December 31, 2014
New Era Dawns in U.S.-Mexico Sugar Trade
On December 19, 2014, the U.S. Department of Commerce
(DOC) signed an agreement with the Government of
Mexico suspending the agency’s countervailing duty
(CVD) investigation into subsidization of Mexican sugar
exports. The DOC also signed a second agreement with
Mexican sugar producers and exporters that suspends an
antidumping (AD) duty investigation into Mexican sugar
exports to the United States. Beginning in 2008, Mexican
sugar exporters occupied a uniquely favored position
among sugar exporters supplying the U.S. market, because
the North American Free Trade Agreement (NAFTA)
provided Mexican sugar with unlimited, duty-free access.
The two suspension agreements fundamentally alter the
nature of trade in sugar between Mexico and the United
States: first by imposing volume limits on Mexican sugar
exports to the U.S. market, and second by setting minimum
price levels for the exported sugar.
(ASC). The ASC alleged that exported sugar from Mexico
was being subsidized and was entering the U.S. market at
less than fair value—defined as below the sale price in
Mexico, or below the cost of production—thereby injuring
the U.S. sugar industry.
Mexican Sugar in the U.S. Market
Mexico has been a significant source of sugar in the U.S.
market in recent years, as Figure 1 illustrates. During the
three most recently completed marketing years, from
2011/2012 to 2013/2014, Mexican sugar amounted to
between 9% and 17% of the sum of U.S. sugar production
and total sugar imports, while averaging 13% over this
Figure 1. Sources of U.S. Sugar Supply
Historically, the U.S. sugar market has been managed to
help stabilize supplies and prices (see CRS Report R42535,
Sugar Program: The Basics, by Mark A. McMinimy).
Prices of U.S. sugar are supported via government
commodity loans and by limiting supplies of sugar for
human use. Domestic production for human consumption is
managed through marketing allotments, while imports of
sugar are controlled via tariff-rate quotas (TRQs). Prior to
the finalization of the two sugar suspension agreements, the
exception to the limit on sugar imports was Mexican sugar,
which had unrestricted, duty-free access to the U.S. market
The two CVD and AD agreements signed in December
2014 suspend the CVD and AD investigations that led
U.S. government agencies to issue preliminary findings that
Mexican sugar was being subsidized by the Mexican
government, and sold in the U.S. market at less than fair
value. Based on these preliminary findings, the DOC had
imposed cumulative duties on U.S. imports of Mexican
sugar, ranging from 2.99% to 17.01% under the CVD order
and from 39.54% to 47.26% under the AD order. Final
determinations in the two investigations had not yet been
issued when the agreements were signed. A negative final
determination in either of the two investigations (i.e., an
outcome that did not affirm the preliminary findings that
Mexican sugar was being subsidized and dumped in the
U.S. market) would have negated the corresponding duties.
The suspension agreements are the end result of parallel
CVD and AD investigations initiated in the spring of 2014
by the International Trade Commission (ITC) and the
International Trade Administration (ITA) of the DOC in
response to petitions filed by the American Sugar Coalition
Elements in the Suspension Agreements
• Both agreements cover raw, estandar, or standard, highpolarity or semi-refined, special white, refined, brown,
edible molasses, desugaring molasses, organic raw, and
organic refined sugars, as well as other sugar products
such as powdered, colored, and flavored sugars, and
liquids and syrups that contain 95% or more sugar by
• Excluded from the scope of these agreements are sugar
imported under the Refined Sugar Re-Export Programs
of the U.S. Department of Agriculture; sugar products
produced in Mexico that contain 95% or more sugar by
dry weight that originated outside Mexico; inedible
molasses; beverages; candy; processed food products
that contain sugar, such as cereals; and specialty sugars,
including caramelized slab sugar candy, pearly sugar,
rock candy, dragees for cooking and baking, fondant,
golden syrup, and sugar decorations.
• U.S. imports of Mexican sugar are limited to an
assessment of domestic needs by the U.S. Department of
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New Era Dawns in U.S.-Mexico Sugar Trade
Agriculture (USDA) in July, with the initial calculation
subject to a recalculation in September, December, and
March, with the potential for upward revisions to
Mexico’s export limit. Mexico’s export limit is the
residual of U.S. needs less domestic production and
imports from tariff-rate quota (TRQ) countries.
• Refined sugar is defined as having a polarity of 99.5%
• The government of Mexico is to determine the amount
Sections 704 and 734 of the Tariff Act of 1930 (19 U.S.C.
§1671(c) and §1673(c)), as amended, provide the legal
authority for the CVD and AD suspension agreements,
of sugar that each Mexican sugar producer/exporter can
export to the United States, and is to issue export
licenses in tandem with these allotments that must
accompany Mexican sugar exports to the United States.
• Mexico agrees not to use imported sugar to fill a
domestic shortfall in order to be in a position to ship
sugar against its export limit to the United States.
• New restrictions are imposed on the pattern of sugar
exports from Mexico to the United States as follows: no
more than 30% of U.S. needs in a given export period as
calculated on July 1 from October 1 through December
31; and no more than 55% of U.S. needs from October 1
through March 31. The initial export period is December
19 through September 30, and thereafter from October 1
through September 30.
• Mexican sugar exporters are subject to reporting
requirements to monitor compliance with quantitative
limits and minimum price levels; violations are subject
to civil penalties and potential loss of export licenses.
• Cash deposits collected by U.S. Customs and Border
Protection as a result of the CVD and AD duty
investigations are to be remitted.
and above, compared with 99.9% in the draft
agreements, to be consistent with existing standards.
Legal Authority and Stakeholder Views
Among key stakeholders, the American Sugar Alliance, a
coalition of U.S. sugarcane and sugar beet producers,
processors, refiners, workers and suppliers, issued a
statement in support of the agreements, indicating they
should stop Mexico from dumping subsidized sugar onto
the U.S. market, and asserting they are a “good deal” for
U.S. sugar producers, taxpayers and consumers. The
Sweetener Users Association, composed of businesses
using sweeteners, blasted the agreements, contending they
dismantle free trade in sugar between the United States and
Mexico, undermine core principles of NAFTA, and force
consumers and businesses to pay more for sugar. The SUA
asserted the suspension agreements make it more critical
that a Trans-Pacific Partnership (TPP) trade agreement
provide sugar exporters Australia and Canada with greater
access to the U.S. market, to offset what it believes will be
reduced shipments from Mexico. According to DOC, the
two agreements do not alter the United States’ obligation
under the World Trade Organization (WTO) to provide
TRQ countries with access to the U.S. sugar market.
Possible Issues for Congress
• The agreements have no termination date, but
signatories may terminate them at any time; suspended
CVD and AD investigations are subject to a review after
• The investigations would be resumed if a signatory to
the agreements, or an interested party such as a U.S.
sugar refiner, were to request such within 20 days of
public notice of the agreements.
Key Changes from Draft Agreements
The final CVD and AD agreements include several changes
from the draft agreements initialed in October, among
which the following three are perhaps the most significant.
• Minimum reference prices of Mexican sugar exports are
raised in the final AD agreement to $0.26 per pound for
refined sugar and $0.2225 for all other sugar (from
$0.2357 per pound and $0.2075 per pound, respectively,
in the draft agreement). Prices are based on dry weight,
commercial value, f.o.b. Mexican plant. These prices are
well above loan rates under the U.S. sugar program of
$0.1875 for raw cane sugar and $0.2409 for refined beet
sugar, both per pound.
• Exports of Mexican refined sugar are limited to 53% of
Mexico’s allowable export quantity in a given period
(initially December 19, 2014, to September 30, 2015,
and thereafter, from October 1 through September 30),
down from 60% in the draft CVD agreement.
The final suspension agreements represent a major course
adjustment in U.S.-Mexican trade in sugar—one that closes
a chapter on unrestricted trade in favor of a regime of
limited access and minimum prices. In broad strokes, the
outcome appears to favor the U.S. sugar industry over sugar
users. At the same time, the imposition of stiff duties on
Mexican sugar is shelved, while the possibility of Mexican
retaliation against U.S. exports is likely avoided. The
USDA’s task of managing the U.S. sugar program at no
cost to the government, as Congress directed when it
reauthorized the program intact though 2018 crops as part
of the 2014 farm bill (P.L. 113-79), is likely to be
facilitated. As recently as crop year 2012/2013, large
forfeitures of U.S. sugar in the face of low market prices
cost the government $259 million.
Congress could consider whether the suspension
agreements, in tandem with the existing U.S. sugar
program, adequately balance the needs of U.S. sugar
producers, users and consumers, and whether this new
outcome is consistent with U.S. objectives in current trade
talks, including the TPP and the Transatlantic Trade and
Investment Partnership (TTIP).
Mark A. McMinimy, firstname.lastname@example.org, 7-2172
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