European Union Tariffs On U.S. Biodiesel
Regulators in the EU have moved to impose permanent tariffs on the importation of US biodiesel, after finding that US government tax credits given to American producers are offering them an unfair advantage over their competitors in Europe. A trade committee of the EC, or European Commission, a body that over sees the trade policy of the European Union’s twenty-seven nations, is calling for an extension of the anti-subsidy and anti-dumping duties currently imposed on imports of US biodiesel. This would last for five years, and affect companies including World Energy Alternatives, Peter Cremer North Americal, Imperium Renewables, Green Earth Energy Fuels, Cargill, Archer Daniels Midland, and at least fifty other companies.
Provisional tariffs were imposed by the trade committee as of March 13, 2008 and range between $38.83 and $342.54 per metric ton for anti-dumping measures and $347.48 and $389.93 per metric ton for anti-subsidy duties. This action has been protested strongly by the affected US biodiesel industry, since American producers are already dealing with tough market conditions caused by lowered fuel prices. US output in March has been reported to have fallen to only thirty million gallons – about fifty percent behind levels in 2008.
The tariffs in the EU are the result of a complaint about importation of US products by the European Biodiesel Board, or EBB, which was filed in April of 2008. This board represents more than seventy companies – about eighty percent of producers in the EU. The EBB maintains that producers in Europe are harmed by subsidies of biodiesel common in the US, including tax credits for federal excise taxes and income tax, in addition to the federal grant program to finance increased production. Subsidy programs offered at the state level were also cited.
The trade commission affirmed the position of the EBB, and launced the investigation formally in June of 2008. It now seeks approval of the application of permanent tariffs by member states of the EU at a meeting of the Union’s anti-dumping comittee. According to the EBB, importation of biodiesel from the US increased from around seven thousand metric tons in 2005 to about a million metric tons in 2007. The US imports accounted for about seventeen percent of the European market during the period between April 2007 and March 2008.
In the past two years, fifteen or more producers of biodiesel in Europe have gone out of business, and others are cutting back production, according to the EBB. The body said that the EU biodiesel production industry is currently running at around forty percent of its total capacity. The US biodiesel market was said to be fully export driven, according to the EBB in a background note published along with its complaint to the commission. Newspapers in the US acknowledges that about eighty percent of biodiesel produced in the US is exported – mostly to Europe.
The EBB emphasized that biodiesel blended with conventional diesel fuel receives a dollar credit per gallon under United States law, via an income tax credit and an excise tax credit, and that these credits apply no matter how much biodiesel is in the blend. These subsidies apply to blends which are exported to Europe, where additional national schemes supporting the production of biodiesel also apply. According to producers in Europe, these subsidies explain the surge in exports of blends from the US. It has been estimated that one and a half million metric tons were exported to the European Union in 2008.
According to Manning Feraci, vice president for federal Affairs of the US National Biodiesel Board, or NBB, the EU used arbitrary procedural conclusions and market assumptions that were not accurate to impose these provisional duties. The NBB also stated that the producers from the EU which are alleging harm in these complaints have actually increased market share by nearly six percent, and posted a profit of 5.7 percent. This percentage is considered healthy by industry standards.
The problems supposedly facing the industry in Europe have nothing to do with exports from the US, according to Feraci. A more expensive feedstock is used by members of the EBB, which causes the process to be more costly for them, he states. The cost of that feedstock has gone up recently. According to industry officials, production in the US is done primarily from soybean oil, while production in Europe is mostly based in European grown canola oil.
A spokesperson for the US Trade Representative was unwilling to comment on the EU action specifically, but stated that it is preferable to encourage expansion of the biofuels industry via cooperation rather than imposing definitive measures.
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