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1 1 (March 18, 2008)

handle is hein.crs/crsaiqj0001 and id is 1 raw text is: Order Code RS21930 Updated March 18, 2008 Ethanol Imports and the Caribbean Basin Initiative (CBI) Brent D. Yacobucci Specialist in Energy and Environmental Policy Resources, Science, and Industry Division Summary Fuel ethanol consumption has grown significantly in the past several years, and it will continue to grow with the establishment of a renewable fuel standard (RFS) in the Energy Policy Act of 2005 (P.L. 109-58) and the expansion of that RFS in the Energy Independence and Security Act of 2007 (P.L. 110-140). This standard requires U.S. transportation fuels to contain a minimum amount of renewable fuel, including ethanol. Most of the U.S. market is supplied by domestic refiners producing ethanol from American corn. However, imports play a small but growing role in the U.S. market. One reason for the relatively small role is a 2.5% ad valorem tariff and (more significantly) a 54-cent-per-gallon added duty on imported ethanol. These duties offset an economic incentive of 51 cents per gallon for the use of ethanol in gasoline. However, to promote development and stability in the Caribbean region and Central America, the Caribbean Basin Initiative (CBI) allows the imports of most products, including ethanol, duty-free. While many of these products are produced in CBI countries, ethanol entering the United States under the CBI is generally produced elsewhere and reprocessed in CBI countries for export to the United States. The U.S.- Central America Free Trade Agreement (CAFTA) would maintain this duty-free treatment and set specific allocations for imports from Costa Rica and El Salvador. Duty-free treatment of CBI ethanol has raised concerns, especially as the market for ethanol has the potential for dramatic expansion under P.L. 109-58 and P.L. 110-140. In the United States, fuel ethanol is largely domestically produced. A value-added product of agricultural commodities, mainly corn, it is used as a gasoline additive and as an alternative to gasoline. To promote its use, ethanol-blended gasoline is granted a significant tax incentive. However, this incentive does not recognize point of origin, and there is a duty on most imported fuel ethanol to offset the exemption. But a limited amount of ethanol may be imported under the Caribbean Basin Initiative (CBI) duty-free, even if most of the steps in the production process were completed in other countries. This duty-free import of ethanol has raised concerns, especially as U.S. demand for ethanol has been growing. Further, duty-free imports from these countries, especially

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