NEW YORK — The U.S. Court of International Trade in New York on Oct. 18 vacated the 2017 amendments to the 2014 agreements that suspended sizable anti-dumping and countervailing duties on U.S. imports of sugar from Mexico.
In both rulings (vacating the countervailing duty and the anti-dumping amendments), the court said, “The court concludes (1) that Commerce’s failure to follow the recordkeeping requirements of 1677f(a)(3) cannot be described as ‘harmless’ and (2) that the agency’s recordkeeping failure substantially prejudiced Plaintiff.”
The rulings leave the original 2014 “suspension agreements” in place, which had the refined/raw mix of sugar imports from Mexico at 53%/47%, the polarity for “other” sugar at 99.5 and reference prices for refined sugar at 26c a lb and for raw at 22.25c a lb. The 2017 amendments had adjusted the refined/raw import mix to 30%/70%, lowered the polarity for “other” sugar to 99.2 (thus 99.2 polarity and above was classified as refined sugar in the amendments), and raised the reference prices to 28c for refined and 23c for raw.
Basically, the amendments, in part, provided more raw sugar for U.S. cane refiners but less sugar at higher prices for companies that process and sell liquid sugar.
Both sides of the sugar industry — sugar producers and sugar users — currently are reviewing the court rulings to assess the potential impact on U.S. sugar imports from Mexico, and on next steps. It also was not yet known how the U.S. Department of Commerce will respond to the rulings.
The basis for the court action stems from a suit filed by CSC Sugar L.L.C. alleging that, in part, the U.S. Department of Commerce failed to meet its obligation to file a complete administrative record that included ex parte communications between Commerce and interested parties. Commerce subsequently provided additional but not complete information on the meetings and communications in question, but the court ruled the additional material was not sufficient to prove that the omissions were harmless.
In the case, CSC Sugar said that among those alleged to have engaged in private communications with the D.O.C. were executives of the largest U.S. sugar refiners, “whose century-old refineries benefited from a key change ushered in by the July 2017 agreement between the U.S. and Mexico to suspend the anti-dumping and countervailing duties implemented against the importation of Mexican sugar.” CSC said that Commerce moved in June 2017 to alter the definition of “refined sugar” in the agreements as well as other changes in shipping requirements.
“The result of these changes was to give a competitive advantage to one segment of the U.S. domestic sugar industry (the U.S. refiners of cane sugar) at the expense of CSC Sugar and others for whom costs escalate when lower purity sugar must be processed,” CSC said.
On June 1, 2018, the court found that “there exists a sufficiently reasonable basis to believe the record is incomplete,” and ordered the D.O.C. to provide additional information by July 11, 2018, by “filing with the court the record of any ex parte meeting.” CSC argued that the D.O.C.’s inability to provide a full record, in violation of federal law, was substantially prejudicial and should render the underlying U.S.-Mexico sugar trade agreements invalid.
The court instead ruled only that the 2017 amendments were invalid, leaving the original 2014 agreements in place.
The trade agreements were put in place after U.S. sugar producers successfully argued in 2014 that subsidized and “dumped” sugar from Mexico had substantially harmed U.S. sugar producers. The agreements limit the quantity and type (refined versus “other”) of sugar, shipment periods and methods among other requirements. Sugar exports from Mexico to the United States had been duty-free and unlimited as of Jan. 1, 2008, under the North American Free Trade Agreement.
About 35% of U.S. sugar imports and about 8% of the total U.S. sugar supply typically is imported from Mexico. The amount varies depending on U.S. sugar production and needs.
The 2014 agreements provide for a review every five years, which the D.O.C. previously indicated it would begin in December of this year, although findings were not expected for several months.