By US Grains Council | May 09, 2022
The US Grains Council worked with the USDA’s Foreign Agricultural Service in Vietnam to lobby Vietnam’s Ministry of Industry and Commerce (MOIT) and Ministry of Finance (MOF) to reduce most-favoured-nation tariffs (MFN) on imported ethanol, which ultimately resulted in new line tariffs that spurred additional U.S. imports of ethanol through Vietnam.
Vietnam practices a dual fuel policy in which ethanol is offered in one grade at the pump and not the other. The Vietnamese government cited average to below-average consumer acceptance of the grade that included ethanol as justification for not moving forward with higher blend ratios. In response, the Council met with industry stakeholders, including major oil companies, retail gasoline suppliers, marketers and government officials, to expand on this information. After this thorough investigation, it was identified that the US ethanol tariff was causing a burden at the pump, causing consumers to simply choose the cheapest option.
Having identified tariffs as one of the main constraints to the organic growth of U.S. ethanol sales in Vietnam, the Council has partnered with FAS to engage the Vietnamese government at every opportunity, including presenting data from performance, public health studies and other documents that would encourage the Prime Minister to lower tariffs on US ethanol.
Despite the tariffs in place, Vietnam directly imported about 3.5 million gallons (1.24 million bushels in corn equivalent) of U.S. ethanol in the 2018/2019 marketing year, in addition to about 16 million gallons for fuel blending via the South Korean transshipment market.
It was thought that a five percentage point cut on ethanol import tariffs would create opportunities to fill the current ethanol demand gap of 170 million gallons (60.3 million bushels in corn equivalent ) in the country. During outreach efforts, the Council outlined a win-win for U.S. farmers and agribusinesses seeking to export more ethanol to Southeast Asia’s fastest-growing economy and for the Vietnamese government, which is seeking to achieve its goal of a higher national fuel blend mandate of 10 percent.
Vietnam’s Prime Minister signed Decree 27 on May 25, 2020, reducing the MFN tariff on certain agricultural imports, including ethanol. While the Council and its partners lobbied for a tariff reduction in line with competing products like aromatics and other petrochemical oxygenates, the tariff was eventually reduced to 15 from 17 percent for 100 percent pure ethanol and at 15 from
20% for ethanol 99% pure or less, the maximum reduction applied to any commodity or product during this review period. The new tariff came into effect on July 10, 2020.
In the short term, gasoline demand fell by 30% during the country’s COVID-19 lockdown, but in the longer term, Vietnam’s total gasoline consumption is expected to increase by nearly 15% over the next five years. years to reach approximately 2.38 billion gallons by 2023.
The Council invested $42,443 of Market Access Program (MAP) funds to support this consultation engagement. As a result, Vietnam’s ethanol import potential increased to 170 million gallons worth $653.334 million, a return on investment (ROI) of $15,393 per dollar of MAP funds invested.