( Photo courtesy Jason Klinowski )

On Feb. 6, the U.S. Department of Commerce officially announced its intent to withdraw from the 2013 Suspension Agreement on Fresh Tomatoes from Mexico. And, absent a new agreement, this withdrawal will become effective as of May 7. This notice has started lots of conversations with a single overarching question: How does this affect importers of Mexican tomatoes?

The short answer is that the U.S. Customs and Border Protection will assess an antidumping duty on the importer of record. 

Between May 8 and the International Trade Commission’s issuance of a final determination, Customs will use the ITC’s Nov. 1, 1996, preliminary determination to assess antidumping duties on importers, which established a 17.56% duty for all exporters not specifically assigned a duty. Customs will assess an antidumping duty of 17.56% upon U.S. importers of Mexican tomatoes until the ITC issues a final determination.
 
The focus here is on the U.S. importer of record because it is the importer’s responsibility to arrange for the payment of all duties and the release of goods from Customs. So, the importer of record bears the antidumping duty. To this end, the importer must certify to Customs that:

They have not entered into any agreement or understanding for the payment or for the refunding to the importer, by the grower or exporter, of all or any part of the antidumping duties assessed on the importations of tomatoes from Mexico. 

This means the importer must pay the cost of the antidumping duty as an un-reimbursable expense or additional cost of goods sold. Commerce placed this financial burden on the importer to ensure that the importer does not facilitate or participate in any type of conduct that would be considered dumping. 

Based on an f.o.b. price of $5 per carton (no more reference price), a straight load of roma tomatoes from Mexico (i.e., 1,600 cases) would cost no less than $8,000 (assuming good delivery). In this hypothetical, the importer would be assessed an antidumping duty of $1,404.80 that must be paid before Customs will release the product. Keep in mind that an antidumping duty is in addition to all other importation costs and does not replace any of the costs importers already pay. 

As you can see, the antidumping duties can severely impact an importer’s cash flow as these duties must be paid upon crossing and cannot be deducted from the importer’s subsequent sale of the product. This additional demand on the importer’s cash and related strain on its capital structure could hinder the importer’s ability to provide grower advances, cross enough loads to satisfy their customers’ demand in the U.S., and these duties might be beyond the pale of what a customs broker will cover. With this new reality apparently coming within a few short month, the entire tomato trade – and especially tomato importers – must anticipate the imposition of an antidumping duty and how it may change the way they do business.

Jason Klinowski is an agricultural and food law attorney at Wallace Jordan Ratliff & Brandt LLC in Birmingham, Alabama. E-mail him at [email protected] or call 205-874-0371.

 
Comments
Submitted by Produce Guy on Mon, 02/18/2019 - 06:27

If the numbers on the example above are right, $88 cents is not even enough to make Florida tomatoes competitive any way. The only thing this will do is:
1) a tax on the consumer
2) It will shift power to large transnational companies that have operations both here and in Mexico.
3) small businesses and farmers will be the ones that pay the price
This is just a bad idea all around.

Submitted by Produce 1 on Fri, 02/22/2019 - 06:45

Some help is better than no help, the Mexican trade has devastated the tomatoe industry and is in the process of doing the same thing to broccoli, and strawberry’s,, just with the difference in labor cost alone Mexican imports have an unfair advantage, in the us minumium labor to harvest is upwards of 11.50 / , all the while maintaining the safest food produced in the world,, the produce farmers, are in a devastating situation squeezed between ever increasing cost of production, and continually declining prices,from major retailers, I am not sure even the USDA posted prices are relative anymore, as they only reflect spot market, for the moment, or what we hope to be spot market, and do not take into any considers of all the long term contracts that are in place,with the major retailers,

In reply to by Produce Guy (not verified)

Submitted by Luis Martínez on Tue, 03/19/2019 - 12:08

The overall benefits are much larger than the loss of producers. If Mexican producers are more efficient, so be it and let that benefit all American consumers. I would also like to point out that exactly the same thing is happening on grains except it is the US producers who have the advantage. This is because grains grow better at latitud where the U.S. happens to be, and tomatos grow better at lower latitudes where Mexicans grow. The competitive advantage was given by nature. NAFTA’s framers knew this, and we all have benefited. A lot of Mexican grain growers have gone bankrupt just as a lot of US tomato growers, but the economy is more efficient. And more, much more people benefit this way. What is happening now with the Trump Administration is that the government is choosing winners, and that is not good. Never has been.
Luis F. Martínez
Trade Specialist
Monterrey, Mexico

In reply to by Produce 1 (not verified)