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Fresh Tomatoes from Mexico

April 25, 2019 Avalon

Fresh Tomatoes from Mexico

The Department of Commerce (DOC) announced on February 6th that it intends to terminate the Tomato Suspension Agreement with Mexico. The merchandise covers all fresh or chilled tomatoes which have Mexico as their origin. Ending the agreement would mean that the DOC can resume the underlying antidumping investigation which initially started back in April 1996. Later that year, the DOC and certain tomato growers/exporters from Mexico entered into an agreement to suspend the antidumping investigation. Throughout the years, the suspension agreement has been revised as necessary to appease both the U.S. and the Mexican growers/exporters. Since January 2018 negotiations have been ongoing to no avail and it seems likely that the U.S. will end the agreement. If a new or amended agreement is not reached, the applicable antidumping case will resume on May 7, 2019. You can read more in the March 3, 2019 Federal Register.

How will the resumed antidumping case affect tomato importers?

With the agreement in place, tomato imports from Mexico are currently at a 0% duty rate. The antidumping duty rate could jump to well over 100% for certain importers. Higher duties mean that a higher bond limit may be needed. For example, an importer who imports about $20M in tomatoes currently may have a $50,000 continuous bond. A possible 17.65% antidumping margin would mean that the importer would need their bond to be increased to at least $400,000.

Importers are encouraged to be proactive and review their expected import activity to determine if they might need a higher bond limit, should the antidumping duties go into effect. If so, they will need to reach out to their surety provider to ensure they are aware of any requirements needed. Importers requesting higher bond limits will most likely have to provide financials so the increase can be underwritten. Since antidumping exposure is significantly riskier than a duty-free exposure, sureties will most likely require collateral to ensure they are covered.

Another consideration to keep in mind if the antidumping case resumes is the need to file a non-reimbursement statement. A non-reimbursement statement certifies that the importer has not entered into any agreement or understanding for the payment or for the refunding all or any part of the antidumping duties. The non-reimbursement statement must be filed in ACE. If it is not filed, upon liquidation, the importer will be charged double the antidumping duties (along with interest).

As a reminder, it is ultimately up to the importer how they handle these potential changes at this time. However, if an agreement is not reached and antidumping duties become due, the new exposure will need to be underwritten and bond sufficiency should be monitored closely.

Avalon will keep you informed with updates regarding this matter as they become available. Please click here to read more about antidumping exposures.

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The Quest Newsletter is designed to provide critical information in the transportation industry. Avalon Risk Management is not responsible for the accuracy or reliability of information contained in articles. The reader/user assumes all risk in the use of such information.