U.S. Secretary of Commerce Wilbur Ross and Mexican Secretary of Economy Ildefonso Guajardo today announced a new agreement in principle to suspend antidumping and countervailing duties against Mexican sugar imports into the United States. During the press conference, Ross noted that the U.S. sugar industry said “it is unable to support the new agreement,” but he expressed hope that they would “come on board” as the two countries finalize the agreement.
The United States is a net importer of sugar, and until the U.S. sugar industry filed anti-dumping and countervailing duty cases in February 2014, there had been free trade in sugar between the United States and Mexico since early 2008. Mexico has become an integral part of the North American sugar trade and is a critical supplier of sugar to the United States.
The new agreement aims to prevent dumping of Mexican sugar and to correct for subsidies the Mexican sugar industry receives. It has five major elements:
- Price – The agreement increases the price at which raw sugar must be sold at the mill in Mexico from 22.25 cents per pound to 23 cents per pound. For refined sugar, the price at the mill must increase from 26 cents per pound to 28 cents per pound. These prices exclude packaging and transportation.
- Raw vs. Refined Split – The new agreement also reduces the percentage of refined sugar that may be imported from 53% to 30%, allowing a significant increase in the amount of raw sugar available to U.S. sugar refiners, while ensuring that subsidized refined Mexican sugar imports do not injure U.S. refiners.
- Purity/Polarity – The dividing line between refined and raw sugar was reduced from 99.5 to 99.2 purity, referred to in the industry as “polarity.” This means that “estandar,” a very common variety of sugar from Mexico, will count against the 30% limit on refined sugar. This point is designed to protect against unfair competition from subsidized refined Mexican sugar imports.
- Enforcement – Mexico agreed to increased enforcement measures and to accept significant penalties for violations, including a reduction in the amount of sugar allowed to be imported equal to twice the amount of any sugar found to be in violation of the modified agreements. In addition, Commerce can increase this reduction to three times the amount if necessary to deter further wrongdoing.
- Additional U.S. Needs – Mexico accepted these modifications on the condition that Mexico be granted a right of first refusal to supply 100% of any “additional need” for sugar identified by USDA after April 1 of each year. Additional need is defined as demand for sugar in excess of the demand USDA had predicted for that crop year. USDA will specify whether the additional need sugar is raw or refined without regard to the 70/30 split. The dividing line between raw and refined additional need sugar is 99.5 polarity, but raw sugar must be shipped in bulk in an ocean-going vessel, increasing the likelihood it will enter a U.S. refinery for further processing.
Click here for a fact sheet on the amended suspension agreements.
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