Traders say circumventing EU tariffs risky

By Nicholas Zeman | June 09, 2009
Shortly following the European Union's imposition of new tariffs on U.S. biodiesel, Canadian companies started getting phone calls. "Several European brokers called us and asked if we would be interested in importing U.S. biodiesel and then selling it to them, so that they could still get the benefits of the blenders credit," said Barb Isman of Vancouver's Clean Energy Corp. "We declined to participate in that."

While the EU has said that it will watch movements of fuel and attempt to stop loopholes where U.S. marketers could send fuel to Argentina or Canada and then redirect it to Europe to avoid the tariffs, traders report they have heard rumors. "I don't know of any specific cases but I've heard that it is happening, it's a rumor in the industry right now," one trader said.

Reuters reported that the European Commission requested on May 27 to extend duties on imports of biodiesel from the United States by up to five years. Once approved, the decision must be endorsed by EU ministers. World Energy Alternatives cited a report regarding EU duties on U.S. biodiesel, which surfaced in late May, and stated that revisions have been set by the EC-including a 38 percent hike for Archer Daniels Midland and a 23 percent decrease for Cargill.

On the heels of Biopetrol's Rotterdam, The Netherlands, biodiesel plant going idle, Radio Netherlands Worldwide reported that struggling producers in Europe were victims of unfair American competition. "The U.S. government stimulates biodiesel production, offering export subsidies," the report stated. "The European Union responded to the competitive U.S. prices by introducing an import duty. The U.S. has managed to circumvent the extra duty by exporting to Europe through Canada."

Several U.S. producers, including GreenHunter Energy Inc. of Grapevine, Tex., however, said they were not attempting to ship biodiesel to Europe through Canada. "But it makes sense doesn't it?" said Jack Zedlitz of Greenhunter. "If people want to get things done they're going to find loopholes."

Other sources, however, indicate that the penalties are too severe to attempt such shady maneuvers. "I think that if Netherlands radio is reporting this, then they should show me the paper trail," said Michael Cooper, president of Biofuels Brokers LLC based in Hickory Corners, Mich. "It would be a case of tax fraud to send shipments of biodiesel through Canada to Europe. Because of the tax credit, a 10-million-gallon shipment would be an infraction of $10 million dollars. There's just too much risk involved."

There certainly might be ways to circumvent the tariffs on U.S. biodiesel, says Falk Von Kriegsheim of Petrotec AG, headquartered in Borken, Germany. "But even if all volumes from the United States were completely stopped, European producers would still have to compete with Argentine and Southeast Asian biodiesel," Kreigsheim said, adding that he had not heard that U.S. producers diverting shipments through Canada or Argentina to capitalize on a possible loophole in EU laws was a problem. "We have not heard these things."

Biodiesel shipping and marketing, because of the tax dollars involved, is very transparent, and therefore difficult for U.S. producers to circumvent the EU tariffs by diverting fuel through other venues. "Marine transport is extremely transparent," Cooper said. "We have to report the vessel, the source of the biodiesel as well as provide documents for traceability purposes for every shipment to the U.S. Coast Guard-I could tell you where every drop goes."

The Canadian export business to Europe has boomed since the countervailing measures were put into place.
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