European Union: US Ethanol Subject Of New European Commission Investigation

A complaint has been lodged by the European Producers Union of Renewable Ethanol Association (ePURE) in October 2011, pursuant to Article 10 of the Council Regulation (EC) No 597/2009 of 11 June 2009 and Article 5 of the Council Regulation (EC) No 1225/2009 of 30 November 2009 ('the basic Regulation'). On 25 November 2011 the European Commission published notices of initiation of anti-dumping and anti-subsidy proceedings concerning imports of bioethanol from the United States.

Under Council Regulation (EC) No 2026/1997 the European Commission has powers to impose protection against subsidised imports from countries not members of the European Community, in the form of duties. Under Council Regulation (EC) No 3283/1994 the European Commission has similar powers to impose protection against dumped imports. This policy is based on principles found in the General Agreement on Trade and Tariffs of the World Trade Organisation. The Commission investigates, on average, 30 new anti-dumping matters each year.

The European Producers Union of Renewable Ethanol Association is in effect a trade association of European producers. The crux of their members' complaint was that US Government and State subsidies were allowing US producers and traders in bioethanol to import into the EU and to undersell producers in the EU. The State schemes specifically mentioned in the Commission's notice are: the Illinois E85 infrastructure grants, the Illinois biofuels production facility grants, the Iowa biofuels infrastructure grants, the Iowa alternate energy revolving loan program, the Minnesota cellulosic ethanol investment tax credit, the Minnesota E85 fuelling infrastructure grants, the Nebraska ethanol production tax credit and the South Dakota ethanol production incentive. These schemes resulted in substantial adverse effects on the overall performance and financial situation of EU producers.

Please note that there was an investigation into anti-dumping and anti-subsidy in the biodiesel market in 2009, during which similar issues arose. Brought about by a complaint lodged by the European Biodiesel Board, the investigation began because the US government had been providing a $1 per gallon subsidy on biodiesel. As a result, the Commission published regulations which imposed both anti-dumping and anti-subsidy duties.

In this case, having advised all interested parties in the USA and the EU at the outset of the investigation, the Commission will use a sample of EU and US producers which have been invited to the Commission's initial communications to work out the "injury" being caused to the EU industry as well as to calculate the specific figures for the subsidy margins and dumping margins. The sampling will be conducted in accordance with Articles 17 and 27 of the basic Regulation.

To establish subsidy and dumping margins, all exporting producers are requested to make themselves known to the Commission within 15 days, by providing the following information:

  • Name, address, e-mail address, telephone and fax numbers and contact person,
  • Turnover in US dollars and the volume in tones of bioethanol sold for export to the Union during the period 1 October 2010 until 30 September 2011 for each of the 27 Member states, separately and in total
  • Turnover in US dollars and volume in tones of bioethanol sold on the domestic market during the period 1 October until 30 September 2011
  • Details of the precise activities of the company worldwide with regard to bioethanol
  • The names and precise activities of all related companies involved in the production and/or sales of the product under investigation
  • Any other relevant information that would assist the Commission in the selection of the sample

Similar information is also requested from unrelated importers.

The injury margins determined by the Commission for the sampled companies are based on positive evidence of the following: the volume of the subsidised/dumped imports; the effect of the subsidised/dumped imports on prices in the Community market; and the consequent impact on the Community industry.

Where parties refuse to provide information within the aforementioned time limits, or significantly impede the investigation, provisional or final findings may be made on the basis of the facts available, in accordance with the basic Regulation. If an interested party does not cooperate or cooperates only partially, and findings are based on facts available, the result may be less favourable to that party than if it had cooperated. Cooperation in the investigation can have a significant effect on the amount of duty payable. For example, as a result of a 2009 biodiesel investigation, Peter Cremer North America LP were ordered in 2009 to pay €198.00 per tonne, whilst Cargill Inc. paid no anti-dumping duty.

As a result of the investigation, once completed, it is possible that anti-subsidy and anti-dumping duties are imposed by the Commission. However, anti-dumping duties have often been limited due to the Commission's approach of not allowing the anti-subsidy duty and anti-dumping duty combined to exceed the injury margins established.

The coming months are absolutely crucial in the development of this matter from both a producer's and a trader's point of view. It should be noted that provisional anti-subsidy and anti-dumping duties have been imposed recently (such as the case where regulations imposed duties on imports of ceramic tiles from China - OJ L143 258/2011 of 16/03/2011.) In this case, the regulations entered force on 16 September 2011 for a period of five years. These duties range from 26.3% to 36.5% for more than 100 Chinese companies which cooperated with the investigation and which represent the majority of Chinese exports to the EU. A duty of 69.7% applies to all other Chinese tile-exporting companies.

Should anti-subsidy and anti-dumping duties be imposed, they will be collected by the national customs administration and forwarded to the European Union. These import duties are part of the own resources of the European Union. The national customs administration can withhold 25% of all collected duties to finance their own costs.

The bioethanol investigation will be concluded within 13 months for the anti-subsidy investigation and 15 months for the anti-dumping investigation. In both cases, provisional measures may be imposed within nine months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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