Legal Alert

Mexican Sugar Imports into U.S. Investigated; Cost of Sugar Likely to Increase

April 10, 2014

The American Sugar Coalition, a group of domestic sugar cane, sugar beet and refining interests, filed a joint antidumping and countervailing duty petition with the Department of Commerce and the International Trade Commission (Commission). The petition alleges that imports of sugar in all forms — raw, refined, dry or liquid, colored or flavored, as well as some sugar-containing products — from Mexico violate the antidumping and countervailing duty laws. Generally, a product is “dumped” when it is sold for export to the United States at prices that are lower than the price in the home market or are less than the cost of production. The countervailing duty laws are designed to equalize prices when the exporter receives subsidies from governments in the country of exportation.

The petition seeks duties of 62.44 percent for raw sugar and 44.88 percent for refined sugar. At present, sugar from Mexico is not subject to duty. Duties will not be imposed until the Commission determines that the dumped and/or subsidized imports are a cause of injury to producers in the United States. Further, the Department of Commerce must determine that the allegations with respect to dumping and subsidization are correct. If Commerce makes that finding, it will determine the correct antidumping and countervailing duty rates.

These cases are subject to a defined timetable but extensions are likely. Countervailing duties can be imposed, at least on a provisional basis as soon as mid-June. In the case of antidumping duties, the earliest likely date is early September.

The duties are paid by importers who may not be reimbursed by their export sources.

If the duties are imposed, the cost of sugar from Mexico will increase and those costs likely will be passed on to customers. It is important to note that the importation of raw and refined sugar from countries other than Mexico is subject to quantitative restraints. Accordingly, normal market forces are not likely to come into play since most quotas are filled at or near opening. The quotas are not absolute. The restrictions take the form of prohibitive duties once the quota level is reached.

While domestic users of sugar will not be involved directly, the Commission could well reach out to users for market information.