Tom Karst

September 19, 2019

The new normal for U.S. imports of Mexican tomatoes is signed, sealed and delivered.

With tweaks finalized Sept. 17 by the Commerce Department, representatives of Mexican tomato growers signed a new suspension agreement the early afternoon of Sept. 19. 

The new agreement will end — likely within a couple of days — the 17.56% duty paid by importers of Mexican tomatoes since early May and replace it with minimum reference prices for U.S. imports of Mexican tomatoes. The agreement, which will be reviewed in five years, also suspends the dumping investigation of Mexican tomatoes into the U.S.

The Department of Commerce and representatives of Mexican grower groups had initialed a draft Agreement Suspending the Antidumping Duty Investigation on Fresh Tomatoes from Mexico on Aug. 20.

The Department of Commerce said it reviewed comments on the draft agreement and have incorporated changes into the final text, signed on Sept. 19

“Today’s successful outcome validates the Administration’s strong and smart approach to negotiating trade deals,” Secretary of Commerce Wilbur Ross said in a news release.  “The Department’s action brought the Mexican growers to the negotiating table and led to a result that protects U.S. tomato producers from unfair trade. It also removes major uncertainties for the Mexican growers and their workers.”

The suspension agreement, according to the release, completely eliminates the injurious effects of unfairly priced Mexican tomatoes, prevents price suppression and undercutting, and eliminates substantially all dumping, while allowing Commerce to audit up to 80 Mexican tomato producers and U.S. sellers per quarter, or more with good cause. 

In addition, the release said the agreement also closes loopholes from past suspension agreements that permitted sales below the reference prices in certain circumstances and includes an inspection mechanism to prevent the importation of low-quality, poor-condition tomatoes from Mexico, which can have price-suppressive effects on the market. 

The Department of Commerce said the Sept. 19 agreement stems from a Nov. 14 request last year from the Florida Tomato Exchange that Commerce terminate the 2013 Suspension Agreement on Fresh Tomatoes from Mexico.

On Feb. 6 this year, Commerce notified the Mexican signatories that it would withdraw from the 2013 Suspension Agreement.  On May 7, the 2013 Suspension Agreement was terminated and, as a result, Commerce continued its antidumping investigation on imports of fresh tomatoes from Mexico. 

“Today’s action exemplifies the Trump Administration’s priority of enforcing U.S. trade laws while ensuring that trade agreements are fair, reciprocal, and benefit American farmers, workers, businesses, and consumers,” the release said. “Tomato producers across America, including those in Florida, Texas, and Arizona, will benefit from this agreement.”

Reaction

The Fresh Produce Association of the Americas said in a statement that the deal comes with “extreme cost” to importers. The FPAA said importers will face unjustified costs and disruption to business due to the border inspection requirement, which the group called a technical barrier to trade.

“It is outrageous that Commerce used false justifications to introduce what essentially acts as a quota or volume control method,” Lance Jungmeyer, president of the Fresh Produce Association of the Americas, said in the release.  “It is completely unnecessary to require USDA to conduct quality inspections on an item that has already demonstrated a historical pass rate of 99.76%.”

The FPAA estimated that constructing new warehouse space for inspections will cost importers more than $200 million upfront, plus another $50 million a year in fees and other costs.

Jungmeyer said the inspection provision may invite other countries to impose similar requirements on U.S. exports. “All around, this is a total step backward.”

On the other  hand, the Florida Tomato Exchange said in a statement that the signing of the agreement is a “step in the right direction to stop further injury to American farmers caused by dumped Mexican tomatoes.”
The statement said the new suspension agreement includes strong monitoring, enforcement and anti-circumvention provisions, including border inspections, “that should help eliminate the injury to American tomato farmers caused by dumped Mexican tomatoes.” 

“The border inspections will only cover about 66% of imported Mexican tomatoes, but this provision should discourage dumping of low quality and defective tomatoes, which have been depressing prices and injuring U.S. tomato producers for years,” the statement said.

“The FTE appreciates the very hard work of Assistant Secretary Jeffrey Kessler and Deputy Assistant Secretary Lee Smith, along with their full team, in reaching this new agreement with the Mexican industry,” the group said. “We also appreciate the crucial work by the U.S. Department of Agriculture in helping develop the border inspection system.”

Sen. Marco Rubio, R-Fla., said in a statement that the agreement is a "significant win" for U.S. tomato growers. 

"I thank President Trump and Secretary Ross for not backing down from their commitment to ensure that tomato growers in Florida and across the U.S. are able to fairly compete in our domestic market,” Rubio said in the statement. “This new agreement includes strong monitoring, enforcement and anti-circumvention provisions to defend American-grown produce and should serve as a model for helping to rebalance agricultural trade with Mexico.”

Mexican tomato interests expressed satisfaction with the agreement.

“The agreement was hard-fought, but we were able to secure a number of important provisions that will make this deal work for our distributors and customers,” Mario Robles, director of the Sinaloa growers association, said in a statement released by Mexican tomato growers.

One of the provisions in the agreement, according to Robles, is the commitment that mandatory inspections required by the deal will be conducted by the U.S. Department of Agriculture in accordance with its normal practice, including being done in a timely manner and completed within 24 hours. 

The Department of Commerce also committed that the inspection program – which does not take effect for at least six months – will be developed and implemented in consultation with experts at the USDA, according to the statement.

“These provisions help relieve our concerns that the U.S. was setting up a de facto quota or volume restriction,” Rosario Beltran, president of the grower association CAADES, said in the statement. “We hope these provisions will give comfort to the many interests in both countries concerned about bottlenecks at the border and supply chain delays.” 

Mexican tomato growers, according to the statement, were also able to preserve the ability to sell directly to U.S. retailers and otherwise protect the rights of these and other U.S. buyers to seek damages in the “infrequent event” of a breach of warranty. “It was very important to us that our U.S. customers not lose their options and we are happy that Commerce agreed,” Salvador Garcia, president of the Baja growers association, said in the release.

“Considering that we started the negotiations with Commerce with the Florida Tomato Exchange demanding that the reference prices should be extended downstream to the final sale and that U.S. buyers be stripped of legal rights, we believe we have ended up in a much better place,” Oscar Woltman, President of AMHPAC, Mexico’s largest growers’ association.

“We take the Department of Commerce at its word that the agreement is not designed to impede trade and we thank the Department’s team for working with us to make important changes to the agreement in the last 30 days,” Antonio Gandara, president of the Sonora growers association, said in the release. “We look forward to continue supplying the best tomatoes in the world to U.S. consumers.”

The Florida Tomato Exchange said in their statement that the agreement can only work if it is enforced.

“The FTE looks forward to working with the Commerce Department and the USDA to ensure that the agreement is enforced vigorously and to identify and stop all efforts to circumvent or undermine its provisions, especially the border inspection system,” the group said. The Florida Tomato Exchange member companies produce close to 50% of the fresh-market tomatoes grown in the U.S., the group states. The Florida Tomato Exchange is the domestic petitioner in the antidumping case against fresh tomatoes from Mexico.