March 01, 2008

ASA considers trade challenge to biodiesel export tax

If differences can't be resolved through the Doha Round negotiations for a new World Trade Organization agreement, the American Soybean Association is considering a legal challenge against Argentina's export tax system, which the U.S. producer group considers an unfair subsidy for that nation's biodiesel exports.

The Argentine export tax system favors biodiesel with lower export taxes for the fuel than for exports of raw soybeans, ASA's president, John Hoffman of Waterloo, Iowa, told Agriculture Online.

"Right now there's a huge advantage for crushers down there to export biodiesel," Hoffman said. It amounts to $1.11 per gallon of biodiesel. Hoffman said it's so profitable, that soybean crushers in Argentina are importing soybeans from Brazil and Paraguay.

The worst part about this is because of the fact that there is no import tariff on biodiesel it leads to a unique situation of our government subsidizing biodiesel heading to Europe.

On the way, tankers of biodiesel stop by U.S. Gulf Coast ports, where as little as one percent petroleum diesel is blended in. That qualifies a load of biodiesel for the $1 dollar a gallon biodiesel tax credit intended for U.S. producers, said ASA spokesman Bob Callanan. That so-called "splash and dash" adds another $1 in subsidies, paid by U.S. taxpayers, for South American biofuel bound for Europe.

The ASA has been leading the efforts to get this tax loophole closed.

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This also raises the question that if the tariff on ethanol were abolished as some have requested, would the same issue occur with foreign produced ethanol?

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