January 2015

On December 19, the U.S. Department of Commerce announced that it had finalized agreements with the Government of Mexico and Mexican sugar exporters to suspend antidumping (AD) and countervailing duty (CVD) investigations on imports of sugar. The agreements immediately suspend both the AD and CVD investigations, allow Mexican sugar to enter the U.S. market free of antidumping or countervailing duties, and create mechanisms to ensure that imports of Mexican sugar do not injure the U.S. sugar industry while enabling U.S. sugar consumption needs to be met.

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The finalized agreements incorporate several changes from the draft suspension agreements that Commerce initialed on October 27. The changes, which include a revised definition of refined sugar and adjustments to the reference price, reflect comments that were submitted by interested parties in response to the Department’s request for public comment on the draft agreements.

“I am pleased that we were able to resolve this matter,” said Assistant Secretary of Commerce for Enforcement and Compliance, Paul Piquado, who signed the suspension agreements on behalf of the United States. “These agreements, which work in concert with the U.S. sugar program, contain important mechanisms that both address the market-distorting effects of unfairly traded sugar and help promote stability in this important market.”

The CVD agreement contains provisions to ensure that there is not an oversupply of Mexican sugar that could cause price declines that threaten the U.S. industry and farmers. These agreements do not change the U.S. Department of Agriculture’s sugar program or U.S. obligations under WTO regarding sugar quotas.

Key Terms of Agreements
Countervailing Duty Agreement (CVD) --

• The CVD agreement contains provisions to prevent an oversupply 10 THE SUGARBEET GROWER January 2015 of sugar in the U.S. market. Specifically, Commerce will calculate an export limit for Mexico based on information it obtains from the U.S.

Department of Agriculture (USDA) about the U.S. needs for sugar in a given year. The CVD agreement will also prevent imports from being concentrated during certain times of the year, and will limit the amount of refined sugar that may enter the U.S. market from Mexico.

• Mexico’s export limit is set at 100% of U.S. needs after accounting for U.S. production and imports from tariff rate quota countries. (U.S. needs are calculated based on USDA data.)

• For purposes of the agreement, “refined sugar” is defined as sugar with a polarity of 99.5% or greater. “Other sugar” is sugar that does not meet the definition of refined sugar. The agreement caps exports of refined sugar at 53% of total exports from Mexico.

• The Government of Mexico will allocate the amount of sugar that each Mexican sugar producer/exporter can export to the United States. As part of this process, the Government of Mexico has agreed to establish an export licensing mechanism. Sugar from Mexico will not be able to enter the U.S. if not accompanied by an export license.

• The signatories of the CVD agreement are Commerce and the Government of Mexico.

Anitidumping Agreement (AD) — 
• The AD agreement establishes reference prices, or minimum prices, to guard against undercutting or suppression of U.S. prices. These minimum prices are $0.26/pound by dry weight commercial value for refined sugar and $0.2225/pound by dry weight commercial value for all other sugar. (Prices are FOB mill, so transportation costs of 5-to-7+ cents per pound must be added to the refined price; so, the minimum refined market price is in the $.31 - $.33 range). “Refined sugar” is defined as sugar with at least 99.5% polarity or above. “Other sugar” is sugar that does not meet the definition of refined sugar.

• The signatories of the AD agreement are Commerce and the Mexican sugar producers and exporters that account for substantially all of the subject merchandise imported into the United States. 

Monitoring and Enforcement

• Commerce and the relevant Mexican government agencies have agreed to establish information exchanges and consultative processes in relation to the operation and enforcement of the agreements.

Next Steps
• Commerce will instruct U.S. Customs and Border Protection to terminate the suspension of liquidation and refund any cash deposits collected as a result of the preliminary AD and CVD investigation determinations consistent with the relevant provisions of U.S. antidumping and countervailing duty law.

There are still a number of required legal steps before this agreement will have certainty over the next five years. Your industry leaders are monitoring it very closely and will act to defend these agreements in light of any opposition to them.

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Data Source: USDA PSD Nov. 2014

— Cuba --
President Obama’s announcement of reestablishing diplomatic ties with Cuba has created yet another interesting geopolitical and economic situation. While pages could be written about this subject, here is the bottom line from a sugar perspective:

First, nothing of significance will change anytime soon. Only Congress can lift the embargo, and that will not happen for some time. A highly charged debate on both sides of the issue is expected, and it will slow whatever transition steps that lie ahead.

Second, the Cuban sugar industry has collapsed from its greatest days when the former Soviet Union bartered Soviet oil for Cuban sugar, with a raw price equivalent of about 40 cents per pound. When the Soviets walked away, the industry began a substantial collapse. (See chart at right.)

The Cuban sugar industry knows it cannot compete with Brazil in the world sugar market, so significant consolidation and lack of investment in maintaining the sugar mills do not paint a rosy picture for the future of the industry. We will discuss this in the weeks and months ahead as the national debate plays out.

Read our entire issue and back issues. Click here.

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