EU Imposes Temporary Import Duties on US Biodiesel

12 March 2009

US exports of biodiesel to Europe have surged, and represent the bulk of US production. Source: EBB. Click to enlarge.

The European Union is imposing temporary anti-dumping and anti-subsidy duties on imports of biodiesel from the United States. The measures will come into effect from 13 March and will be in place for four months while the investigation and contacts with stakeholders continue.

The level of the measures, which are applied together, is set at between €211.20 to €237.00 (US$271.22 to $304.35) per tonne for the anti-subsidy duties and between €23.60 and €208.20 (US$30.31 to $267.31) per tonne for the anti-dumping measures. At the end of this time, the Commission will make a final recommendation to EU member states on whether or not to impose definitive duties in this case, which if imposed would normally last for five years.  Provisional duties in anti-dumping and anti-subsidy cases are imposed by the European Commission, while definitive measures are imposed by the European Council.

After a thorough investigation based on the facts in this case, the Commission has today decided to apply temporary duties on imports of US biodiesel. Anti-dumping and anti-subsidy measures are not about protectionism, they are about fighting unfair trade. This decision was taken on the basis of clear evidence that unfair subsidization and dumping of US biodiesel has taken place, and that this is harming otherwise competitive EU industry, with potentially dire long term effects.

—Lutz Guellner, EU Spokesperson for Trade

Background. The EC launched an investigation into US biodiesel on 13 June 2008 following complaints received from EU industry. The EC said that its investigations confirmed evidence provided by the European Biodiesel Board (EBB) that US producers of biodiesel exported biodiesel to the Community at dumped prices, received countervailable US Federal (in particular tax credits) and State subsidies and that the exports of dumped and subsidized biodiesel were causing material injury to the biodiesel industry in the EU.

The US Volumetric Biodiesel Credit, signed into law in 2004 as part of the American JOBS Creation Act (H.R.4520), provides US biodiesel producers with excise tax and income tax credits to encourage the blending of biodiesel with petroleum diesel.

Both credit mechanisms apply without limitation in terms of biodiesel content. US biodiesel producers can therefore be subsidized up to $264 per m³ (i.e. approximately $300 per tonne) by adding only a “drop” of mineral diesel to biodiesel when releasing a “B99.9” blend for consumption. The benefit of the subsidy is not limited to biodiesel produced in the US for domestic consumption, but is also available upon export. As a result, a B99 “blend” can be exported to Europe where it is also eligible to existing national schemes supporting biodiesel production.

(The Joint Committee on Taxation of the United States Congress estimated that the biodiesel excise tax credit cost the US Treasury $50 million per year and the biodiesel income tax credit costs the US Treasury $100 million per year, in fiscal years 2007 and 2008.)

Because the blender’s credit benefit was not restricted to US consumption of biodiesel, the 2004 support provisions resulted in a surge of US biodiesel exports to the EU, representing a major and unfair competition for the domestic industry, according to the EBB. The EBB charged that in most cases, US biodiesel is sold in the European market with a substantial discount and very often at a lower price than the main vegetable oil raw material used for its manufacturing. The result, charged the EBB, has been the idling of a majority of European biodiesel production capacity.

On the issue of “splash and dash” practices, whereby biodiesel produced in third countries is imported into the US in order to avail of alleged subsidies, the US has removed the “splash and dash” element of the subsidy program.

During the investigation period (April 2007 – March 2008) US imports held a market share of 17% in Europe. In the same period the EU market for biodiesel was worth approx. €5 billion with imports from the US accounting for approx. € 700 million (total imports = approx. € 800 million). Imports from the US have increased significantly in recent years from approx. 7,000 tonnes in 2005 to more than 1 million tonnes in the investigation period.

Manning Feraci, Vice President of Federal Affairs for the US National Biodiesel Board (NBB), called the European action “a flawed decision.”

The imposition of provisional duties is nothing more than a politically expedient effort to appease the protectionist whims of the European biodiesel industry and is inconsistent with the European Union’s (EU) World Trade Organization (WTO) obligations. This sets a dangerous precedent for global commerce.

To comply with WTO rules, the EC must prove that harm is being caused to the EU industry before duties are imposed. This simply is not the case, and the EC has data before it clearly demonstrating that the European biodiesel industry has not been harmed by US competition. In fact, some EU companies have fared quite well. For those that have not, it is factors unrelated to US competition—bad business models; high feedstock costs; and detrimental EU member state policy—that are to blame.

Resources

• Commission Regulation (EC) No 193/2009 of 11 March 2009 imposing a provisional anti-dumping duty on imports of biodiesel originating in the United States of America

• Commission Regulation (EC) No 194/2009 of 11 March 2009 imposing a provisional countervailing duty on imports of biodiesel originating in the United States of America