U.S. and Mexico Strike Deal on Sugar


Today U.S. Secretary of Commerce Wilbur Ross and Mexican Secretary of Economy Ildefonso Guajardo announced new agreement in principal to suspend antidumping and countervailing duties against Mexican sugar imports into the United States. 

“We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” said Secretary Ross.  “I am glad to say that Minister Guajardo and his colleagues have been honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship.”

NAFB reprots that under the agreement, Mexico will cut its refined sugar exports to the United States from 53 percent to 30 percent. The deal is designed for Mexico to avoid the imposition of punitive tariffs due to a finding by the U.S. government that Mexico had sent the United States subsidized sugar, and that the sugar was sold at dumped prices, according to the Hagstrom Report. 

U.S. Grains Council CEO Tom Sleight called the agreement an important milestone as the Grains Council works to “maintain our existing, robust trade of U.S. grains and related products” ahead of the NAFTA talks. Former chairman of the U.S. International Trade Commission, Daniel Pearson, told Reuters if the negotiations “had melted down, the NAFTA conversation would have been more difficult.” USDA Secretary Sonny Perdue said the agreement “sets an important tone of good faith” leading up to NAFTA renegotiations.

These new agreements between the Governments United States and Mexico, as well as the Mexican sugar industry, prevent dumping of Mexican sugar and corrects for subsidies the Mexican sugar industry receives.  The agreement addresses the concerns of the U.S. sugar industry and prevents harm to other U.S. industries, including confectioners, beverage producers, and corn growers, that might have resulted if no agreement were reached.

“Unfortunately, despite all of these gains, the U.S. sugar industry has said it is unable to support the new agreement, but we remain hopeful that further progress can be made during the drafting process,” continued Secretary Ross. “We look forward to continuing discussions with them as we finalize the agreement. We remain confident that this deal defends American workers across many industries and is the best way to ensure stability and growth.”

The revised suspension agreement has five major elements:

  1. 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.  This will protect the U.S. sugar industry from harm caused by Mexico “dumping” sugar in the United States. 
  2. Raw vs. Refined Split – The new agreement also reduces the percentage of refined sugar that may be imported from 53{43a21437b022293ea22983a65937d7e18883fb2ff2b11e03a1041d36bd400603} to 30{43a21437b022293ea22983a65937d7e18883fb2ff2b11e03a1041d36bd400603}.  This results in 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.
  3. 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{43a21437b022293ea22983a65937d7e18883fb2ff2b11e03a1041d36bd400603} limit on refined sugar.  This will further protect against unfair competition from subsidized refined Mexican sugar imports.
  4. 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.
  5. Additional U.S. Needs – Mexico accepted the above significant modifications on the condition that Mexico be granted a right of first refusal to supply 100{43a21437b022293ea22983a65937d7e18883fb2ff2b11e03a1041d36bd400603} 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.  Importantly, when the Export Limit is increased pursuant to a request by USDA prior to April 1, such sugar shall be subject to the pre-April 1 70/30 split and the 99.2 polarity divide, an added protection for U.S. domestic refiners. Further, USDA retains the flexibility to specify the polarity of post-April 1 additional needs sugar specifically needed to rectify certain extraordinary and unforeseen circumstances that seriously threaten the economic viability of the U.S. sugar refining industry.

Click HERE for a fact sheet on the amended suspension agreements.

Picture: Pixabay

U.S. Department of Commerce and NAFB

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