Summary: Pursuant to a legislative requirement, GAO examined ethanol production in Caribbean Basin Initiative (CBI) countries, focusing on: (1) whether CBI producers could compete using local feedstock, rather than imported feedstock, to produce ethanol; and (2) potential modifications to U.S. tariff requirements that would not harm U.S. producers and would ensure meaningful ethanol production and increased employment in CBI countries and discourage use of imported feedstock.
GAO found that: (1) CBI ethanol producers would be economically disadvantaged in complying with a 75-percent local feedstock requirement because of current sugar and gasoline prices in the region; (2) total CBI ethanol production capacity is about 88 million gallons annually, but could increase to about 217 million gallons if two plants under construction are completed; (3) a 75-percent local feedstock requirement would neither allow CBI producers to compete nor contribute to regional economic development; (4) it is not likely that ethanol imports from CBI countries would impact on U.S. production; and (5) CBI ethanol producers would significantly benefit if the U.S. feedstock requirement was eliminated, since they could obtain subsidized imported supplies at low prices. GAO believes that Congress should either: (1) set a low local feedstock requirement in addition to CBI value-added requirements; (2) eliminate the local feedstock requirement while maintaining CBI value-added requirements; or (3) exempt up to 120 million gallons of imported ethanol from tariffs and impose a 30-percent local feedstock requirement on the remainder.
