By Philip L. Comella and William R. Schubert

As a recent trade ruling by the European Commission illustrates, the economic forecast for the U.S. biofuels industry is susceptible to the decisions of governments at home and abroad.

In Council Regulation (EC) No 771/2012, published on August 23, the European Commission required the registration of U.S. bioethanol imports for which an anti-subsidy investigation is currently pending.  The purpose of the required registration is to enable the EU to retroactively impose countervailing duties — designed to offset foreign export subsidies and create a “level playing field” in the importing country — on bioethanol from the U.S.  The EU would only impose retroactive duties, however, in the event that the Commission later determines that the U.S. has retroactively re-instated countervailable bioethanol subsidies.

To clarify, the Commission determined that imposing duties pending issuance of the final order is unnecessary (at least for now) because evidently, the U.S. has discontinued its bioethanol subsidies.  Nonetheless, the Commission required registration of the imports based on the possibility that the U.S. could retroactively reinstate subsidies in the near future.  As the Commission observed:

“[d]espite positive findings of countervailing subsidisation and material injury caused thereby to the Union industry during the investigation period (‘IP’), namely from 1 October 2010 to 30 September 2011, the Commission decided not to adopt provisional countervailing duties pursuant to Article 12 of the basic Regulation because it was provisionally found that the main subsidy scheme in force during the IP had ceased, in the sense that it no longer conferred a benefit at the time provisional measures would have been imposed. However, there is evidence that the United States might reinstate the main subsidy scheme found to be countervailable in the coming months with retroactive effects. In that event, the Commission considers that it would have been entitled to adopt (and eventually collect) provisional countervailing duties in the present investigation.”

Aside from the anti-subsidy investigation, the Commission also has an anti-dumping investigation pending against U.S. bioethanol imports.  Both the petitioning industry in Europe and the respondent industry in the U.S. will have opportunities to submit comments and have hearings in these investigations.  A final order is due by December 25, 2012 in the anti-subsidy investigation and by February 25, 2013 in the anti-dumping investigation. Positive findings would make the U.S. imports subject to anti-dumping and countervailing duties (which in theory, would bring artificially low U.S. export prices back up to “normal value”) for the next five years.

Trade remedies that aim to curb sales of foreign goods priced at “less than fair value” have already slowed the circulation of biofuels in European export markets — and if recent headlines are any indication, this may be a continuing trend.  U.S. biodiesel, for example, is already subject to anti-dumping duties ranging from 0 to 36.2% and countervailing duties ranging from 29.1% to 41% in the EU until at least 2014.  Further, the European Commission just announced new anti-dumping investigations against biodiesel imports from Argentina and Indonesia two weeks ago.