 of S. 559, “extension of additional duties on ethanol”, which is:
“Headings 9901.00.50 and 9901.00.52 of the Harmonized Tariff Schedule of the United States are each amended in the effective period column by striking “1/1/2011” and inserting “1/1/2016.” Thank you for your consideration.