Order Code IB95117
Issue Brief for Congress
Received through the CRS Web
Sugar Policy Issues
Updated October 18, 2002
Remy Jurenas
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Brief History of the Sugar Program
Main Features of U.S. Sugar Policy
Price Support
Loan Rates
Effective Support Levels
Import Quotas
Sugar Industry, Market, and Program Developments
Structural Changes
Low Sugar Prices and USDA’s Responses
Sugar Program in the 2002 Farm Bill
New Sugar Program’s Provisions
Background on New Program
Farm Bill Debate
Sugar Trade Issues
Sweetener Disputes with Mexico
Mexico’s Tax and Trade Policies on Corn Syrup Imports from the United States
Mexico’s Access to the U.S. Sugar Market
Status of Negotiations
Circumvention of Sugar Import Quotas
Sugar in Negotiations on Future Trade Agreements
LEGISLATION
FOR RELATED INFORMATION, PLEASE SEE THE FOLLOWING CRS PRODUCT:
CRS Electronic Briefing Book on Agriculture Policy and the Farm Bill, Sugar Program

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Sugar Policy Issues
SUMMARY
The sugar program is designed to protect
tive support level by 5-6% compared to that
the incomes of growers of sugarcane and
available over the last 6 years, gives USDA
sugar beets, and those firms that process each
tools to operate the program at no cost, and
crop into sugar. To accomplish this, the U.S.
reactivates “marketing allotments” to limit the
Department of Agriculture (USDA) supports
amount of domestically produced sugar that
domestic prices by making available loans at
processors can sell in the U.S. market. This is
minimum price levels to sugar processors,
intended to meet current import commitments
restricting sugar imports, and limiting the
accepted under two trade agreements.
quantity of domestically-produced sugar that
processors can sell when imports fall below a
In trade promotion legislation (P.L. 107-
certain level (under the marketing allotment
210), sugar producers and cane refiners sought
authority added by the 2002 farm bill).
to establish a mechanism for USDA to follow
to reduce the entry of sugar into the U.S.
Debate on the sugar program included in
market in forms intended to circumvent the
the 2002 farm bill occurred against the back-
sugar import quota. Importers of sugar-con-
drop of structural changes in the production
taining food products opposed a Senate-
sector and an oversupply situation that caused
adopted provision. Conferees clarified that
historically low prices. Processors exercised
products containing molasses were to be made
their right to forfeit loans, which led to the
subject to a quota, but scaled back its scope to
first significant program outlays since the
include Customs in the monitoring of such
mid-1980s. USDA acted to mitigate the effect
imports and to retain flexibility on handling
of low prices with purchases and a paid diver-
any identified circumvention.
sion program, and continues to dispose of its
large acquired sugar inventory.
Sugar producers and users will monitor
how USDA implements the new program’s
In the debate, growers and processors
authorities (especially the marketing allotment
stressed the industry’s importance in provid-
provisions) and what steps USDA takes to
ing jobs and income in rural areas. Sugar
eliminate the balance of its sugar inventory.
users, some cane refiners, and their allies
With mutual recognition that NAFTA sugar
argued U.S. sugar policy costs consumers and
provisions have not worked, U.S.-Mexican
results in lost jobs at food firms in urban
negotiators have intensified efforts to resolve
areas. The sugar production sector proposal
two longstanding sweetener trade disputes.
called for resolving trade disputes, retaining
Though both sides are close to agreement on
current loan rate levels, and relying on domes-
some matters, differences remain on the length
tic marketing controls to control supplies.
of an agreement and how to handle over-quota
Program opponents advocated various ap-
Mexican sugar exports to the U.S. market.
proaches to reduce the level of price support,
Separately, the U.S. sugar production sector
and/or phase out the program by mid-decade.
argues that liberalizing trade in sugar should
The House and Senate rejected opponents’
be addressed in multilateral negotiations but
amendments offered during debate.
excluded from hemispheric and bilateral free
trade agreements. Sugar users advocate in-
The sugar program enacted in the 2002
cluding sugar in all negotiating initiatives the
farm bill (P.L. 107-171) increases the effec-
Bush Administration is pursuing.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
U.S. and Mexican negotiators met the week of October 7, 2002, to reportedly further
clarify their respective positions on resolving two sweetener trade disputes – the sale of U.S.
corn syrup to Mexico and the terms of access for Mexican sugar in the U.S. market. While
both sides have exchanged proposals, two major issues remain unresolved – the time period
that a prospective deal would cover and the terms under which Mexico would sell sugar
above its quota level to U.S. cane refiners.
The U.S. Department of Agriculture (USDA) on September 30, 2002, announced
FY2003 limitations (“allotments”) on the marketing of sugar by raw cane processors and
beet sugar refiners. Its announcement detailed allotments for each cane producing state,
and allocations for each cane processor and beet refiner, reflecting the detailed provisions
of the new sugar program authorized by the 2002 farm bill.
BACKGROUND AND ANALYSIS
Brief History of the Sugar Program
Governments of every sugar producing nation intervene to protect their domestic
industry from fluctuating world market prices. Such intervention is necessary, it is argued,
because both sugar cane and sugar beets must be processed soon after harvest using costly
processing machinery. When farmers significantly reduce production because of low prices,
a cane or beet processing plant typically shuts down, usually never to reopen. This close link
between production and capital intensive processing makes price stability important to
industry survival.
The United States has a long history of protection and support for its sugar industry.
The Sugar Acts of 1934, 1937, and 1948 required the U.S. Department of Agriculture
(USDA) to estimate domestic consumption and to divide this market for sugar by assigning
quotas to U.S. growers and foreign countries, authorized payments to growers when needed
as an incentive to limit production, and levied excise taxes on sugar processed and refined
in the United States. This type of sugar program expired in 1974. Following a 7-year period
of markets relatively open to foreign sugar imports, mandatory price support only in 1977
and 1978, and discretionary support in 1979, Congress included mandatory price support for
sugar in the Agriculture and Food Act of 1981 and the Food Security Act of 1985.
Subsequently, 1990 farm program, 1993 budget reconciliation, and 1996 farm program laws
extended sugar program authority through the 2002 crop year. Even with price protection
available to producers, the United States historically has not produced enough sugar to satisfy
domestic demand and thus continues to be a net sugar importer.
Prior to the early 1980s, domestic sugar growers supplied roughly 55% of the U.S. sugar
market. This share grew over the last 15 years, reflecting the price protection provided by
a sugar program. In FY2001, domestic production filled 88% of U.S. sugar demand for food
and beverage use. As high-fructose corn syrup (HFCS) displaced sugar in the United States
during the early 1980s, and domestic sugar production increased in the late 1980s, foreign
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suppliers absorbed the entire adjustment and saw their share of the U.S. market decline. The
import share of the U.S. sugar market last year was 12%.
U.S. sugar policy maintains domestic sugar prices considerably above the world market
price, and is structured primarily to protect the domestic sugar producing sector (sugar beet
and sugarcane producers, and the processors of their crops) and to ensure a sufficient supply.
As a result of the price differential, U.S. consumers and food product manufacturers pay
more for sugar and manufactured food products where sugar is an ingredient than they would
if imports entered without any restriction.
The sugar program differs from most of the other commodity programs in that USDA
makes no direct payments to growers and processors. Structured this way, taxpayers do not
directly support the program through government expenditures. This fact is highlighted as
a positive feature by the sugar production sector and its supporters. The program’s support
level and import protection, though, keep the U.S. sugar price above the price of sugar traded
internationally, and constitute an indirect subsidy to the production sector by way of higher
costs paid by U.S. sugar users and consumers. Program opponents frequently refer to this
subsidy component to argue for changes to U.S. sugar policy.
Main Features of U.S. Sugar Policy
To support U.S. sugar prices, the USDA extends short-term loans to processors at
statutorily-set price levels and limits imports of foreign sugar. The sugar program, though,
differs from the grains, rice, and cotton programs in that USDA makes no income transfers
or payments to beet and cane growers. In practice, overall U.S. sugar policy operates to
indirectly support the incomes of domestic growers and sugar processors by limiting the
amount of foreign sugar allowed to enter the domestic market. This is accomplished by
using an import quota — a mechanism that is not an integral part of the sugar program’s
statutory authority as laid out in commodity legislation, but which operates as an integral part
to ensure that market prices stay above effective support levels. Accordingly, USDA’s
decisions on the size of the import quota, and now under the newly-authorized program (see
Sugar Program in the 2002 Farm Bill for details), on how it will administer sugar
marketing allotments and other authorities, affects market prices. USDA administers these
policy instruments to ensure that growers and processors realize the benefits of price support
the law provides, whether or not loans are actually taken out.

Price Support
USDA extends price support loans to processors of sugarcane and sugar beets rather
than directly to the farmers who harvest these crops. Growers receive USDA-set minimum
payment levels (a requirement changed slightly by the 2002 farm bill) for deliveries made
to processors who actually take out such loans during the marketing year — a legal
requirement. With those processors that do not take out loans, growers negotiate contracts
that detail delivery prices and other terms. These loans at times are attractive to sugar
processors as a source of short-term credit at below-prime interest rates.

Loan Rates. The 2002 farm bill freezes loan rates — 18¢ per pound for raw cane
sugar and 22.9¢ per lb. for refined beet sugar — at levels first set in 1995 for another 6 years
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(through the 2007 crop year). The loan support for beet sugar is set higher than for raw
sugar, largely reflecting its availability after processing as a product ready for immediate
industrial food and beverage use or for human consumption (unlike raw cane sugar). By
contrast, raw cane sugar must go through a second stage of processing at a cane refinery to
be converted into white refined sugar that is equivalent to refined beet sugar in terms of end
use. Any beet or cane processor that meets statutory requirements can take out a non-
recourse loan at these rates (adjusted by region and other factors). The loan’s “non-recourse”
feature means a processor can exercise the legal right to hand over sugar it initially offered
USDA as collateral to fully repay the loan, if the market price is below the support level
when the loan comes due.
Effective Support Levels. The above loan rates, though, do not serve as the price
floor for each type of sugar. In practice, under the new farm bill, USDA’s aim is to support
the raw cane sugar price (depending upon the region) at not less than 20.1¢ to 21.2¢ per lb.
(i.e., the price support level in a region plus an amount that covers a processor’s cost of
shipping raw cane sugar to a cane refinery plus the interest paid on any price support loan
taken out plus location discounts ). Similarly, USDA seeks to support the refined beet sugar
price at not less than 23.0¢ to 25.9¢ per lb. (i.e., the regional loan rate plus specified
marketing costs plus the interest paid on a price support loan), depending on the region.
USDA has available various authorities to ensure that market prices do not fall below these
“loan forfeiture,” or higher “effective” price support, levels. These include: (1) limiting the
amount of foreign raw sugar imports allowed into the United States for human consumption,
(2) limiting the amount of domestically-produced sugar permitted to be sold under the new
marketing allotment mechanism, and (3) offering sugar in its inventory to processors (and
growers) who agree to reduce production. A loan forfeiture (turning over sugar pledged as
loan collateral to USDA) occurs if a processor concludes, also weighing other factors, that
the domestic market price at the end of the loan term is lower than the “effective” sugar price
support level. These support levels essentially provide a processor with a price guarantee
whenever market prices are lower.
Import Quotas
USDA restricts the quantity of foreign sugar allowed to enter the United States for
refining and sale for domestic food and beverage consumption. By controlling the amount
of sugar allowed to enter, USDA seeks to ensure that market prices do not fall below
effective price support levels and that it does not acquire sugar due to any loan forfeitures.
Tariff-rate quotas (TRQs) are used as the policy instrument to restrict sugar imports to
the extent needed to meet U.S. sugar program objectives. In practice, the U.S. market access
commitment made under World Trade Organization (WTO) rules means that a minimum of
1.256 million ST of foreign sugar must be allowed to enter the domestic market each year.
While the WTO commitment sets a minimum import level, policymakers may allow
additional amounts of sugar to enter if needed to meet domestic demand. In addition, the
United States committed to allow sugar to enter from Mexico under North American Free
Trade Agreement (NAFTA) provisions. The complex terms are detailed in a schedule and
a separate side letter, which lay out rules for calculating how much Mexico can sell to the
U.S. market. Under the WTO and NAFTA agreements, foreign sugar enters under two TRQs
— one for raw cane, another for a small quantity of refined (including specialty) sugar. The
Office of the U.S. Trade Representative (USTR) is responsible for allocating these TRQs
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among 41 eligible countries, including Mexico and Canada. The amount entering under each
quota (the “in-quota” portion) is subject to a zero or low duty. Sugar that enters in amounts
above the WTO quota is subject to a prohibitive tariff, which serves to protect the U.S. sugar
producing sector from the entry of additional foreign sugar. The tariff on above-quota sugar
entering from Mexico under NAFTA continues to decline, and is viewed as a growing threat
by the domestic production sector. In addition, other TRQs limit the import of three
categories of sugar-containing products (certain products containing more than 10% sugar,
other articles containing more than 65% sugar, and blended syrups). Quota and tariff
provisions differ depending on whether these imports enter from Mexico, from Canada, or
from any other country.
USDA on July 30, 2002, set the FY2003 tariff-rate quotas for sugar imports (raw and
refined) at 1.272 million short tons (ST), raw value. This amount is slightly higher than the
U.S. commitment made under WTO rules, and just slightly above the quantity announced
for FY2002. A sugar quota for Mexico under NAFTA provisions or under possibly new
terms still being negotiated will be announced if, and when, both countries reach a resolution
to their longstanding disputes on two sweetener issues (see Sugar Trade Issues).
Sugar Industry, Market, and Program Developments
Those with a direct financial stake in the debate on U.S. sugar policy include:
sugarcane and sugar beet farmers, processors (raw sugar mills and beet sugar refineries), cane
sugar refineries, industrial sugar users (including food and beverage product manufacturers),
foreign countries that export sugar to the U.S. market, corn producers and manufacturers of
high-fructose corn syrup (HFCS), and the federal government.
Congressional debate over sugar policy leading up to the 2002 farm bill changes took
place against the backdrop of structural changes in the industry, historically low domestic
sugar prices caused by oversupply, and the inability of policymakers working within the
1996-enacted U.S. sugar program framework to reconcile the two objectives of protecting
the price of domestic sugar (under the sugar program) and also meeting trade agreement
obligations that allow foreign sugar to enter the U.S. market (under the import quota).
Structural Changes
Seeking since the mid-1990s to capture the financial benefits associated with operating
more efficiently and increasing their market share, two processing firms established a joint
refined beet and cane sugar marketing alliance, another company pursued a strategy of
expanding horizontally in order to be a major player in both beet and cane sugar refining, and
three raw cane mills in Florida integrated vertically by building or purchasing cane refineries
to handle their output.
The decline in domestic sugar prices that began in fall 1999 contributed to the
emergence of severe financial difficulties for firms operating facilities in the higher-cost
sugar producing regions, and for the farmers who delivered crop to them. Two beet refining
factories in California, another beet factory in Nebraska, and two raw cane mills (one in
Hawaii, another in Louisiana), closed their doors in recent years. Others filed for bankruptcy
or have actively sought buyers for unprofitable operations. Imperial Sugar Company
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(operating both beet and cane refining operations) came out of bankruptcy protection in
August 2001. Part of its recovery plan included the sale of its four beet factories in Michigan
to a farmer cooperative. Over the last few months, Imperial Sugar sold another three beet
refineries (located in Montana, Texas and Wyoming) to American Crystal Sugar Company
(a farmer cooperative based in the Red River Valley), and one beet factory in Wyoming to
a grower cooperative. Tate & Lyle (a British firm with multiple sugar and corn sweetener
operations in North America) in mid-2001 completed the sale of its Western Sugar Company
operations in Colorado, Montana, Nebraska, and Wyoming to another farmer cooperative.
Late in 2001, Tate & Lyle completed the sale of its Domino Sugar cane refineries in New
York City, Baltimore, and Louisiana to Flo-Sun, a Florida-based privately-held firm that
harvests cane for processing in its 3 raw cane mills and 2 cane refineries.
Low Sugar Prices and USDA’s Responses
In marketing year 1999/2000, record domestic sugar production from the 1999 crops,
combined with imports of sugar permitted under trade agreements or entering not subject to
any limitation, contributed to a substantial oversupply. Since the U.S. government could not
further reduce imports to accommodate higher domestic sugar output without breaking its
market access commitment to other countries made under World Trade Organization rules,
USDA intervened to bolster market prices that had fallen below effective price support
levels. Government sugar purchases, and USDA’s decision to pay growers sugar “in-kind”
to plow under some of their to-be-harvested crop in order to reduce output, though, did not
raise prices enough to enable processors pay back all of their price support loans when they
came due. Some processors exercised their right to “forfeit” 10% of FY2000 sugar output
(1.1 million ST), and USDA recorded significant program outlays ($465 million in FY2000).
During the 2000/01 marketing year, USDA reduced about one-third of its inventory
under the first sugar payment-in-kind (PIK) program. Lower raw cane sugar output helped
prices to recover above loan forfeiture levels. Refined beet prices, though, did not rise above
their forfeiture levels until late in September 2001, largely due to a reduced production
outlook, and USDA’s policy to continue disposing of its sugar inventory in order to reduce
storage costs and bolster market prices. It announced sales would occur whenever specified
market price levels thresholds were reached, and that it would offer another PIK program.
In the 2001/02 marketing year just ended, USDA further reduced its inventory by
completing a second sugar PIK program, conducting several sales of refined beet sugar, and
facilitating the exchange of some of its acquired raw cane sugar for what some foreign
countries would have shipped to the U.S. market under their respective allocations of the
U.S. sugar TRQ. These initiatives, weather-related concerns about the beet crop outlook in
the Red River Valley area, and expectations that marketing allotments will limit sugar sales
after October 1, 2002, contributed to a firming in both raw cane and refined beet sugar prices.
With year-ending prices around or above loan forfeiture levels, processors did not forfeit on
any price support loans taken out earlier.
Sugar Program in the 2002 Farm Bill
The new sugar program slightly increases effective price support levels for raw cane
sugar and refined beet sugar, and reactivates a mechanism (called “marketing allotments”)
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to limit the amount of domestically produced sugar that can be sold when imports are
projected to be below a specified level. Other provisions require USDA to operate the
program again at no-cost to the federal government, modify some features of the 1996-
enacted program, explicitly authorize a payment-in-kind program for sugar, and prescribe in
great detail how USDA must administer marketing allotments. Certain provisions are
intended to meet the sugar production sector’s objective that the program operate at no cost
to the government.
During floor debate in each chamber, program opponents failed in efforts to reduce the
level of price support, and/or to phase out the current program. The Bush Administration did
not present any proposals with respect to the sugar program, but earlier questioned the
practice of compensating growers for not harvesting a portion of their crop. Conferees easily
resolved the few differences between the House and Senate sugar program provisions. The
most important was an agreement to repeal the 1996-enacted approximate one-cent penalty
imposed on a processor that decides to forfeit any price support loan taken out (i.e., hand
over sugar to the government as payment).
To implement the new program for the 2002 sugar crops, USDA has issued revised
program regulations (published in the August 26, 2002 Federal Register) to reflect farm bill
changes. Other administrative announcements provide details on regional loan rates (issued
September 27), the breakdown of 2002/03 marketing allotments between cane and beet
(August 27), and the allocations of these allotments among cane producing states and all
processors (October 1). The most significant was USDA’s determination of the national
allotment quantity, the subject of a public hearing held September 4. The sugar production
sector commented favorably on USDA’s implementation of allotment-setting authority.
Sugar users (primarily food manufacturing firms) disagreed, stating USDA set the allotments
much lower than called for, when viewed against historical ending stock indicators.
New Sugar Program’s Provisions
The new program is designed to maintain a balance between supply and demand in the
U.S. sugar market, ensure that sugar producers and processors receive enhanced price support
and other program benefits that offset some of the revenue lost to reduced sales under the
new allotment mechanism, and remove most of the federal government’s budgetary
exposure. The program reflects the sugar production sector’s willingness to accept reduced
sales in return for gaining price protection for the entire quantity of sugar that the marketing
allotment mechanism allows processors to sell. The sector’s objective, expecting little
growth in domestic sugar demand and accepting U.S. trade commitments that allow other
countries access for a minimum quantity of their sugar, is to maintain the status quo for as
long as possible, until U.S. market demand for sugar increases and/or trade negotiations
conclude in a way that favors their interests.
Major provisions (with some discussion on a few) –
! reauthorize the sugar program for 6 years (i.e., 2002 to 2007 crop years).
! increase the effective price support level by 5-6% (to a range of 20¢-22¢
per pound for raw cane sugar, and 24¢-27¢ per lb. for refined beet sugar).
Though the loan rates continue at the 1996-enacted levels (18¢ per lb. for
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raw cane sugar, and 22.9¢ per lb. for refined beet sugar), the repeal of the
loan forfeiture penalty (see below) effectively raises by about one cent the
minimum price levels USDA uses to administer the no-cost objective.
! make non-recourse loans available to processors of sugarcane and sugar
beets at the specified loan rates. The loan program is expanded to allow
loans to be made also for in-process sugars and syrups at 80% of the raw
cane or refined beet loan rate.
! repealed the loan forfeiture penalty effective May 13, 2002.
! repealed the sugar marketing assessment retroactively to October 1, 2001.
This will save the sugar production sector about $40 million annually.
! require USDA to operate the sugar program at no cost to the federal
government using two tools – marketing allotments and sugar payment-
in-kind (see below for explanations). USDA is directed to use both tools to
ensure no loan forfeitures occur. In other words, administrative decisions
must be made so that domestic sugar prices do not fall below effective price
support levels that would make it more attractive for processors to hand over
to USDA sugar pledged as collateral for a price support loan.
! require marketing allotments when imports are below 1.531 million short
tons (ST). By limiting the amount of domestically-produced sugar that raw
cane mills and beet refiners can sell, this mechanism ensures that the United
States meets its annual market access commitments for sugar imports under
the WTO agreement (1,255,747 ST) and under NAFTA’s sugar side letter
in effect through FY2007 (up to a maximum 275,578 ST). Provisions detail
the formula that USDA must follow to calculate the amount of domestic
sugar that can be sold (i.e., the total allotment), specify the factors to apply
in making this determination, and split the allotment between the beet and
cane sectors at 54.35% and 45.65%, respectively. Additional rules specify
how the raw cane allotment is to be distributed among sugarcane producing
states, and then among the mills in each state. Separate rules stipulate how
the beet sugar allotment is to be allocated among processing companies
(many of which operate across state lines). Once the detailed calculations
are made, each firm will be able to sell only as much sugar as stated in its
allotment notification received from USDA.
USDA set the 2002/03 marketing year’s overall allotment quantity at 7.7 million ST, almost
9% below projected output. The raw cane sector will absorb much of the impact under this
announcement, being required to hold off from selling 75% of the estimated 745,000 ST of
domestically-produced sugar determined to be in excess. Estimates show the cane sector will
need to reduce its sales by almost 14% of projected production, compared to the 4.3%
reduction that will apply to the beet sugar sector (see table on next page).
! explicitly authorize a sugar payment-in-kind (PIK) mechanism that allows
sugar processors (acting in concert with producers of cane and beets) to
submit bids to obtain sugar in USDA’s inventory in exchange for reducing
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production. This provision supplements 1985 farm bill authority which
USDA tapped to implement the 2000 and 2001 sugar PIK programs.
Comparison of Marketing Allotments to Projected Sugar Production, 2002/03
ESTIMATED
REDUCTION AS
STATUTORY
ANNOUNCED
PROJECTED
REDUCTION IN
SHARE OF
SHARE
ALLOTMENTS
PRODUCTION
SALES
PRODUCTION
percent
1,000 short tons, raw value
percent
Refined Beet
54.35
4,185
4,375
190
4.3
Raw Cane
45.65
3,515
4,070
555
13.6
TOTAL
100.00
7,700
8,445
745
8.8
Note: Allotments reflect USDA’s August 27, 2002 announcement. Projected sugar production reflects
USDA’s October 2002 supply estimate. Sugar sales reductions by sector are derived as the difference
between production and allotments, and will change during the year as USDA revises production
estimates as cane and beet crops are processed into sugar. The amount of sugar required to be held off
the market may also further change, to reflect quarterly USDA recalculations of the national allotment.
! authorize a new storage loan facility program to provide financing to
processors for constructing or upgrading facilities to store and handle raw
cane and refined beet sugar. This will give qualifying processors access to
below-commercial rate financing to install additional facilities for holding
sugar that cannot be sold when marketing restrictions mandated by
allotments are in effect.
! reduce the interest rate USDA charges on price support loans extended to
sugar processors by 100 basis points (1%). This provision is unique to the
new sugar program; loans made available to producers of eligible crops will
continue to carry an interest rate equal to what USDA’s Commodity Credit
Corporation pays the U.S. Treasury for its funds plus 100 basis points.
Final regulations reflect USDA’s decision to apply the same interest rate on sugar non-
recourse loans as it applies to loans extended to other commodities (2.75% for loans made
in October 2002). While the sugar production sector views this as contrary to the enacted
provision, USDA’s stance is the farm bill did not establish a specific sugar loan interest rate.
Background on New Program
The 2002 farm bill’s sugar provisions reflect the recommendations offered by the
American Sugar Alliance (ASA) – representing sugar farmers and processors – in testimony
presented to the House and Senate Agriculture Committees in the spring and early summer
of 2001. The ASA has commended committee and floor actions taken that reinstate a U.S.
sugar policy that “will ensure stable prices for farmers and consumers and operate at no cost
to taxpayers.” It views the “domestic inventory management tool” included in the farm bill
as “restoring balance to the U.S. sugar market” when there is a surplus. Its spokesmen have
acknowledged that the industry “is reluctant to face the prospect of limited marketings in
some years,” but that trade commitments under the WTO and NAFTA agreements require
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the United States to import as much as 1.5 million ST of sugar each year (about 15% of
consumption), “whether we need that sugar or not.” They add that growers and processors
under marketing allotments will have the flexibility to plant as much crops and produce as
much sugar, respectively, as they wish, but noted that processors who increase sugar output
faster than the growth in U.S. demand “may have to postpone the sale of some sugar, and
store that sugar at their expense until the market requires it.”
Farm Bill Debate
The nearly identical sugar programs reported by the House and Senate Agriculture
Committees were challenged by program opponents during floor debate. In the House,
Representatives Dan Miller and George Miller offered an amendment on October 4, 2001,
to replace the Committee’s proposed sugar program with an approach they argued would
result in a sugar policy more oriented to market forces. They had earlier expressed
disappointment that the Agriculture Committee “decided to ignore the failure of the U.S.
sugar program,” noting that the measure approved contains “no meaningful reform” and
turns “the clock back on consumers, workers, taxpayers and the environment.” Their
amendment proposed to retain the current program's non-recourse loan feature, reduce the
current level of sugar price support by almost 6%, increase financial penalties on processors
that hand over sugar to the CCC rather than repay any non-recourse loans taken out, and
designate $300 million from the amendment's savings for conservation and stewardship
programs (with a priority for efforts in the Everglades). Price support would be reduced by
1¢ per pound for raw cane sugar, and 1.2¢ per pound for refined beet sugar (to 17¢ / lb. and
21.6¢ / lb., respectively). Penalties that processors would pay to the CCC would double if
they forfeit on their price support loans (increasing to 2¢ / lb. for raw cane sugar, and 2.14¢
for refined beet sugar). The House rejected this amendment on a 177 to 239 vote.
The Coalition for Sugar Reform (an association of food manufacturers, consumer and
taxpayer advocacy groups, environmental organizations, and publicly-traded cane refiners)
favored this amendment offered during House debate. The Coalition has long claimed that
the current sugar program “is an economic disaster for producers, consumers, workers in
urban centers who are losing their jobs and the food manufacturing industry” and should be
reformed. Its spokesmen have testified “reform” would do this by: (1) securing adequate
supplies for consumers, industrial users, and cane refiners, (2) accommodating present and
future U.S. international trade obligations by providing market access for imports, (3)
removing “the current economic incentives for overproduction, and (4) allowing sugar to
trade at market prices “below support levels when market forces dictate.”
Two Senate amendments offered during debate proposed more sweeping changes to the
sugar program. Both mandated recourse (i.e., removing processors’ access to price
protection) rather than non-recourse loans and the program’s phase out by mid decade.
Senator Lugar’s amendment, offered on December 12, 2001, would have completely phased
out the sugar and other commodity programs after the 2005 crops. Until then, USDA could
only make recourse loans to sugar processors. The level of price support would have been
“progressively and uniformly” lowered starting with the 2003 crops in order to reach zero
in 2006. Prices support would have been replaced with vouchers of up to $30,000 made
available annually through 2006 to any sugar producer who signed a “risk management
contract,” and undertook specified risk management activities such as buying whole farm
revenue insurance and/or contributing to a whole farm stabilization account. This voucher
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system would have applied to all (and not just sugar crop) producers. His proposal was
defeated on a 70-30 vote. Senator Gregg’s amendment (offered December 12) similarly
proposed a recourse loan program to be phased out by 2006, but differed in requiring that the
budget savings be used to increase benefits for the food stamp program’s shelter expense
deduction. His proposal was tabled 71-29 during floor debate. Similar proposals were
introduced as identical bills (H.R. 2081 and S. 1652) earlier in the session.
Sugar Trade Issues
The United States must import sugar to cover the balance of its domestic needs that the
domestic sugar production sector cannot supply – currently about 12%. Accordingly,
provisions found in trade agreements approved by the United States that apply to both
imports and exports of sugar, sugar-containing products, and other sweeteners such as corn
syrup affect the economic interests of the U.S. sugar production sector, domestic cane
refiners, U.S. corn sweetener manufacturers, domestic sugar users, and sugar exporting
countries. These provisions are complex, reflecting compromises made in trade negotiations
and the results of bilateral talks to resolve disputes. These compromises further reflect
Executive Branch efforts to accommodate differences among the economic interests
represented by parties with a stake in U.S. sugar policy.
Trade in sweeteners affects the domestic sugar supply situation, and in turn, the level
of U.S. sugar market prices. Sugar imported under market access commitments made by the
United States in the NAFTA and WTO trade agreements, together with some sugar products
that were not subject to import restrictions until recently, have added, or could under certain
conditions contribute, to a U.S. sugar surplus and pressure prices downward. At present,
efforts to resolve U.S.-Mexican sweetener disputes are the most important sugar trade issue.
The success or failure of continuing negotiations will be a key factor affecting USDA’s
implementation of the new sugar program’s provisions. Economic interests with the most
at stake are the: (1) the U.S. sugar production sector, concerned about the amount of sugar
allowed to enter the domestic market under Mexico’s access under NAFTA’s terms; (2) U.S.
manufacturers of high-fructose corn syrup (HFCS), seeking to take advantage of a market
opportunity opened under NAFTA to sell to the large Mexican market; and (3) the financially
ailing Mexican sugar sector, pressing to expand sales to the U.S. market, in large part until
recently because of concern that its domestic sugar sales would increasingly be displaced
by the Mexican soft drink industry’s import of cheaper HFCS from U.S. corn sweetener
firms. The importance and sensitivity of this matter are reflected in the fact that sweetener
issues have been frequently discussed at meetings held by both countries’ presidents since
the late 1990s.
A provision in the trade promotion authority and adjustment assistance measure
(Section 1002 of P.L. 107-210) addresses in part the domestic sugar industry’s concern that
some sugar-containing products are entering the U.S. market in a deliberate effort to
circumvent the U.S. sugar import quota system. Separately, the sugar production sector
advocates that the Bush Administration address further liberalization in sugar trade in the
comprehensive multilateral WTO negotiations rather than in hemispheric and bilateral free
trade negotiations involving major sugar exporting countries. Sugar users, though, argue that
sugar should not be excluded from any prospective regional or bilateral trade agreement.
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Sweetener Disputes with Mexico
Mexico’s Tax and Trade Policies on Corn Syrup Imports from the United
States. Legislation passed by the Mexican Congress on January 1, 2002, to tax soft drinks
containing corn syrup but not sugar temporarily eliminated the market for U.S. corn and
HFCS (processed from corn) in Mexico and jeopardized the viability of two U.S. companies
that manufacture HFCS there. The U.S. corn and HFCS sectors viewed this as a step back
in negotiating a resolution to the long-standing HFCS dispute, and pressed Administration
officials to persuade Mexican authorities to remove this tax. Observers viewed the new soft
drinks tax, though, as an effort by the Mexican sugar industry to capture back their home
market and apply pressure on the United States to negotiate a comprehensive solution on all
sweetener disputes sooner rather than later. Though Mexican President Fox in late March
suspended the application of this tax through the end of September, the Mexican Congress
on April 2 voted to challenge his decision in the country’s Supreme Court. Reflecting this
uncertainty, U.S. exports to Mexico of corn for processing into sweeteners and also HFCS
remain at noticeably low levels. The imposition of this tax is related to earlier WTO and
NAFTA panel rulings that found Mexico’s 1998 decision to impose anti-dumping duties on
imports of U.S.-produced HFCS to prevent further damage to its domestic sugar sector was
inconsistent with its trade commitments. To comply with them, Mexico on April 22
established a new tariff rate quota for HFCS imports from the United States. Imports above
the 148,000 metric tons (MT) quota will be subject to a 210% duty. Observers note that this
quota equals the amount of Mexican sugar the U.S. government allowed to enter in FY2003
under NAFTA (see below) and WTO provisions. In subsequent action, Mexico completely
lifted its high anti-dumping duties on imports of U.S. HFCS in mid May 2002. Mexico’s
Supreme Court on July 12, 2002, reinstated the 20% tax on soft drinks manufactured with
HFCS.
Mexico’s Access to the U.S. Sugar Market. Starting October 1, 2000, Mexico
under NAFTA became eligible to ship much more sugar duty free to the U.S. market than
the 25,000 MT allowed to enter in earlier years. Until recently, U.S. and Mexican
negotiators disagreed, however, over just how much sugar Mexico actually could export to
the United States. Their disagreement centered on which version of the NAFTA agreement
governed this issue. U.S. negotiators based their position on the sugar side letter (dated
November 3, 1993) to the NAFTA agreement that was struck in last minute talks between
U.S. Trade Representative and his Mexican counterpart. The side letter was included along
with other NAFTA documents that President Clinton submitted to Congress together with
the implementing legislation. Mexican negotiators instead based their position on the sugar
provisions found in the August 1992 NAFTA agreement and signed by each country’s
president in December 1992.
The side letter effectively placed a lower cap on duty-free imports of Mexican sugar into
the U.S. market than the ceiling would have been under the original NAFTA agreement. The
side letter accomplished this by: (1) redefining the original formula for “net production
surplus” – the amount of sugar that one country could ship to the other duty free – to also add
consumption of HFCS, and (2) raising, but keeping level, the maximum amount that could
enter duty free during the FY2001-FY2007 period. Using FY2002 to illustrate, Mexico
under the side letter’s terms can export its “net surplus” but not more than 250,000 MT of
sugar duty free. USDA announced on September 18, 2001, that Mexico under the side
letter’s formula can sell 137,788 MT of sugar to the United States in FY2002. Under the
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original NAFTA agreement, Mexico (if determined to be a net surplus producer under the
original agreement’s formula for two consecutive years) would have been able to ship its
entire projected net sugar surplus. If this formula were used, Mexican officials argued that
550,000 MT would have been eligible for entry.
The U.S. sugar production sector has been concerned that a decision not to abide by the
side letter would result in a flood of additional Mexican sugar into an already well-supplied
U.S. market. U.S. cane refiners have held firm to their position that Mexican shipments be
in the form of raw rather than refined cane sugar, so as not to undercut U.S. refining capacity.
U.S. manufacturers of HFCS have signaled they want their concern about access to the
Mexican market addressed. Looking forward, the U.S. sugar industry is most apprehensive
about the impact of other NAFTA provisions that are scheduled to take effect. These include
substantial over-quota sugar imports from Mexico projected to occur starting in FY2004
(e.g., likely to be price competitive in the U.S. market should world sugar prices fall to
historically low levels), and unlimited duty-free imports beginning in FY2008.
Status of Negotiations. Statements made by U.S. and Mexican negotiators suggest
they have laid aside the issue of whether or not NAFTA’s sugar side letter applies, in favor
of pursuing negotiations to arrive at a comprehensive sweetener agreement acceptable to both
sides and their respective domestic interests. On July 15, 2002, USTR presented a proposal
to the Mexican Government that effectively would double the level of access for Mexican
sugar to the U.S. market if Mexico reciprocates to allow imports of an equal amount of U.S-
produced HFCS. The U.S. proposal contained a number of other features to address other
issues of concern to both the U.S. corn refiner and sugar sectors. The Mexican government
responded in late August, and again in late September, with its counterproposal. The status
of key negotiating positions to date is as follows. On duty-free access to the U.S. market for
its sugar, Mexico proposes a 300,000 MT quota (compared to the U.S. offer of 275,000 MT).
Both sides have agreed that Mexico would receive additional access equal to 25% of any
growth in the U.S. sugar market over the agreement period. On HFCS exports to Mexico,
each side proposes a duty-free quota equal to the U.S. sugar quota level. Reacting to the U.S.
proviso (intended to protect U.S. cane refiners) that Mexican sugar shipments be split 80%
raw / 20% refined, Mexico proposes to condition HFCS imports to a 50/50 split between its
soft drink and bakeries industries. U.S. corn refiners oppose this, viewing such a split as
restricting market access since almost all HFCS export sales are to the soft drink sector.
Mexico would repeal its 20% tax on HFCS-sweetened soft drinks as part of a deal.
Differences, though, remain on two key issues – the duration of an agreement, and
treatment of over-quota sugar imports from Mexico. The United States reportedly is seeking
a “permanent agreement” to allow for some restraint on sugar imports after 2008, a position
sought by the U.S. sugar sector. Mexico wants any agreement to expire by 2008 to reflect
NAFTA’s original timetable. U.S. negotiators want Mexico to commit to shipping not more
than its quota amount (e.g., not take advantage of NAFTA’s declining tariffs on over-quota
imports). Mexico has signaled it may accept this, depending on how the U.S. side proposes
to implement such a commitment. The United States also has reportedly proposed a peace
clause against taking any anti-dumping action against over-quota sugar imports, in exchange
for Mexico giving up its NAFTA rights after 2008. Adding pressure to the negotiations are
calls by Mexican legislators that its government hold off complying with NAFTA provisions
that eliminate quotas and tariffs on U.S. imports of potatoes, pork, poultry, among other
products, effective January 1, 2003, and the prospect that if the United States applied the side
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letter’s provisions in FY2003, Mexican access to the U.S. sugar market would be much
smaller than FY2002's 148,000 MT.
Circumvention of Sugar Import Quotas
The sugar production and cane refining sectors have pursued a legislative remedy to
prevent U.S. firms from taking advantage of tariff “loopholes” to import sugar outside of (to
“circumvent”) the existing sugar and sugar-containing product TRQs. This initiative is one
of the three “pillars” the production sector has sought in order to achieve a sugar policy that
accomplishes their objective of achieving a supply-demand balance that protects their
interests. Sugar producers, processors, and refiners, citing the “stuffed molasses” case as a
prime example,1 have argued that imports of some sugar mixtures and products have
undermined the domestic sugar industry by adding to the sugar surplus.
During Senate Finance Committee markup of trade adjustment assistance legislation (S.
1209) on December 4, 2001, Members approved an amendment offered by Senator Breaux
to authorize USDA to identify imports that are circumventing the TRQs on sugars, syrups,
or sugar-containing products, and to require the President to include such-identified products
in proclaiming revisions to these quota provisions. This provision was included in the trade
promotion authority and adjustment assistance legislative package (Section 1002 of H.R.
3009) passed by the Senate on May 23, 2002. There was no comparable provision in the
trade bill package that the House on June 26 agreed to. House and Senate conferees
subsequently reached agreement on July 26 on a compromise to the Senate provision. The
conference report clarified that certain products containing molasses were to be made subject
to a specific sugar TRQ, but pared back the scope of the Senate language to also include
1 Starting in the mid-1990s, controversy surrounded the import by a Michigan company (Heartland
By-Products, Inc.) of a liquid sugar syrup (i.e., “stuffed molasses”) from Canada. This product was
created from sugar imported into Canada at the low world price primarily from Brazil, mixed with
molasses and water, and then shipped duty free to the United States taking advantage of a specific
tariff provision. Using special equipment, this firm extracted sugar from this syrup and reportedly
shipped the remaining molasses back to Canada where the process started over again. Concerned
that this industrial-grade sugar sold to U.S. food companies displaced sales of domestically produced
beet sugar (an estimated 118,000 short tons in 1999/00 – equal to 1.2% of total domestic food use
that year), U.S. beet and cane refiners sought a remedy to block its import. Refiners argued that
stuffed molasses was imported deliberately to circumvent the sugar TRQ, by entering under a tariff
line that did not subject it to quota restrictions and high tariffs.
Seeking to “close this loophole,” these refiners since early 1998 sought relief from U.S.
Customs and then the courts. This process culminated in a court decision issued August 30, 2001,
when the U.S. Circuit Court of Appeals in Washington unanimously ruled in favor of the U.S.
Government and the Beet Refiners’ Association. Its decision upheld the Customs’ 1999 ruling that
imports of stuffed molasses should be subject to the sugar import TRQ’s limits. In its decision, the
3-judge panel stated that the U.S. Court of International Trade (in countering Custom’s ruling in a
subsequent decision) went too far in determining that this product was not foreign in origin and thus
not covered by the TRQ. The American Sugar Alliance representing growers and processors
applauded the decision, stating it “cuts off one avenue for circumventing the sugar import rules.”
The U.S. Supreme Court on October 7, 2002, denied a petition filed by Heartland to hear an appeal
of the August 2001 Circuit Court of Appeals ruling.
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Customs in monitoring such imports and to retain flexibility for the Executive Branch and
Congress on how any identified circumvention is to be handled (Section 1002 of P.L. 107-
210). The compromise language, depending on how implemented, initially may serve to stop
the flow of easily identifiable “stuffed molasses”-like products. Most observers, though, do
not view it as sweeping in scope compared to the language initially introduced.
A coalition of food groups opposed the Senate-passed provision, arguing that it
represented “a direct attempt to close the borders to lawfully imported sugar containing
products.” It pointed out that the amendment was so broadly written that food products that
contain sugar, such as gelatin or ice tea mix, could be placed under a TRQ, despite its stated
intent to target only those products that “circumvent” TRQs. The coalition claimed the
wording failed to define “circumvention,” gave USDA “no effective guidance” on how to
identify products for reclassification in a TRQ, allowed for no review by the President or the
courts of USDA determinations, and undermined the Department of Treasury’s role in
administering tariff laws by creating an exception for sugar-containing products. This
coalition further stated the amendment could violate U.S. trade agreements and invite foreign
retaliation. Sixty House members laid out these same arguments in a late June letter to
House trade bill conferees, and asked that they reject the Senate amendment in conference.
The sugar industry argued the Senate provision would enhance the function that TRQs
perform in U.S. sugar policy by establishing a process to protect the industry from the impact
of products containing sugar being imported into the United States in forms that have no
commercial use. Inside U.S. Trade reported that one industry source stated the language
“does not cover any finished products or any products with any commercial use in the form
in which it is imported.” The food group coalition, though, countered that the wording
would require USDA to identify imports of manufactured food products found in four
chapters of the Harmonized Tariff Schedule as circumventing the sugar and related product
TRQs. The sugar industry also claimed that the provision would protect the market access
of those countries with a share of the U.S. sugar TRQ by ensuring that their sales of sugar
do not decline as a result of sugar-containing products entering intentionally to circumvent
the TRQ. The American Sugar Alliance commended the inclusion of the anti-circumvention
provision in the trade bill conference report.
Sugar in Negotiations on Future Trade Agreements
Whether, and on what terms, to liberalize trade in sugar and sugar-containing products
in prospective trade agreements could prove to be a contentious issue for U.S. negotiators.
Exporting countries have signaled they want these agreements to provide increased access
for their sugar to the higher-priced U.S. market. The U.S. sugar production sector is
concerned that any additional entry of sugar and products under bilateral and regional trade
agreements would undermine its market share, threaten the viability of the domestic sugar
program, and result in significant loan forfeitures. U.S. manufacturers which use sugar in
food products and beverages favor opening up the domestic market to additional imports,
foreseeing that the resulting lower sugar prices would benefit them and consumers.
Sugar trade is expected to be more of an issue in negotiating the hemispheric Free Trade
Area of the Americas (FTAA) and a free trade agreement with five Central American
countries (CAFTA) than in multilateral efforts to reach an agreement on the pace and terms
of liberalizing agricultural trade under the WTO framework. With Brazil and Guatemala
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viewed as major low-cost sugar producing and exporting countries in South America and
Central America, respectively, free trade agreements (FTAs) that the United States might
enter into with them conceivably would allow for additional sales of sugar to the U.S. market
than now permitted under their allocated shares of the U.S. sugar TRQ. Brazil’s negotiators
frequently mention sugar as one commodity they expect would significantly benefit under
the FTAA. Since the inherent objective of any free trade agreement is to eliminate all border
protection on all imports (including agricultural commodities) within some specified time
period, the scenario of removing current U.S. quota provisions and tariffs on imports of sugar
and sugar containing products from countries that are signatories to these agreements would
result in additional U.S. sugar imports. This assumes the U.S. domestic price remains
significantly higher than the world sugar price, with this difference (or price premium)
serving as the incentive for exporters to sell to the U.S. market rather than to the rest of the
world. By contrast, any multilateral agreement that emerges from the WTO’s Doha
Development Round will reduce to some extent those trade-distorting policies used by
countries to support their sugar and other commodity sectors. The degree to which such
reductions might occur will not begin to become apparent until March 2003, when
negotiators must settle upon the parameters and process that each country must use to
develop specific reductions in trade distorting policies to arrive a broad multilateral
agreement by late 2004. Though still early to call, the final text and accompanying schedules
that emerge are not expected to require the complete phasing out of such policies in all
countries’ sugar sectors, and thus would affect the U.S. sugar sector likely only at the margin.
The American Sugar Alliance (ASA) representing sugar crop farmers and processors
argues that the Bush Administration’s efforts should be to “reform the world sugar market
through comprehensive, sector-specific WTO negotiations” and not through regional or
bilateral trade agreements. ASA supports the goal of global free trade (including for sugar)
through the WTO, which it views as the best venue for addressing “the complex array of
government policies that distort the world sugar market” on a multilateral and comprehensive
basis. Spokesmen frequently mention subsidies that various countries use to “encourage the
dumping of sugar at a fraction of what it costs to produce it.” For this reason, ASA opposes
negotiating sugar trade provisions in regional agreements because it claims the most
damaging government policies (citing Brazil’s sugarcane-ethanol subsidies, the Mexican
government’s ownership of sugar mills, and the European Union’s (EU) sugar export subsidy
regime) will not be addressed by the FTAA negotiations. It also fears that sizable sugar
exports from CAFTA countries would injure U.S. sugar producers and not benefit consumers
in the form of lower prices.
The Sweetener Users Association (SUA) (comprised of industrial users of sugar and
other caloric sweeteners and the trade associations which represent them) and the Coalition
for Sugar Reform (CSR) (trade associations for food and beverage manufacturers, some cane
refiners, taxpayer advocacy organizations, environmental groups and consumer organizations
that advocate reform of U.S. sugar policies) support the Bush Administration’s proposal
tabled at the WTO to further liberalize agricultural trade as well as its FTAA and bilateral
FTA negotiating objectives. Submitted in July 2002, it calls for eliminating export subsidies,
reducing tariffs on any agricultural product to not more than 25%, and expanding the in-
quota amount of current tariff-rate quotas (TRQs) by 20%. SUA expects that under this
proposal “world sweetener markets will operate more efficiently and fairly,” as EU’s export
subsidies are phased out and U.S. sugar import quotas become more market oriented. Both
groups argue that liberalizing trade in sugar would benefit the U.S. economy through lower
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prices, encourage product innovation and stimulate demand, keep food manufacturing jobs
in the United States rather than see them move overseas, help maintain a viable cane refining
industry with its well-paid union jobs, and stimulate competition and thus thwart excessive
industry concentration.
LEGISLATION
P.L. 107-171 (H.R. 2646)
Farm Security and Rural Investment Act of 2002. Title I, Subtitle C, Chapter 2 amends
the Agricultural Market Transition Act of 1996 to authorize a sugar program for the 2002-
2007 sugar crops. House Agriculture Committee’s passed its bill by voice vote on July 27,
2001. H.Rept. 107-191, Part 1, filed August 2; Part II filed August 31. During floor debate
October 4, the House rejected (177-239) amendment 343 offered by Representative Dan
Miller to extend the sugar program at reduced loan rates. Measure (as amended) passed
House 291-120 October 5. The Senate Agriculture Committee during markup on November
15, approved (12-9) a commodity title that includes a revamped sugar program. During floor
debate on December 12 on S. 1731 (S.Rept. 107-117, filed December 7), Senate tabled (71-
29) S.Amdt. 2466 offered by Senator Gregg to phase out the sugar program and use any
resulting savings to improve nutrition assistance. Senate approved in mid-February 2002 by
voice vote 2 technical amendments (to modify process for allocating allotments to beet
refiners (S.Amdt. 2836) offered by Senator Conrad; and to authorize USDA to increase the
sugar import quota to make up for any shortfall in the amount of sugar countries supply to
the U.S. market (S.Amdt. 2829) offered by Senator Feinstein. Senate passed its farm bill
amended with slightly different sugar provisions on February 13, 2002. Conference report
(H.Rept. 107-424) filed May 1. On May 2, House motion to recommit with instructions to
conference committee failed 172-251. House later that day agreed (280-141) to conference
report. Senate agreed (64-35) to conference report on May 8. Signed into law May 13, 2002.
P.L. 107-210 (H.R. 3009)
Trade Act of 2002. Section 1002 of Division A (Trade Adjustment Assistance) as
passed by the Senate on May 23, 2002 required USDA to set up a procedure to identify and
stop violators of the tariff-rate quotas on sugar, syrups, and related sugar-containing products.
This language was identical to the amendment text offered on December 4, 2001 by Senator
Breaux and adopted by voice vote by the Senate Finance Committee during markup of S.
1209. Section 1002 (Sugar Policy) was included in S.Amdt. 3401 offered by Senators
Baucus and Grassley on May 10, 2002 to H.R. 3009, which the Senate agreed to by voice
vote on May 23. The Senate passed (66-30) its version of H.R. 3009 on May 23. House on
June 26 adopted H.Res. 450 (216-215) that effectively combined its earlier-passed measure
with other trade bills (further amended) in order to enter into conference with the Senate.
The Conference committee arrived at a compromise to the Senate-passed provision (new
Section 5203), and filed conference report (H.Rept. 107-624) on July 26. House agreed
(215-212) to report on July 27. Senate agreed (64-34) on August 1. Signed into law on
August 6, 2002.
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