RS21930 - Ethanol Imports and the Caribbean Basin Initiative
18-Mar-2008; Brent D. Yacobucci; 6 p.
Update: Previous Releases:
April 24, 2007
June 2, 2006
March 10, 2006
Abstract: Fuel ethanol consumption has grown significantly in the past several years, and it will continue to grow with the establishment of a renewable fuel standard (RFS) in the Energy Policy Act of 2005 (P.L. 109-58) and the expansion of that RFS in the Energy Independence and Security Act of 2007 (P.L. 110-140). This standard requires U.S. transportation fuels to contain a minimum amount of renewable fuel, including ethanol.
Most of the U.S. market is supplied by domestic refiners producing ethanol from American corn. However, imports play a small but growing role in the U.S. market. One reason for the relatively small role is a 2.5% ad valorem tariff and (more significantly) a 54-cent-per-gallon added duty on imported ethanol. These duties offset an economic incentive of 51 cents per gallon for the use of ethanol in gasoline. However, to promote development and stability in the Caribbean region and Central America, the Caribbean Basin Initiative (CBI) allows the imports of most products, including ethanol, duty-free. While many of these products are produced in CBI countries, ethanol entering the United States under the CBI is generally produced elsewhere and reprocessed in CBI countries for export to the United States. The U.S.- Central America Free Trade Agreement (CAFTA) would maintain this duty-free treatment and set specific allocations for imports from Costa Rica and El Salvador. Duty-free treatment of CBI ethanol has raised concerns, especially as the market for ethanol has the potential for dramatic expansion under P.L. 109-58 and P.L. 110-140.