Brazil’s Ministry of Economy announced Tuesday that beginning Wednesday, Brazil will suspend its 18% tariff on ethanol imports for the rest of 2022 in an inflation-cutting effort to reduce fuel prices domestically.

“The goal is to increase the productivity and competitiveness of the Brazilian economy by reducing the costs involved in the import of strategic products,” the Ministry said in a statement.

U.S. farm and fuel groups lauded the move.

“We are pleased to see the temporary elimination of the 18% tariff, which should improve access for Brazil’s ethanol consumers as well as help meet its own decarbonization goals,” U.S. Grains Council President and CEO Ryan LeGrand, Growth Energy CEO Emily Skor and Renewable Fuels Association President and CEO Geoff Cooper said in a statement. “This is an issue we have been working on for a number of years in meetings and correspondence with officials from Washington to Brasilia.”

U.S. and Brazilian trade officials clashed repeatedly during the final months of the Trump administration about access to the ethanol market in Brazil, where consumers depend on fuel with high levels of ethanol that is made from sugarcane there.

A Brazilian tariff rate quota that allowed 198 million gallons of U.S. ethanol to avoid Brazil’s 20% tariff annually expired on Aug. 31, 2020, despite U.S. efforts to convince Brazil to keep it in place. The Brazilians then issued a short 90-day extension, but that also expired after negotiators failed to reach an agreement.

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Brazil had been demanding increased access to the U.S. sugar market during negotiations, government sources told Agri-Pulse during those negotiations more than two years ago, and the U.S. did appear to budge on that request. The USDA increased its TRQ for sugar imports on Sep. 10, 2020, and then the USTR allocated almost all of that quota increase to Brazil.

But the overall ethanol negotiations failed, and Brazil allowed the 20% import tax to be reinstated in December. About a year later Brazil quietly lowered the tariff to 18% with little explanation.

The U.S. farm and fuel groups say they don't want to see the tariff repeal end in December.

“We will continue to pursue a long-term, open and mutually beneficial ethanol trading relationship with Brazil as we work to make this temporary reduction permanent,” LeGrand, Skor and Cooper said. “We look forward to continuing to work closely with USDA and USTR to return to a fair and reciprocal trading relationship with Brazil regarding ethanol."

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