EU imposes blanket tariff on U.S. bioethanol

Fri Feb 22, 2013 8:20am EST

* Country-wide duty is unusual

* Fuel to be covered in potential EU-US trade pact

By Ethan Bilby

BRUSSELS, Feb 22 (Reuters) - The EU will place a duty on all U.S. bioethanol imports to the 27-nation bloc from Saturday, in a move that has prompted Washington to express "serious concerns" and that comes as both sides prepare to launch negotiations on a free-trade deal.

The European Union will levy a 9.5 percent tariff on all bioethanol coming from the United States, the bloc's Official Journal said on Friday, concluding a 15-month investigation that argued U.S. bioethanol was being dumped, or sold below cost.

Since most bioethanol is a component in blended fuel, the ruling sets a fixed charge of 62.30 euros ($82.38) per net tonne of bioethanol present in fuel.

Brussels says that U.S. incentives to produce clean fuels constitute an illegal subsidy under world trade rules, and have allowed U.S. producers to sell cheap fuel to Europe, an accusation rejected by U.S. producers.

But U.S. industry groups representing companies such as Valero Renewable Fuels, CHS, and Patriot Renewable Fuels, say they will challenge the ruling.

The United States is the largest producer of bioethanol, with the EU market worth about $3 billion in 2010. Overall shipments from the United States to the EU are worth more than 700 million euros ($925 million) a year.

A U.S. trade official said this week Washington had "serious concerns about a number of procedural and methodological irregularities that took place during the final stages of the (EU's) investigation".

The EU's decision comes 10 days after U.S. President Barack Obama announced his intention to try for a free-trade agreement with the European Union, something sought by EU leaders in search of economic growth.

The two sides plan to begin negotiating in June, with automotive fuel standards one of many issues up for discussion.

European demand for bioethanol has also been buoyed by official targets made to wean the bloc off fossil fuels and fight climate change. EU tariffs will apply to imports of U.S. bioethanol from August last year, when the EU began registering incoming fuel in preparation for possible duties.

UNUSUAL METHODS

EU bioethanol industry association ePURE, whose members produce 80 percent of Europe's bioethanol, complained to the Commission that tax credits in the United States allowed its exporters to cut their EU selling price by about 40 percent.

The group said that low prices helped grow U.S. imports to the EU, with levels 13 times higher in 2011 than in 2009, at roughly 1.2 billion litres.

"This decision represents a legitimate recognition of damage suffered by the European ethanol industry," ePURE head Rob Vierhout said of the ruling.

But the country-wide nature of the new duties is unusual, Brussels-based trade lawyers say.

The European Commission, the EU executive, usually imposes different anti-dumping duties on different producers, based on how greatly they are deemed to undercut the EU market with their pricing, a so-called injury margin.

In the EU's journal, the European Council, which represents the bloc's member states, said it needed to base its data on traders not producers, because bioethanol producers did not know whether their fuel would be shipped to the EU.

Since it was not possible to trace purchases from traders to individual producers, the Commission said, it decided to recommend country-wide duties. ($1 = 0.7563 euros) (Reporting by Ethan Bilby; editing by Andrew Roche)