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Suspension agreement will sharply increase floor prices for Mexican tomatoes

The U.S. Department of Commerce published the final version of a newly renegotiated antidumping investigation suspension agreement with producers and exporters of fresh tomatoes from Mexico, which sharply increases the reference or floor prices at which Mexican tomatoes can be sold in the United States, effective immediately.

The new reference prices, which are identical to those in the propose agreement announced by Commerce Feb. 2, range from nearly 50 percent higher than under the previous agreement to nearly three times as high.

Previously, reference prices for all Mexican tomatoes were 21.6 cents a pound during winter and 17.2 cents a pound during summer. The new agreement sets different reference prices for different categories of tomatoes, with winter prices ranging from 31 cents to 59 cents and summer prices ranging from 24.6 cents to 46.8 cents depending on the category.

While many involved in the Mexican tomato trade feel that the new prices are excessively high, the new agreement avoids termination of an agreement that has been in place for 16 years and a resumption of the anti-dumping investigation initiated in 1996 at the request of domestic (primarily Florida) tomato growers.

In responding to the final tomato trade deal, the Fresh Produce Association of the Americas, whose members are importers and distributors of Mexican tomatoes and other produce, issued a press release March 5, congratulating "the negotiating team representing Mexican tomato growers for their hard work on behalf of the industry in reaching a final agreement. Because it provides continuity, the finalized agreement is a win for U.S. jobs, U.S. companies and U.S. consumers."

"We stand fully behind the Mexican growers in implementing the new tomato suspension agreement," Lance Jungmeyer, president of FPAA, said in the release. "Their tireless efforts to maintain market access for Mexican tomatoes mean that consumers will still be able to find the quality and diversity of tomatoes that they have grown to prefer at the supermarket and in restaurants. The agreement will ensure continued stability in the tomato supply chain."

U.S. distributors "and the tens of thousands of U.S. individuals that rely on Mexican tomatoes for their livelihoods are now moving forward to implement the new agreement with minimal disruptions for customers," Mr. Jungmeyer said in the release. "We will continue to supply the superior, vine-ripe tomatoes that consumers prefer. We will continue creating new, cutting-edge technology and researching advanced growing practices. As our members and their growing partners have done for generations, we will continue to innovate, adapt and advance."

In an interview with The Produce News March 5, Mr. Jungmeyer said, "We do think that the prices are a little more than what the distributors would like to have seen, but we do appreciate the fact that there is continuity in the market. If there had not been an agreement or if the prices had been even worse, U.S. consumers would have had less opportunities to buy Mexican tomatoes."

Vine-ripe tomatoes from Mexico "are one reason why the tomato category has grown so much in recent years" in the United States, he said. "Anything that would have taken those out of the market or restricted them would have been awful."

There are some positive benefits to the new agreement in comparison to the previous version, according to Mr. Jungmeyer. "The agreement has serious enforcement provisions." One is that "everybody who sells [Mexican] tomatoes has to abide by this," whereas the previous agreement required that only 85 percent of exporters be signatories.

Also, under the final version of the new agreement PACA "is now involved in actively enforcing" the agreement. "There are going to be some serious penalties, from fines up to losing your PACA license" for repeated and flagrant violations, he said.

"Those are huge developments, and from our standpoint, good all around," he said.

"We are still reviewing" the details of the new agreement "with our legal counsel to determine any other little changes," Mr. Jungmeyer said. But overall, "I think because this does keep Mexican tomatoes in the U.S. marketplace, it is a positive thing."

Reggie Brown, manager of the Florida Tomato Committee and executive vice president of the Florida Tomato Exchange, told The Produce News March 5, "Basically the domestic tomato industry had three major concerns" that it felt needed to be addressed in the new agreement. "One was coverage," he said, and "that has been dealt with by the Mexican government's commitment to ensure that all producer and exporters of tomatoes from Mexico would be signatories to the agreement and setting regulatory programs in place to accomplish that."

The second concern was price, "and the price issue has been addressed" in the new agreement, Mr. Brown said. "While we do not feel that it is meeting the legal requirement of 85 percent of the dumping margin from the 1996 case, there is provision in the law for the domestic industry to pursue an administrative review, at which time the Commerce Department would be obligated to obtain cost of production numbers from the Mexican producers to determine what the correct reference price should be under the statute to eliminate the dumping margins. That is available to the domestic industry in one year, and the domestic industry has every intention of pursuing that opportunity when it is presented."

The third area of concern the domestic industry had "was in the area of enforcement, and the inclusion of the Perishable Agricultural Commodity Act team at USDA as potential routes of investigation of violations of the agreement is a step in the right direction in terms of making that a viable enforcement effort, and we will be working very closely with PACA and the Commerce Department to insure that the enforcement is enhanced because the value of an agreement is zero unless there is aggressive enforcement," Mr. Brown said.

"We have been assured by the Secretary of Agriculture's staff and the staff at AMS and PACA that they are committed and engaged," he continued. "And with the efforts of the Commerce Department and the industry providing information, we have the potential to have a very aggressive enforcement program, and you can rest assured that the domestic industry will be participating aggressively in that effort to ensure that everyone plays by the rules."

The new agreement takes effect at the peak of the Mexican tomato season. Questions remain as to what effects the higher reference prices may have on the volume of Mexican tomatoes imported into the U.S. market, but it should not take long for some of those questions to be answered. If there is a negative effect on trade, it is likely to become manifest over the next several weeks.