B99 exports to Europe come under fire

By | May 25, 2007
An unforeseen loophole in the American JOBS Creation Act of 2004, which created the biodiesel tax credit, is causing consternation amongst the European Biodiesel Board (EBB) and the National Biodiesel Board (NBB). The loophole could allow foreign companies to send tanker shipments of biodiesel into U.S. ports, blend it with 1 percent diesel fuel, claim the blender's credit of 99 cents (one cent per percent of biodiesel in the shipment), and then export the shipment outside of the United States, most likely to Europe.

Neither organization could be reached to confirm if the practice is actually happening. However, both officially came out against the idea. "This type of reexporting activity was clearly not intended by the legislative policy and is an inappropriate use of the tax credit," the NBB said in an April statement. "Taxpayers should be advised that the NBB will aggressively pursue legislation and/or regulatory rulemaking that would clarify any ambiguity and clearly state that biodiesel involved in such reexporting transactions is not eligible for the credit."

The EBB alerted the European Commissioner for Trade Peter Mandelson of the potential of this practice in a letter dated March 19. "Triangular trade is starting with biodiesel producers or traders from third countries (Malaysia, Brazil, etc.) shipping biodiesel to U.S. harbors to be 'blended' with a 1 percent ([biodiesel blend]but even a 0.001 percent could be enough) for exporting to Europe afterwards, in a sort of 'touch-and-go' trade," the letter read.

According to the EBB, the subsidized biodiesel is offered on the European market by U.S. exporters at the same price of the raw materials, such as rapeseed oil, purchased by the European Union's (EU) biodiesel production industry. "This competition is price-setting and is progressively disrupting the margins of EU biodiesel producers, putting out of business many EU biodiesel producers who are already confronting important market difficulties because of the late implementation of EU biofuels legislations in many EU countries and subsequent industrial overcapacities," the EBB said. "This system clearly represents an unfair trade measure that urgently needs to be reviewed and eliminated-at least in its unfair trade aspects-by the U.S. government."

Even though the original intent of the biodiesel tax credit was, in part, to enhance domestic energy security by adding fuel to the U.S. energy supply, the legislation did allow the biodiesel tax credit to be applied to biodiesel intended for export. The EBB said it requested that the NBB support the elimination of B99 subsidized exports, but that the NBB responded with a statement that it supports the continued applicability of the U.S. tax credits for U.S.-produced biodiesel that is exported.
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