The Key Elements of the Deal
- The Department of Commerce and the Government of Mexico and the Mexican sugar industry have reached agreement on final amendments to the antidumping duty (AD) and countervailing duty (CVD) suspension agreements on sugar from Mexico.
- The Department finalized these amendments after careful consideration of the comments received from interested parties and other stakeholders on the draft amendments released on June 14.
- Consistent with the draft amendments, the finalized versions update certain provisions, such as, in the CVD agreement, the ratio between the quantities of Refined and Other Sugar that Mexico may export to the United States during a given export limit period, and the polarity division between the two types of sugar.
- Further, in the amended AD agreement, the minimum prices of Other Sugar and Refined Sugar are higher to ensure that Mexican sugar imports do not suppress or undercut domestic price levels, in accordance with statutory requirements.
- Finally, each amended agreement contains enhanced monitoring and enforcement provisions such as a requirement for polarity testing and stiff penalties for non-compliance.
- Each of these elements ensures that the amended agreements provide an adequate remedy to the U.S. domestic sugar industry against the dumping and unfair subsidization determined in the investigations.
- In addition, the finalized amendments will ensure that the sugar suspension agreements continue to promote stability in the U.S sugar market, in coordination with USDA’s sugar program.
What are the Improvements over the Existing Agreements and How Do They Address the Problems?
- The AD and CVD Agreements signed by the Department and the GOM in December 2014 differentiated between “Refined Sugar” at a polarity of 99.5 degrees and above, and “Other Sugar” at a polarity less than 99.5 degrees, and provided that no more than 53 percent of Mexican exports could be of Refined Sugar.
- By contrast, the finalized amendments define “Refined Sugar” as sugar at a polarity of 99.2 degrees and above, and “Other Sugar” as sugar at a polarity less than 99.2 degrees and shipped in bulk, freely flowing.
- These changes, which move the dividing line between Refined and Other Sugar down to 99.2 from 99.5 degrees, and add shipping conditions for Other Sugar, address concerns regarding ensuring an adequate supply of sugar in the U.S. market, and concerns that a large portion of Other Sugar is bypassing cane refiners for direct consumption or end use.
- Specifically, the petitioners previously asserted that the sale of Mexican semi-refined sugar (to which the lower reference price of Other Sugar set in the AD Agreement applies) was hindering the competitiveness of U.S. cane refiners by substantively diminishing the supply of Mexican sugar for their processing operations, and suppressing U.S. prices for refined sugar.
- Because the changes in the finalized amendments substantially decrease the proportion of Sugar from Mexico that may be Refined Sugar and mean that a higher reference price applies to semi-refined sugar, there is a greater likelihood that sufficient sugar for further processing will be available in the U.S. market.
- The amendments finalize an additional protection for U.S. domestic refiners that was added to the draft amendments with certain modifications to preserve USDA’s flexibility. Specifically, with respect to additional needs sugar (over the expected fiscal year U.S. needs) granted to Mexico, the date on which the polarity division changes from 99.2 to 99.5 has moved from April 1 to May 1. Thus, when additional needs sugar is granted to Mexico prior to May 1, except in cases where an extraordinary or unusual circumstance is declared, such sugar shall be subject to the pre-May 1 99.2 polarity divide. For post-May 1 additional needs sugar, USDA will specify whether raw or refined sugar is needed but at a polarity divide of 99.5. Further, at any time during a given fiscal year, USDA retains the flexibility to specify the polarity of additional needs sugar specifically needed to rectify certain extraordinary and unforeseen circumstances.
- Further, in the finalized amendments, the reference price for Other Sugar is being raised from 22.25 cents/pound to 23 cents/pound, while the Refined Sugar price is being raised from 26 cents/pound to 28 cents/pound.
- In addition, the spread between the two prices has increased. This enhanced pricing structure serves to ensure that U.S. producers’ prices are not suppressed or undercut by imports of Mexican sugar, thereby ensuring that the agreements provide an adequate remedy to the U.S. domestic industry found to have been injured.
- The amendments will be published in the Federal Register, and the Department also expects to release explanatory memoranda no later than July 14, 2017.