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UPDATED: Deal struck between Commerce Department, Mexican growers

10:21AM Aug 21, 2019
Tomato suspension agreement
File photo

(UPDATED, 1:28 p.m.) Mexican tomato growers and the U.S. Commerce Department struck a deal for a new tomato suspension agreement late Aug. 20.

The five-year agreement enters a public comment period and goes into effect Sept. 19.

Mexican tomato growers released a statement indicating a deal was reached “minutes before midnight” on Aug. 20 to suspend the anti-dumping investigation that was reactivated May 7 this year after the Commerce Department pulled out of the 2013 agreement in response to complaints from domestic growers.

A series of five-year suspension agreements between Mexican growers and the Commerce Department since 1996 had set minimum prices for Mexican tomato imports and suspended U.S. dumping investigations and duties.

The Florida Tomato Exchange said in a statement that the new agreement is “strong,” replacing 23 years of suspension agreements that “never worked to protect American tomato growers from injurious dumping of Mexican tomatoes”

“The agreement establishes unprecedented measures and enforcement provisions that will help protect American tomato farmers from injurious dumped Mexican tomatoes,” the statement said. 

The group commended the Commerce Department and the Mexican industry for coming to an agreement that recognizes the need for stronger enforcement.

“The new tomato antidumping suspension agreement includes major provisions requested by U.S. growers to improve enforcement and monitoring of the agreement,” the statement said. The Mexican industry conceded on core provisions such as border inspections of all Mexican round, roma and bulk grape tomatoes, according to the statement, along with improved compliance and monitoring tools.

“Without these and other new provisions, the agreement will not eliminate the injury being caused by unfairly traded Mexican tomatoes,” the statement said. “We look forward to this agreement being implemented in 30 days from now,” the Florida Tomato Exchange said in the statement.

The Department of Commerce has started a public comment period on the deal that will end Sept. 9, according to the draft agreement.

According to a statement from Mexican tomato growers, the new agreement will go into effect on Sept. 19.

Importers will be entitled to reimbursement of cash deposits made from May 7 to that date, according to the statement. Mexican tomato growers have been subject to an initial 17.56% antidumping duty since May 7. A final determination of injury had been expected by Sept. 19, but that process will now be suspended with the agreement. The Department of Commerce in late July announced a preliminary dumping margin of 25.28% on Mexican tomato imports following its investigation whether tomatoes from Mexico are being dumped into the U.S. 

The Fresh Produce Association of the Americas issued a statement Aug. 21 that expressed mixed feelings about the deal.

“The Fresh Produce Association of the Americas is gratified that the United States Department of Commerce and Mexican tomato growers have produced a new draft Tomato Suspension Agreement that will end the current duties on tomatoes exported from Mexico to the U.S.,” the statement said.

“At the same time, the FPAA is profoundly concerned that a provision in the draft agreement appears to require inspections of up to 92% of all lots of tomatoes from Mexico at the U.S. border.”

However, the Department of Commerce press office said in an e-mail that the 92% figure cited by FPAA is inaccurate because it incorrectly includes tomatoes on the vine (TOVs), which are explicitly excluded from the near-the-border inspection requirement under the draft agreement. 

See related story:  Inspection provision in Mexico tomato deal draws critics

Instead,  Commerce estimates that the correct figure of Mexican tomatoes subject to inspection at 66%. The agency said that products subject to near-the-border inspections under the draft suspension agreement (shares of U.S. import volumes of tomatoes from Mexico) are:

  • Protected romas: 26.3%
  • Protected rounds, other than TOVs: 12.36%
  • Open field romas: 17.1%
  • Open field rounds: 8.2%
  • Bulk grapes: 2.4%

Lance Jungmeyer, president of the FPAA, said in the statement that the inspections have the potential to destabilize the U.S. tomato market.

“U.S. importers and marketers of Mexican tomatoes will bear what amounts to punitive costs associated with such levels of inspection. Because of the sheer volume of tomatoes shipped north from Mexico to the U.S., we can expect the inspections to create substantial delays that compromise the quality, affordability and availability of tomatoes to American consumers and will create bottlenecks for other goods crossing the border.” 

Jungmeyer also said that while FPAA commends the U.S. Department of Commerce and tomato producers in Mexico for months of work to revise the tomato suspension agreement,  the association strongly urges both to consider their members’ concerns and those of many other American companies and consumers during the coming 30-day comment period. 

He noted that the heightened inspections are slated to start about six months after the new tomato suspension Agreement, if the deal is finalized on September 19.

“The inspection provision is essentially a non-tariff trade barrier whose ripple effects will not only damage the U.S. tomato market but many other industries that trade with Mexico,” Jungmeyer said in the statement.

Tomatoes, he said, make up almost 20% of produce imports that flow from Mexico through the Nogales port of entry. Increasing the volume of tomatoes to be inspected there will only create bottlenecks for all goods at the border, according to the FPAA.

FPAA estimates that it will cost $220 million to construct the warehouse space needed for these enhanced inspections, as well as other related costs of close to $50 million per year, according to the statement.

If the changes are ratified, FPAA said the reference price of Mexican organic tomatoes will likely rise by as much as 40% more than the price of conventional tomatoes.

 “We worry that U.S. market will not be able to bear this dramatic cost increase,” Jungmeyer said in the statement. “It will almost certainly  and dramatically reduce the availability of organic tomatoes for the many U.S. consumers who prefer them.”

The new suspension agreement includes mandatory quality inspections and increases in floor prices on Mexican tomatoes.

According to the draft agreement, the inspection requirement will begin about six months from the effective date, and the tomato trade will have at least 60 days advance notice before the inspection program begins.

The United Fresh Produce Association issued a statement Aug. 21 about the deal:

“Early this morning, United Fresh learned that the Mexican tomato industry and the United States Department of Commerce have come to an agreement on a new tomato suspension agreement that would suspend the anti-dumping investigation which was reactivated on May 7, 2019," the statement said.

"This will now start a 30 day public comment period with a new agreement entering into force on September 19, 2019, suspending the final determination of Department of Commerce and allow importers to be reimbursed of cash deposits made since May 7. The details of the agreement have yet to be announced, but United Fresh would like to congratulate all of those involved to resolve this matter to bring stabilization back to the tomato marketplace. This will be beneficial for the entire distribution chain, most importantly growers and consumers.”

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