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1 (January 6, 2005)

handle is hein.crs/crsmthabcrr0001 and id is 1 raw text is: Order Code RS21930 Updated January 6, 2005 CRS Report for Congress Received through the CRS Web Ethanol Imports and the Caribbean Basin Initiative Brent D. Yacobucci Specialist in Energy Policy Resources, Science, and Industry Division Summary Fuel ethanol consumption has grown significantly in the past several years. Most of the U.S. market is supplied by domestic refiners producing ethanol from American corn. However, imports do play a role, albeit small, in the U.S. market. One reason for the relatively small role is a 54-cent-per-gallon tariff on imported ethanol. This tariff offsets 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 caps 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 if an omnibus energy bill or similar legislation were enacted. In a related development, due to increased ethanol demand in California, as well as high gasoline prices, direct imports from Brazil to the United States increased dramatically in 2004. This report will be updated as events warrant. Introduction 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 tariff 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, and has the potential to dramatically increase under certain policy scenarios. Further, duty-free imports from these countries, especially Costa Rica Congressional Research Service **o The Library of Congress

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