According to Reuters, Mexican tomato growers and the Trump administration reached a deal to end a potential anti-dumping investigation and end a tariff dispute. The agreement means many Mexican tomato exports will be subject to U.S. border inspections, and specialty tomatoes face higher reference prices on the American marketplace.
The negotiations began back in May when the Trump administration imposed a 17.5% tariff on Mexican tomatoes after the parties did not reach an agreement.
The Commerce Department said the new deal will ensure sales do not fall below certain prices for Mexican tomatoes and allows a mechanism to audit up to 80 Mexican tomato producers per quarter, or more.
According to publimetro.com.mx, the Secretary of Economy of Mexico, Graciela Marquez claims the US is inflexible in their demand to review 100% of tomato shipments at the border within 72 hours. The Mexican Government claims the US does not have enough man power to process the tomatoes.
The current tomato dispute stems began in 1996, when tomato growers in Florida initiated antidumping investigations against Mexican tomato exports. A deal was reached in November 1996 between Mexican growers and the Department of Commerce that led to the suspending of the investigation. The suspension was renewed in 2002, 2008 and 2013. However, earlier this year, Florida tomato growers complained the Mexican growers were violating their end of the deal. Since May of 2019, Mexican tomato exporters have had to pay a countervailing duty rate of 17.5% before the tomatoes can be exported into the United States.
The final determination will be issued on September 19, 2019 followed by a final determination regarding the damages to the industry due on November 1, 2019.
Mexico is the world’s largest tomato exporter in 2018, with external sales of $2.3 billion dollars of which 99.7% of its exports are to the US.
As you are aware, a suspension agreement between tomato growers and the Department of Congress was passed in 1996 – this agreement reached between US and Mexican tomato growers to maintain a balance in market share between the two sides. This agreement also postponed any Commerce investigation into whether Mexican tomatoes are “dumped” into the US. Last year, tomato growers in Florida petitioned Commerce to suspend the agreement due to an increase in market share by Mexican tomato growers. After the required notice period, the agreement was withdrawn on May 7th.
On May 22nd, Mexico’s tomato growers submitted a proposal that addresses among other things:
1. reference prices for organic and non-organic tomatoes.
2. Mexican growers contend there is no instance of a sale below reference price.
3. Mexican growers without a US repack operation will have a disproportional and negative impact.
4. Revisions to Appendix D removing 100 percent of defective product from the US market.
5. Protection from legal challenges and exposure to treble damages for Mexican growers.
6. Export management such as quarterly certifications to include volumes assigned and or received for export.
7. Adding all tomatoes to the USDA marketing order on Florida tomatoes
8. Increase PACA enforcement including quarterly certifications, preseason letters
9. Commerce Department changes – establishing a taskforce between Commerce, USDA and CBP, quarterly meetings with Commerce to discuss monitoring and enforcement efforts, third-party verification compliance.
The full document can be viewed here.
Check back for any updates on a new suspension agreement. If you have any questions, contact David Hsu at 832-896-6288 or by email at email@example.com.
While we frequently hear “tariff” and “China” in the same sentence, we will likely now start hearing “tariff” and “Mexico” more frequently as the Trump administration has placed near tariffs on imports of fresh tomatoes from Mexico.
A little background – in 1996 the US did not pursue tariffs on Mexican tomAatoes based off assurances from Mexican tomato growers would not sell their tomatoes at articially lower prices. However, last year Florida tomato growers requested the Trump administration to investigate whether Mexican tomatoes were being sold at articially low prices. In February 2019, the Trump administration issued a notice they would withdraw from the 1996 agreement on May 7th if a new deal could not be reached. Since no agreement was reached, Mexican tomatoes are now subject to a 17.5% tariff. If a subsequent investigation finds no unfair pricing, then any tariffs paid will be refunded.
Questions about the tomato tariffs, call/text David Hsu at 832.896.6288 or email at firstname.lastname@example.org.
The U.S. Department of Commerce will resume anti-dumping investigations into imports of Mexican tomatoes despite a previous agreement not to.
Zippy Duvall, President of the American Farm Bureau Federation indicated an anti-dumping investigation was needed because Mexican producers have increased their market share despite an agreement to ban artificially low prices.
On February 6, 2019, the Department of Commerce notified Mexico they would withdraw from the 2013 Suspension Agreement on Fresh Tomatoes from Mexico under a clause that the signatories may withdraw from the Agreement with “ninety days written notice to the other party”. The expiration of the 90-days is May 7, 2019.
After the withdraw on May 8th, an investigation by the Department of Commerce will continue and will send notification to the International Trade Commission of its final determination.
If you are an importer of Mexican tomatoes or want to know how this may impact you, contact antidumping duty attorney David Hsu at email@example.com or by phone/text at 832.896.6288 for a no cost or obligation consultation.