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ASA considers trade challenge to biodiesel export tax

Agriculture.com Staff 02/28/2008 @ 2:38pm

If differences can't be resolved through the Doha Round negotiations for a new World Trade Organization agreement, the American Soybean Association is considering a legal challenge against Argentina's export tax system, which the U.S. producer group considers an unfair subsidy for that nation's biodiesel exports.

The Argentine export tax system favors biodiesel with lower export taxes for the fuel than for exports of raw soybeans, ASA's president, John Hoffman of Waterloo, Iowa, told Agriculture Online.

"Right now there's a huge advantage for crushers down there to export biodiesel," Hoffman said. It amounts to $1.11 per gallon of biodiesel. Hoffman said it's so profitable, that soybean crushers in Argentina are importing soybeans from Brazil and Paraguay.

A trade agreement that resolves that issue is the first choice of ASA. But if that fails, the organization is considering a legal challenge against the export tax differential. Until now, Hoffman said, the ASA hasn't made public that it's considering a legal challenge.

"We're evaluating right now the economic impact on global markets of the differential export tax," he told Agriculture Online. "We're currently doing the analysis to make a case."

So far, the biodiesel exports aren't coming into the U.S., where biodiesel plants are already limiting production due to the high cost of vegetable oils. Hoffman said the Argentine biodiesel is mainly going to the European Union.

On the way, tankers of biodiesel stop by U.S. Gulf Coast ports, where as little as one percent petroleum diesel is blended in. That qualifies a load of biodiesel for the $1 dollar a gallon biodiesel tax credit intended for U.S. producers, said ASA spokesman Bob Callanan. That so-called "splash and dash" adds another $1 in subsidies, paid by U.S. taxpayers, for South American biofuel bound for Europe.

The ASA has long complained about an IRS interpretation of U.S. laws that allows the credit to be applied to imported fuels and hasn't yet been able to get Congress to clarify the law.

Callanan is more optimistic that the tax loophole might be closed before the tax credit is extended. It expires at the end of this year unless Congress renews it.

"When we've tried to fix it before, they didn't seem to support it, but now they're seeing the abuse," Callanan told Agriculture Online.

If differences can't be resolved through the Doha Round negotiations for a new World Trade Organization agreement, the American Soybean Association is considering a legal challenge against Argentina's export tax system, which the U.S. producer group considers an unfair subsidy for that nation's biodiesel exports.

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