Court voids 2017 sugar suspension agreement with Mexico

The Hagstrom Report

The U.S. Court of International Trade has vacated a 2017 agreement with Mexico on its sugar exports to the United States, throwing into question the stability of the U.S. sugar market.

Reuters said, “The decision, which will revert sugar trade terms to a previous, 2014 agreement, marks a blow to the Trump administration by overturning its very first trade agreement.”

Trump had praised the reworked agreement on Twitter in June 2017 as “a very good one for both Mexico and the U.S.,” Reuters said.

The court said the agreement was invalid because the Commerce Department had not released all records of meetings related to the agreement.

The agreement amended a 2014 agreement between Mexico and the United States after the U.S. government found that Mexico had subsidized sugar exports and dumped sugar at below-market prices in the United States. The agreement suspended countervailing duties and antidumping duties that would have been imposed on Mexican sugar imports into the United States.

After the agreement went into effect, U.S. refiners said that they were not getting enough sugar for their operations. U.S. and Mexican officials went back to the negotiating table, coming up with an agreement that U.S. officials, growers and refiners have said brought stability to the market and that the Sweetener Users Association has said led to high prices.

Baking News said, “The rulings leave the original 2014 ‘suspension agreements’ in place, which had the refined/raw mix of sugar imports from Mexico at 53%/47%, the polarity for ‘other’ sugar at 99.5 and reference prices for refined sugar at 26c per pound and for raw at 22.25c per pound. The 2017 amendments had adjusted the refined/raw import mix to 30%/70%, lowered the polarity for ‘other’ sugar to 99.2 (thus 99.2 polarity and above was classified as refined sugar in the amendments), and raised the reference prices to 28c for refined and 23c for raw.

“Basically, the amendments, in part, provided more raw sugar for U.S. cane refiners but less sugar at higher prices for U.S. ‘melters’ such as CSC Sugar, who supply food manufacturers directly without further refining the imports.”

CSC Sugar LLC, a Connecticut firm, has argued that “the 2017 amendment was the result of negotiations between the governments of the United States and Mexico that changed the purity definition of refined sugar, effectively altering the product definition for trade purposes and significantly imperiling CSC’s business, whose cutting-edge refining processes were developed to use a higher purity input,” Husch Blackwell, CSC’s law firm, said in a news release.

In its news release, Husch Blackwell, led by Washington-based partner Jeffrey Neeley, said it “developed a legal strategy that challenged the Commerce Department’s failure to place information regarding ex parte meetings of discussions with other members of the domestic industry and Commerce officials, including Secretary Wilbur Ross, on the record. Ultimately, the CIT agreed, holding that Commerce had acted in violation of the law regarding the agreement. As a result, the court stated that the Commerce decision was vacated and that the amended agreement with Mexico is null and void.”

Husch Blackwell touted the decision as a “first-of-its-kind decision.”

“This is the first decision in which a suspension agreement of any kind has been overturned,” the firm said.

The government and U.S. sugar growers said that the agreement should be upheld, but the court said that, “although Defendant contends that CSC Sugar was not prejudiced because it ‘actively participated in the administrative proceeding,’ Defendant fails to address the fact that Commerce’s complete failure to follow § 1677f (its recordkeeping requirements) effectively prevented CSC Sugar from commenting on the ex parte materials and discussions Commerce engaged in during the CVD (countervailing duty) Amendment negotiations.”

“We’re pleased that the court agreed with our argument concerning recordkeeping and material information that was not placed on the record,” Neeley said in the news release. “We look forward to working with the government over the coming weeks and months to develop a lasting solution to the issues our case addressed.”

Phillip Hayes, a spokesman for the American Sugar Alliance, which represents U.S. cane and beet growers, told The Hagstrom Report, “We are consulting with the Department of Commerce and exploring all legal options.” ❖