Ecuador Eliminates VAT on DDGS
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On February 2nd, 2023, Ecuador’s National Customs Service (SENAE) informed Ecuadorian Grain and feed importers that Distiller’s Dried Grains with Solubles (DDGS) will now be subject to a new tax code which will eliminate the 12 percent value-added tax (IVA) currently placed on imported DDGS. Like other Grains used for animal feed, DDGS will now face zero value-added tax following import. This culminates five years of effort by FAS Quito, the Ecuadorian feed millers’ association, and U.S. Grains Council, which has worked to promote DDGS in Ecuador. It included educating shrimp, pork, and poultry producers on the benefits of DDGS while simultaneously working to remove the IVA.
For years, DDGS has been subject to the additional 12 percent tax due to product misconceptions and political pressures, as other Grains used for animal feeds are exempt from IVA. This issue reduced the competitiveness of imported DDGS, increasing feed prices and the cost of animal proteins. As part of the communication, SENAE indicated that Ecuador’s Internal Revenue Service (SRI) will create and release tax code 0640 for a zero percent IVA for Harmonized System subheading 2303.30.00.12 with the following description, “ONLY FOR DRY DISTILLERS GRAINS WITH SOLUBLES (DDGS), USED FOR ANIMAL FEED THAT ARE RAISED FOR HUMAN FOOD, DETERMINED BY THE COMPETENT AUTHORITY.”
In 2022, the United States exported 92,000 metric tons (MT) of DDGS to Ecuador, all for the shrimp industry. FAS estimates the actual demand for DDGS for the Ecuadorian shrimp industry to be between 150,000-180,000 MT per year. With this change, it will be more viable to use DDGS in the pork and poultry industries, adding another estimated 100,000 MT of demand per year, bringing the total estimated demand to 250,000-280,000 MT annually. In consultation with local and U.S. industry, FAS Quito forecasts 2023 U.S. exports of DDGS to Ecuador could range between 140,000-180,000 MT, depending on the prices of other Grains such as Corn and Wheat. Current prices would represent an additional $10-20 million in U.S. exports to Ecuador.
The Government of Ecuador continues defining the yearly minimum price for local Corn, rice, and Wheat production. The Minister of Agriculture supports the reduction of Corn area and the shift to other crops mainly focused on the export market. Corn consumption remains similar to 2021 levels, based on high poultry and aquaculture production. Wheat imports continue increasing in direct relation to shrimp and poultry production. Other sectors, such as bread and pasta production, maintain the consumption of this Grain.
Ecuador’s Grain Trade
According to AgFlow data, Brazil shipped 71,000 tons of Corn to Ecuador in 2022, followed by Argentina (65,300 tons) and the United States (20,000 tons). Import volume totaled 98,000 tons in Jan 2023. Regarding Wheat, last year’s import volume was 0.9 million tons. Canada shipped 0.4 million tons of Wheat to Ecuador in 2022, followed by the United States (0.3 million tons), Argentina (0.1 million tons), and Brazil (0.1 million tons).
In 2020, Ecuador imported Wheat worth $394 million, becoming the world’s 35th largest importer of Wheat. During the same period, Wheat was Ecuador’s 6th most imported product. Ecuador imports Wheat primarily from: Canada ($194 million), the United States ($177 million), Argentina ($14.8 million), Ukraine ($8.48 million), and Peru ($176k).
The same year, Ecuador imported Corn worth $29.6 million, becoming the world’s 87th largest importer of Corn. During the same period, Corn was Ecuador’s 104th most imported product. Ecuador imports Corn primarily from: Argentina ($11.2 million), Thailand ($6.86 million), Mexico ($3.88 million), the United States ($3.7 million), and Brazil ($2.33 million).
Other sources: USDA
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