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Aug. 26 — Mexican sugar exported to the U.S. is being unfairly subsidized at rates ranging from 2.99 percent to 17.01 percent, the International Trade Administration announced in a preliminary ruling that could mean higher prices for those exports as well as for candy and soft drinks.
As a result, the Commerce Department will instruct U.S. Customs and Border Protection to require cash duty deposits on sugar imports from Mexico based on the preliminary rates. Commerce will continue the subsidy investigation as well as a companion dumping investigation. In subsidy cases, interested parties have seven days from Commerce's preliminary announcement date to submit a request for a suspension agreement to settle the case.
In a press statement, Mexican officials said they are profoundly disappointed by Commerce's decision, characterizing it as a step backwards in integrating U.S. and Mexican markets under the North American Free Trade Agreement. The Mexico Ministry of Trade plans to continue discussions with U.S. authorities over how best to ensure Mexican products access into the U.S. market and preserves its rights under NAFTA. It also plans to mount a vigorous defense before the World Trade Organization, the press statement said.
Commerce will require a 17.01 percent duty deposit on sugar imported from mills operated by the Mexican government. Sugar produced by the Mexican company GAM (Grupo Azucarero Mexico S.A. de C.V) will be subject to a 2.99 percent duty deposit. Commerce assigned all other Mexican producers a preliminary subsidy rate of 14.87 percent.
The American Sugar Coalition and its members—the American Sugarbeet Growers Association; the American Sugar Cane League; American Sugar Refining Inc.; the Florida Sugar Cane League; Hawaiian Commercial & Sugar Co.; Rio Grande Valley Sugar Growers Inc.; Sugar Cane Growers Cooperative of Florida; and U.S. Beet Sugar Association—asked for the investigations. The petitioners argued that dumped and subsidized sugar exports from Mexico were harming U.S. sugar producers and workers.
The American Sugar Alliance (ASA), an organization with the same membership, backs the investigations.
ASA spokesman Phillip Hayes said ASA expects the final countervailing duties to be higher. “One reason for our confidence about the final determination is that [Commerce] is now investigating new information about Mexican subsidies,” he said in an e-mailed statement.
Hayes said the U.S. industry is also anticipating a positive outcome when Commerce issues its preliminary antidumping ruling—expected on or about Oct. 24.
The ASA statement noted that Mexico's government owns and operates 20 percent of the country's sugar production.
However, the Sweetener Users Association characterized the case as a “cynical effort to drive up prices for consumers and kill American jobs in the food manufacturing sector.”
The Sweetener Users Association said Mexico has unfairly become the scapegoat for the U.S. sugar program's failings.
“Mexico is a critical U.S. ally and trading partner that has stepped in to help the U.S. Department of Agriculture ensure adequate supplies of sugar in times of need, including following Hurricane Katrina in 2005 and after an explosion at a major refinery in Georgia in 2008. Imports of sugar from Mexico, as well as from other countries, are essential, as the United States does not produce enough sugar annually to meet domestic needs,” the Sweetener Users Association statement said.
Commerce's final determination in the subsidy case is expected on or about Jan. 7, 2015. After the final subsidy ruling, the U.S. industry has one more hurdle to clear—an affirmative International Trade Commission injury determination—before duties are finalized.
Commerce may negotiate suspension agreements with foreign governments/producers/exporters of products subject to antidumping and countervailing duty investigations. Prior to any suspension of an investigation, Commerce gives interested parties a chance to comment on the proposed agreement.
Sixty-three House members from both sides of the aisle told Commerce Secretary Penny Pritzker and Agriculture Secretary Tom Vilsack in an Aug. 6 letter that a suspension agreement could jeopardize U.S. manufacturing jobs and hurt consumers. The House lawmakers' letter followed a similar letter sent by 17 senators opposing a possible suspension pact. The lawmakers voiced support for open sweetener trade as provided for by NAFTA.
NAFTA phased in free trade in sweeteners between the U.S. and Mexico in 2008 after a 15-year adjustment period. Mexico and the U.S. are among the 12 Pacific Rim countries negotiating the Trans-Pacific Partnership.
The Coalition for Sugar Reform, a group of business associations, also opposes a managed trade agreement with Mexico on sugar. The coalition has warned that restricting sugar trade between the U.S. and Mexico would run counter to U.S. NAFTA obligations and the shared objective of completing a comprehensive TPP agreement.
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The Commerce Department's fact sheet on the decision is available at http://op.bna.com/itr.nsf/r?Open=rbri-9ncpts. The press release from the Mexican Trade Ministry is available in Spanish at http://www.economia.gob.mx/eventos-noticias/informacion-relevante/10592-boletin14-111.
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