Last Monday the President, AMLO, held an event in Veracruz, an agricultural producing state. The President held that the government is going to review “the agreements made regarding the sale of sugar overseas and the permits that were given to use syrups from abroad” and concluded saying that “we want free trade and we will respect the agreements, but we will defend the domestic producer. Mexico first, the foreigner comes later.”
We believe that the President is referring to the agreement between the Ministry of Economy and the US Department of Commerce regarding the agreement suspending the countervailing duty investigation on Mexican sugar. Per the agreement, Mexico established a Mexican sugar export quota to the US, the US may increase the limit if it deems necessary. This suspension agreement may be “reviewed” pursuant American law, however, there are possible scenarios if a review is triggered, like the elimination of the agreement but with the establishment of CVD.
As for the syrups, like High Corn Fructose Syrups, import permits or licenses do not exist. These goods are subject to a 75% import MFN duty unless they are imported, for instance, from the US with a duty-free import quota pursuant NAFTA. Under Chapter 3 and Annex 3-B of the USMCA, Mexico will be able to continue to provide duty free quotas, while the adoption of a restriction (like a permit or licensing) to import syrups may be contrary to USMCA.
This Thursday the US Department of Commerce (DOC) announced its intent to withdraw from the suspension agreement that suspended the antidumping investigation against Mexican tomato, agreement that has been in force since 1996. The Mexican exporters agreed to a price reference for its sales to the US; however, the American producers (mainly from Florida) consider that the suspension agreement has not been sufficient to avoid the “unfair trading practices”.
The suspension agreement requires a party to notify with 90 days in advance its intent to withdraw, term that started on January 6 and will end on May 7. If under these 90 days the parties do not reach a new agreement, the US will formally withdraw and DOC will continue with its dumping investigation. If a final determination of dumping is found, the International Trade Commission will analyze the injury. Hence, there is a possibility that the US might impose antidumping duties against Mexican tomato.
This is not the first time that the US threatens to withdraw from this agreement, and now it is within the context of USMCA’s ratification.