Tomato antidumping duties would be a disaster for all parties

In June 2023, the Florida Tomato Exchange requested that the U.S. government terminate the “suspension agreement” that has regulated U.S. imports of Mexican tomatoes for over 25 years.  

The agreement “suspended” the imposition of antidumping duties that would have made it more expensive for U.S. consumers to buy fresh tomatoes imported from Mexico. In exchange, the agreement established a minimum price and quality requirements for Mexican tomatoes, ensuring that only high-quality Mexican tomatoes would be sold in the U.S. market at a fair price.

The FTE claims that applying duties on imported tomatoes would be more helpful to American tomato growers than a suspension agreement. But American growers themselves benefit significantly from the suspension agreement. In fact, FTE members, along with the entire U.S. tomato market, will be far worse off if the suspension agreement is replaced by duties. Here’s why. 

How is a suspension agreement different from antidumping duties?

By imposing a minimum price, the suspension agreement ensures that U.S.-grown tomatoes can compete with Mexican imports. However, without the suspension agreement, there would be no minimum prices and U.S. market prices will be far more volatile with sharper price swings. Tomatoes are perishable, seasonal and regional, making them highly sensitive to rapidly changing supply and demand conditions. Duties imposed on Mexican tomatoes will increase their prices but won’t prevent market price volatility like a minimum price does.

If a company isn’t dumping tomatoes, won’t the Department of Commerce find it owes no duties at all?

The Department of Commerce will not examine each importer individually. It will select only two or three of the largest Mexican producers as a representative sample of the entire industry and determine individual duty rates only for these producers. All other growers will be subject to an average of the duty rates calculated for the examined producers, even if they supply to members of the FTE. Most companies won’t have a chance to prove to the Commerce Department that they are not dumping and will be stuck paying the average duty rates, whether they are dumping or not.

If antidumping duties are imposed, who pays the duties and how much are the duties?

U.S. importers, not the Mexican growers, are responsible for paying the duties on Mexican tomatoes upon importation. If the suspension agreement is terminated, most importers will have to pay an additional 20.91% of the total value of the tomatoes. But as explained below, that rate is in effect only for a limited period, and it could go up or down each year.

Will these duty rates be permanent?

No. The duties paid at the border are only estimated duties. Each year, the Department of Commerce examines imports made during the preceding year to retroactively determine what the final duties should be for those imports. The final amount of duties owed is often significantly different from the estimated duties originally paid. If the final duties are higher, the importer must pay the difference, plus interest. Importers would be shocked by the huge bill for additional duties several years after the product had been imported, sold and consumed.

Do importers need to pay additional charges related to duties?

Yes. Surety companies consider imports subject to antidumping duties to be high-risk because the final duties may be exponentially higher than the estimated duties collected at the time of entry. Bonding companies often demand that importers pay additional security in the form of letters of credit or cash collateral sometimes equal to 100% of the value of the imports. These increased collateral requirements can multiply over time. As a result, duties may create a cash flow crunch for importers, particularly for those that lack the financial resources to pay for the bonds needed to import tomatoes subject to the duties.

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Some of the FTE’s largest members have significant Mexican tomato growing and distribution networks. Given their own experience, these FTE members know how vital the supply of Mexican tomatoes is to their own operations, let alone to the U.S. tomato market in general. FTE members are putting their own interests at risk by calling for the termination of the suspension agreement and imposition of duties.

Put simply, the imposition of antidumping duties will not put the FTE members in a better position. Without the benefit of minimum pricing under the suspension agreement, FTE members who are also importers will be subject to duties they can’t control, potentially face significant bills for duties on tomatoes that they imported several years earlier and deal with the unpredictability of duties that will change every year.

This unpredictable environment will stifle their investments and make their business projections meaningless. If the industry thinks it's tough living with the suspension agreement, it would be a lot worse without it.

Javier Badillo is managing member of Fresh International LLC, Tucson, Ariz. He also is chairman of the Tomato Division of the Fresh Produce Association of the Americas, Nogales, Ariz.