Long, strange trip: How U.S. ethanol reaches China tariff-free

NEW YORK/KUALA LUMPUR (Reuters) – In June, the High Seas tanker ship loaded up on ethanol in Texas and set off for Asia.

Two months later – after a circuitous journey that included a ship-to-ship transfer and a stop in Malaysia – its cargo arrived in China, according to shipping data analyzed by Reuters and interviews with Malaysian and Chinese port officials.

At the time, the roundabout route puzzled global ethanol traders and ship brokers, who called it a convoluted and costly way to get U.S. fuel to China.

But the journey reflects a broader shift in global ethanol flows since U.S. President Donald Trump ignited a trade war with China last spring.

Although China slapped retaliatory tariffs up to 70 percent on U.S. ethanol shipments, the fuel can still legally enter China tariff-free if it arrives blended with at least 40 percent Asian-produced fuel, according to trade rules established between China and the Association of Southeast Asian Nations (ASEAN), the regional economic and political body.