The U.S. government, through the Commerce Department, on Tuesday announced that they will be looking to tax Mexican sugar imports at a rate as high as 17.01% as soon as next week. The move follows a host of rhetoric and litigation that began in March as U.S. sugar producers lodged a complaint with the Commerce Department alleging that Mexican sugar was flooding the U.S. market. The tariff could attach as soon as next week, although duties won’t be final until early winter after the Commerce Department has time to fully investigate the dumping claims.
The news has already served to widen the gap between U.S. and world sugar contracts. U.S. ICE futures finished at an almost two year high of 26.35 cents while world prices extended losses to 15.71 cents on the same ICE exchange. The U.S. typically produces around 70% of its total annual consumption with the rest filled by imports primarily from Mexico. Under NAFTA rules, Mexico is one of the few countries with unlimited access to U.S. sugar markets and is projected to ship a whopping 1.9 mmt of sugar into the U.S for the crop year which ends in September. The shipments came at the same time that U.S. prices plunged, sparking sugar processor loan defaults of more than $250 million.
U.S. and Mexican authorities have been in talks to resolve this issue and reach some sort of compromise. The Mexican Sugar Chamber on Tuesday appeared set to accept an export cap instead of an all encompassing tariff. American Sugar Alliance spokesman Phillip Hayes was quoted as saying the Commerce Departments decision “validates our claim that the flood of Mexican sugar, which is harming America’s sugar producers and workers, is subsidized by the Mexican government”. Many Mexican sugar mills are ultimately state owned following economic issues in the 1990′s that forced the Mexican government to bail them out by assuming at least partial ownership.Share