[Congressional Record Volume 150, Number 103 (Thursday, July 22, 2004)]
[Senate]
[Pages S8751-S8752]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Coleman):
  S. 2762. A bill to encourage the use of indigenous feedstock from the 
Caribbean Basin region with respect to ethyl alcohol for fuel use; to 
the Committee on Finance.
  Mr. GRASSLEY. Mr. President, I rise today to introduce legislation to 
close a loophole under the Caribbean Basin Initiative, CBI, trade 
preference program which could allow large quantities of Brazilian 
ethanol to be shipped to the United States duty-free. This loophole 
allows companies to use the CBI program as a passthrough to get duty-
free treatment for Brazilian ethanol. This could end up displacing U.S. 
production and hurting Iowa's ethanol producers. I want to help make 
sure that does not happen.
  Also, when the Caribbean Basin Initiative was enacted during the 
Reagan administration, the purpose of the program was to encourage 
trade and development with the region. I support the CBI program. 
However, I believe that the program should encourage meaningful 
economic development in the region. Unfortunately, one special interest 
provision in the statute permits ``wet'' ethanol from Brazil to be 
shipped to the CBI region and merely dehydrated, thus qualifying for 
duty-free access to the U.S. market. The dehydration process which 
occurs in the CBI region is not very complicated. It simply removes a 
small percentage of water from ``wet'' ethanol, thereby converting it 
into ``dry'' ethanol. Such ``dry'' ethanol is provided duty-free access 
to the U.S. market. I do not believe that such simple processing is 
substantial enough to warrant the benefit of getting duty-free access 
to the U.S. market. In keeping with the original intent of the CBI, I 
believe that more meaningful economic activity should occur in the CBI 
region before a product qualifies for duty-free treatment.
  My bill would limit the opportunity to exploit this special interest 
provision. It would introduce a fixed cap on the amount of ethanol that 
can take advantage of the passthrough provision. The amount of the cap 
is based on the historical volume of ethanol exports from the CBI 
region over the past 20 years. Thus, my bill will permit the continued 
duty-free importation of some ethanol that is simply dehydrated in the 
CBI region, based on historical trade amounts. However, my bill would 
put a stop to the unlimited future growth of such duty-free imports.
  It is my belief that this modification should not impact any of the 
CBI companies that are currently operating ethanol plants in the 
region. At the same time, my bill will encourage greater investment and 
development in the CBI region because ethanol that is produced from 
scratch in the CBI region, using CBI inputs, will continue to be 
eligible for duty-free access to the U.S. market under the CBI program. 
If ethanol is made from scratch in the CBI region then it will qualify 
for duty-free treatment.
  In sum, my bill only addresses new investments in dehydration plants, 
whose sole purpose is to merely dehydrate Brazilian ethanol. Our tariff 
preference programs should not be granting economic incentives in the 
form of tariff preferences for such passthrough operations. In my mind, 
that is not what the CBI program is for, and it is not fair for Iowa's 
ethanol producers.
  I ask unanimous consent that the bill be printed in the Congressional 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2762

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. ETHYL ALCOHOL FOR FUEL USE.

       (a) In General.--Subparagraph (B) of section 423(c)(3) of 
     the Tax Reform Act of 1986 (19 U.S.C. 2703 note) is amended 
     to read as follows:
       ``(B) The local feedstock requirement with respect to any 
     calendar year is--
       ``(i) 0 percent with respect to the base quantity that is 
     entered;
       ``(ii) 30 percent with respect to the 35,000,000 gallons of 
     dehydrated alcohol and mixtures entered in excess of the base 
     quantity; and
       ``(iii) 50 percent with respect to all dehydrated alcohol 
     and mixtures entered after the amount specified in clause 
     (ii) is entered.''.
       (b) Base Quantity.--Clause (i) of section 423(c)(3)(C) of 
     the Tax Reform Act of 1986 (19 U.S.C. 2703 note) is amended 
     to read as follows:
       ``(i) The term `base quantity' means, with respect to 
     dehydrated alcohol and mixtures entered during any calendar 
     year--

       ``(I) 90,000,000 gallons in the case of dehydrated alcohol 
     and mixtures produced in a distillation facility located in a 
     beneficiary country that was established before, and in 
     operation on July 1, 2004; and
       ``(II) 0 gallons in the case of dehydrated alcohol and 
     mixtures produced in any other distillation facility located 
     in a beneficiary country.''.

[[Page S8752]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after 2004.
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