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But there was no misunderstanding when Brazil reimposed a 20% tariff on U.S. ethanol in December, according to U.S. government officials. The two sides had been negotiating for months to reinstate a quota that would allow the U.S. to ship 198 million gallons of ethanol annually to enter Brazil duty-free.
Brazil was asking for increased access to the tightly guarded U.S. sugar market in return for reestablishing the tariff-rate quota, but the demands were too high and the talks failed, according to sources who asked not to be named because of the sensitivity of the issue. U.S. negotiators essentially resigned to the failure.