On March 28, 2014, the U.S. sugar industry filed antidumping and countervailing duty (AD/CVD) petitions against imports of sugar from Mexico. From the time that NAFTA’s sugar provisions were fully implemented in 2008, Mexico has been the only country in the world with unfettered access to the U.S. sugar market. Sugar interests now are hoping to clamp the fetters back on. It is not at all clear whether that effort will succeed.
Both the Commerce Department and the U.S. International Trade Commission (ITC) play important roles in this process. Commerce must determine the extent of any dumping margin (selling at “less than fair value” due to pricing practices of individual firms) and any countervailing duty margin (benefit received by Mexican exporters from subsidies provided by their government). The estimated dumping margins for the preliminary phase of the investigation range from 30 to 64 percent; they are likely to be adjusted based on additional information gained in the final phase of the investigation. Commerce has not yet had an opportunity to establish CVD margins. Given the degree of government involvement in Mexico’s sugar business, a CVD margin at some level seems likely.
The job of the ITC is to determine whether the domestic sugar industry has been “injured” by the imported sugar. In its preliminary determination, the commission voted unanimously in the affirmative, which means that the investigation will go forward into its final phase. This vote was not at all a surprise. The legal standard for a negative vote in a preliminary determination is quite high. To have voted in the negative, the ITC would have had to conclude that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.” That is a very difficult standard to meet on the basis of the somewhat limited preliminary record – often with inconclusive evidence – that must be compiled not more than 45 days after the case has been filed.