CORRECTED: A previous version of this story included an error on the states where Florida Tomato Exchange members grow tomatoes.
A new normal is taking hold for importers of Mexican tomatoes.
Industry leaders report no progress for a new tomato suspension agreement after a recent Department of Commerce proposal was rejected by Mexican growers.
With the Department of Commerce conducting an antidumping investigation on Mexican tomatoes that will be concluded this fall, it appears the U.S. tomato trade might be living with the 17.56% duty on Mexican tomato imports for months to come.
On May 7 the Commerce Department withdrew from a tomato suspension agreement with Mexican tomato growers. The suspension agreement set minimum reference prices for Mexican tomatoes shipped to the U.S. for more than 20 years.
After terminating the agreement, Commerce imposed the provisional duty of 17.56% and resumed a dumping investigation that had been suspended for more than two decades.
That investigation is expected to be concluded by the end of September, and its outcome could raise or lower the duty, or remove it entirely.
Volume and pricing
Since the end of the suspension agreement, U.S. Department of Agriculture statistics show that Mexico exported about 56 million 25-pound cartons of tomatoes to the U.S. from May 8 to June 26. That is down about 21% from a year ago, when Mexico shipped about 71 million cartons during that same period.
This year, average prices for Mexican tomatoes at U.S. terminal markets were $14.04 per carton on May 11, trending gradually higher to $17.27 on June 22.
That’s not much different from last year. On May 12, 2018, the U.S. average terminal market price for all Mexican tomatoes was $11.88 per carton, and ranged from $13.86 on May 19 to $17.43 on June 23. Jason Klinowski, an agricultural and food law attorney at Wallace Jordan Ratliff & Brandt LLC in Birmingham, Ala., has several clients who import Mexican tomatoes.
Klinowski said importers are relieved that a threat from President Trump to levy an immigration tariff on all Mexican imports has not happened, because that would have resulted in added costs on all Mexican fresh produce items.
Most importers paying the 17.56% duty on tomato imports report they are still moving the same volume, he said.
However, some small and mid-sized import companies are having issues with putting in place bonds necessary to ensure payment of the anti-dumping duty.
After more than six weeks without a suspension agreement, paying the duty has become the “new normal,” with compliance issues involving about the same level of difficulty as under the previous suspension agreement, Klinowski said.
Point and counterpoint
Michael Schadler, executive vice president of the Florida Tomato Exchange, said a Department of Commerce June 3 proposal was largely supported by the domestic tomato industry.
With no agreement from Mexican tomato growers on the proposal, however, Schadler said it doesn’t appear a new suspension agreement is imminent.
“We (the domestic tomato industry) support the June 3 proposal from the Department of Commerce (as) the basis for any negotiations going forward,” he said.
In a news release issued June 26, the Fresh Produce Association of the Americas said the June 3 proposal from the Department of Commerce would hurt the U.S. tomato supply chain.
A delegation of leaders from the Fresh Produce Association of the Americas in mid-June shared their concerns with the Department of Commerce officials and members of Congress, according to the release. The FPAA said in the release that the Commerce proposal would benefit a small group of Florida-based marketing companies and hurt other importers of Mexican tomatoes.
The FPAA also expressed concern about the new proposal’s effect on the ability to allow produce buyers to seek price adjustments for loads that do not meet quality standards.
“Give us an agreement that allows all companies to use the rules and regulations afforded by the Perishable Agricultural Commodities Act, which was passed by Congress and affords buyers the ability to make adjustments for breach of contract, which is an essential element of interstate commerce,” Lance Jungmeyer, president of the FPAA, said in the release. “The proposed agreement essentially eliminates these benefits for some U.S. marketers of Mexican tomatoes.”
FPAA objected to a provision that would require USDA inspections of 100% of Mexican tomato shipments. The group said that would substantially slow the flow and cause damage to the tomatoes.
Schadler said the trade friction is not Mexico versus Florida alone but rather the whole domestic tomato industry.
He noted that Florida Tomato Exchange members grow in multiple states, including California, Georgia, South Carolina, North Carolina, Virginia, New Jersey and Puerto Rico.
“The U.S. tomato industry is very united on this,” Schadler said, noting that only two of the six growers who spoke at an International Trade Commission hearing about Mexican imports were from Florida. The others were from Michigan, Tennessee and two from California.
The Commerce Department proposal that would limit price adjustments below the reference price floor is reasonable, Schadler said.
“This is something that would eliminate or greatly reduce the loophole that existed in the old agreement, where people — when there was an oversupplied market, and prices were low — they were looking to be able to take advantage of adjustments to reduce the price,” he said. “This wouldn’t come into play when the market price is higher (than the reference price), you can reduce the price all you want when the markets higher so long as it’s above the reference price,” he said.
Schadler said the U.S. tomato industry could welcome a new tomato suspension agreement that adequately protects the domestic industry from injury.
“I don’t know if there’s going to be some middle ground that can be reached,” he said. “I think most people would like (a) new agreement.”
Any suspension agreement must be mutually beneficial for all parties because the shock value of the antidumping duty has passed, Klinowski said.
“The (Mexican) industry would probably say (it would be) beneficial to have some sort of a suspension agreement reached — as long as it’s truly fair and balanced,” he said.