[Congressional Record Volume 155, Number 46 (Tuesday, March 17, 2009)]
[Senate]
[Pages S3182-S3183]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself, Mr. Gregg, Mr. Bingaman, Ms. 
        Collins, Ms. Cantwell, and Mr. Martinez):
  S. 622. A bill to ensure parity between the temporary duty imposed on 
ethanol and tax credits provided on ethanol; to the Committee on 
Finance.
  Mrs. FEINSTEIN. Mr. President, I rise to introduce the Imported 
Ethanol Parity Act of 2009.
  This legislation is cosponsored by Senators Gregg, Bingaman, Collins, 
Cantwell and Martinez.
  First, let me explain what this bill does.
  The Imported Ethanol Parity Act instructs the President to lower the 
secondary ethanol import tariff, so that tariffs on ethanol are no 
higher than the subsidy for blending ethanol into gasoline.
  This would restore parity between the real tariff faced by imported 
gasoline and ethanol, which currently compete.
  This legislation is necessary because last year's Farm Bill shifted 
the function of ethanol tariffs.
  Historically, there has been relative parity between ethanol 
subsidies and ethanol tariffs. The tariffs served to ``offset'' 
domestic subsidies for ethanol use, thereby preventing imported ethanol 
from benefiting from domestic subsidies.
  But after passage of the Farm Bill, these tariffs began to serve as a 
real barrier to trade.
  The Farm Bill maintained the primary 2.5 percent tariff and extended 
the secondary tariff for two more years at $0.54 per gallon, creating a 
combined tariff of $0.56 to $0.59 per gallon, depending on the sale 
price. But the Farm Bill reduced the ethanol blending subsidy that 
these tariffs are intended to offset to $0.45 per gallon.
  This disparity means that an ethanol importer pays more tariff than 
he gets back in subsidy, and parity has been lost.
  Specifically, an ethanol importer pays $0.11 to $0.14 per gallon of 
tariff to the U.S. Treasury that he never gets back from the ethanol 
subsidy.
  Ethanol is therefore disadvantaged when it competes directly with 
other imported transportation fuels, such as gasoline and diesel.
  It increases the cost of gasoline in the United States by making 
ethanol more expensive.
  It prevents Americans from importing ethanol made from sugarcane. 
Sugar ethanol is the only available transportation fuel that works in 
today's cars and emits considerably less lifecycle greenhouse gas than 
gasoline.
  It taxes imported transportation fuel from our friends in Brazil, 
India, and Australia, while oil and gasoline imports from OPEC enter 
the United States tax free.
  It hinders the emergence of a global biofuels marketplace through 
which countries with a strong biofuel crop could sell fuel to countries 
that suffered drought or other agricultural difficulties in the same 
crop year. Such a global market would permit mutually beneficial trade 
between producing regions and stabilize both fuel and food prices.
  It makes us more dependent on the Middle East for fuel when we should 
be increasing the number of countries from whom we buy fuel. When it 
comes to energy security for the United States, which has less than 3 
percent of proven global oil reserves and 25 percent of demand, we must 
diversify supply.
  Bottom Line: Until the tariff is lowered, the United States will tax 
the only fuel it can import that increases energy security, reduces 
greenhouse gas emissions, and lowers gasoline prices.
  This legislation responds to the Tariff's defenders.
  In 2006 I introduced legislation to eliminate the ethanol tariff 
entirely, and in 2007 I cosponsored an amendment to the Energy Bill 
which would have eliminated the tariff.
  The Imported Ethanol Parity Act is a different proposal that I 
believe addresses the concerns of tariff defenders.
  The advocates of the $0.54 per gallon secondary tariff on ethanol 
imports have always argued that the tariff is necessary in order to 
offset the blender subsidy that applies to the use of all ethanol, 
whether produced domestically or internationally.
  They argue that the ethanol subsidy exists to support American 
farmers who produce ethanol at higher cost than foreign producers. For 
instance, on May 6, 2006, the Chairman of the Senate Finance Committee 
stated on the Senate floor that, ``the U.S. tariff on ethanol operates 
as an offset to an excise tax credit that applies to both domestically 
produced and imported ethanol.''
  On May 9, 2006, the Renewable Fuels Association stated in a press 
release: ``the secondary tariff exists as an offset to the tax 
incentive gasoline refiners receive for every gallon of ethanol they 
blend, regardless of the ethanol's origin.''
  In a letter to Congress dated June 20, 2007, the American Coalition 
for Ethanol, the American Farm Bureau Federation, the National Corn 
Growers Association, the National Council of Farmer Cooperatives, the 
National Sorghum Producers, and the Renewable Fuels Association stated 
that the blender tax credit is available to refiners regardless of 
whether the ethanol blended is imported or domestic. To prevent U.S. 
taxpayers from subsidizing foreign ethanol companies, Congress passed 
an offset to the tax credit that foreign companies pay in the form of a 
tariff.
  In 2008, the Renewable Fuels Association's Executive Director 
asserted that ``The tariff is there not so much to protect the industry 
but the U.S. taxpayer.''
  I ask tariff advocates to either support this legislation or explain 
how a tariff can justifiably be higher than the subsidy it is designed 
to offset.
  Bottom Line: Ethanol from Brazil or Australia should not have to 
overcome a trade barrier that no drop of OPEC oil must face. The 
tariffs cannot be justifiably maintained at $0.56-$0.59 per gallon if 
its intent is to offset a $0.45 per gallon blender subsidy, and it 
should be reduced.
  Climate Change is the most significant environmental challenge we 
face, and I believe that lowering the ethanol tariff will make it less 
expensive for the United States to combat global warming.
  Here is how: the fuel we burn to power our cars is a major source of 
the greenhouse gas emissions warming our planet. In California, it 
accounts for 40 percent of all of our emissions. To reduce this impact, 
we need to increase the fuel efficiency of our vehicles and lower the 
lifecycle carbon emissions of the fuel itself.
  For this reason, in the 110th Congress I introduced the Clean Fuels 
and Vehicles Act with Senators Olympia Snowe and Susan Collins.
  The legislation proposed a ``Low Carbon Fuels Standard,'' which would 
require each major oil company selling gasoline in the United States to 
reduce the average lifecycle greenhouse gas emissions per unit of 
energy in their gasoline by 3 percent by 2015 and by 3 percent more in 
2020.
  This concept became a major aspect of the Energy Independence and 
Security Act of 2007, in which Congress requires oil companies to use 
an increasing quantity of ``advanced biofuels'' that produce at least 
50 percent less lifecycle greenhouse gas than gasoline.
  Unfortunately the ethanol tariff puts a trade barrier in front of the 
lowest carbon fuel available, making it considerably more expensive for 
the United States to lower the lifecycle carbon emissions of 
transportation fuel.

[[Page S3183]]

  The lifecycle greenhouse gas emissions of ethanol vary depending on 
production methods and feedstocks, and these differences will impact 
the degree to which ethanol may be used to meet ``low-carbon'' fuel 
requirements under the Energy Independence and Security Act of 2007.
  For instance, sugar cane ethanol plants use biomass from sugar stalks 
as process energy, resulting in less fossil fuel input compared to 
current corn-to-ethanol processes. By comparison, researchers at the 
University of California concluded that ``only 5 to 26 percent of the 
energy content in corn ethanol, is renewable. The rest is primarily 
natural gas and coal,'' which are used in the production process.
  The most recent research compiled by the California Air Resources 
Board concluded that the direct lifecycle greenhouse gas emissions of 
imported sugar based ethanol are 73 percent lower than gasoline, while 
the direct lifecycle greenhouse gas emissions of corn based ethanol 
from the Midwest are 31 percent lower than gasoline.
  Even when land use change is factored in, the lifecycle greenhouse 
gas emissions of sugar-based ethanol from Brazil is the single least 
emitting fuel option available for today's vehicles. It is only 
surpassed on an emissions basis by electric and fuel cell cars, which 
are unfortunately at least a few years away from widespread adoption.
  Biofuels that protect our planet may be produced abroad, and we 
should not put tariffs in front of these fuels, if we import crude oil 
and gasoline tariff free.
  This legislation accomplishes two goals: it corrects the Farm Bill's 
mistaken policy that imposed a real trade barrier on clean and climate 
friendly ethanol imports, giving gasoline imports a competitive 
advantage over cleaner fuel that simply should not exist at a time we 
are trying to combat climate change.
  It prevents ethanol producers abroad from receiving American ethanol 
subsidies, which is supposedly the intent of the ethanol tariff.
  I think it strikes the right balance, and I urge Congress to pass 
this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 622

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Imported Ethanol Parity 
     Act''.

     SEC. 2. ETHANOL TAX PARITY.

       Not later than 30 days after the date of the enactment of 
     this Act, and semiannually thereafter, the President shall 
     reduce the temporary duty imposed on ethanol under subheading 
     9901.00.50 of the Harmonized Tariff Schedule of the United 
     States by an amount equal to the reduction in any Federal 
     income or excise tax credit under section 40(h), 6426(b), or 
     6427(e)(1) of the Internal Revenue Code of 1986 and take any 
     other action necessary to ensure that the combined temporary 
     duty imposed on ethanol under such subheading 9901.00.50 and 
     any other duty imposed under the Harmonized Tariff Schedule 
     of the United States is equal to, or lower than, any Federal 
     income or excise tax credit applicable to ethanol under the 
     Internal Revenue Code of 1986.
                                 ______