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.