Sugar From Mexico: Amendment to the Agreement Suspending the Antidumping Duty Investigation

AGENCY:

Enforcement and Compliance, International Trade Administration, Department of Commerce.

DATES:

Effective June 30, 2017.

SUMMARY:

The Department of Commerce (the Department) and a representative of the signatory sugar producers/exporters accounting for substantially all imports of sugar from Mexico have signed an amendment to the Agreement Suspending the Antidumping Duty Investigation on Sugar from Mexico (AD Suspension Agreement). The amendment to the AD Suspension Agreement modified the definitions for sugar from Mexico, revises the reference prices for the applicable sugar from Mexico, and provides for enhanced monitoring and enforcement mechanisms.

FOR FURTHER INFORMATION CONTACT:

Sally Craig Gannon or David Cordell at (202) 482-0162 or (202) 482-0408, respectively; Bilateral Agreements Unit, Office of Policy, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

On April 17, 2014, the Department initiated an antidumping duty investigation under section 732 of the Tariff Act of 1930, as amended (the Act), to determine whether imports of sugar from Mexico are being, or are likely to be, sold in the United States at less than fair value (LTFV). On October 24, 2014, the Department preliminarily determined that sugar from Mexico is being, or is likely to be, sold in the United States at LTFV, as provided in section 733 of the Act, and postponed the final determination in this investigation until no later than 135 days after the date of publication of the preliminary determination in the Federal Register.

The Department and a representative of the signatory producers/exporters accounting for substantially all imports of sugar from Mexico signed the AD Suspension Agreement on December 19, 2014.

On January 8, 2015, Imperial Sugar Company (Imperial) and AmCane Sugar LLC (AmCane) each notified the Department that they had petitioned the International Trade Commission (ITC) to conduct a review of the AD Suspension Agreement under section 734(h) of the Act, to determine whether the injurious effects of the imports of the subject merchandise are eliminated completely by the AD Suspension Agreement. On March 19, 2015, in a unanimous vote, the ITC found that the AD Suspension Agreement eliminated completely the injurious effects of imports of sugar from Mexico. As a result of the ITC's determination, the AD Suspension Agreement remained in effect, and on March 27, 2015, the Department, in accordance with section 734(h)(3) of the Act, instructed U.S. Customs and Border Protection (CBP) to terminate the suspension of liquidation of all entries of sugar from Mexico and refund all cash deposits.

Notwithstanding issuance of the AD Suspension Agreement, pursuant to requests by domestic interested parties, the Department continued its investigation and made an affirmative final determination of sales at less than fair value. In its Final Determination, the Department calculated weighted-average dumping margins of 40.48 percent for Fondo de Empresas Expropiadas del Sector Azucarero (FEESA), 42.14 percent for Ingenio Tala S.A. de C.V. and certain affiliated sugar mills of Grupo Azucarero Mexico S.A. de C.V. (collectively, the GAM Group), and 40.74 percent for all other Mexican producers/exporters. The Department stated, in its Final Determination, that it would “not instruct CBP to suspend liquidation or collect cash deposits calculated herein unless the AD Suspension Agreement is terminated and the Department issues an antidumping duty order,” and, in that case, it would “instruct CBP to suspend liquidation and require a cash deposit equal to the weighted-average amount by which normal value exceeds U.S. price,” and adjusted for export subsidies. The ITC subsequently made an affirmative determination of material injury to an industry in the United States by reason of imports of sugar from Mexico.

Since June 2016, the Department and representatives of the Mexican sugar producers/exporters have held consultations regarding the AD Suspension Agreement to address concerns raised by the domestic industry and ensure that the AD Suspension Agreement meets all of the statutory requirements for a suspension agreement, e.g., that suspension of the investigation is in the public interest, including the availability of supplies of sugar in the U.S. market, and that effective monitoring is practicable. On June 14, 2017, the Department and a representative for Mexican sugar producers/exporters initialed a draft amendment to the AD Suspension Agreement. We invited interested parties to provide written comments by June 21, 2017, and rebuttal comments by June 26, 2017. On June 17, 2017, the Department released draft memoranda explaining how the draft amended AD Suspension Agreement meets the requirements of section 734(c) of the Act and invited interested parties to provide written comments by no later than the close of business on June 23, 2017, with rebuttal comments due no later than the close of business on June 26, 2017.

Scope of Agreement

See Section I, Product Coverage, of the AD Suspension Agreement.

Analysis of Comments Received

We received comments on the draft amendment from the International Sugar Trade Coalition, the Australian Sugar Industry Alliance, CSC Sugar LLC (CSC), the Corn Refiners Association, the Organic Trade Association, Archer Daniels Midland Company, the American Sugar Coalition, Imperial Sugar Company, the Government of Canada, the Sugar Users Association (SUA), and the Governments of Barbados, Belize, Dominican Republic, Guyana, and Jamaica. We received rebuttal comments on the draft amendment from Cámara Nacional de Las Industrias Azucarera y Alcoholera (Mexican Sugar Chamber), the American Sugar Coalition, and Zucarmex, S.A. de C.V. and Zucrum Foods LLC. CSC also filed unsolicited rebuttal comments to the American Sugar Coalition's rebuttal comments. We received comments on the draft statutory memoranda from SUA. In reaching a final amendment to the AD Agreement, the Department has taken into account all comments and rebuttal comments submitted on the record of the suspension agreement proceeding and has made changes, where warranted, to the June 14, 2017 draft AD amendment based upon those comments. The Department expects to place its written analysis of the changes made and response to comments on the record of the suspension agreement proceeding no later than July 14, 2017.

Amendment to AD Suspension Agreement

The Department consulted with the Mexican sugar producers/exporters and the petitioners and has considered the comments submitted by interested parties with respect to the draft amendment to the AD Suspension Agreement. On June 30, 2017, after consideration of the interested party comments received, Wilbur L. Ross, Jr., Secretary of Commerce, U.S. Department of Commerce and Juan Cortina Gallardo, for Mexican Sugar Industry, a representative of sugar producers/exporters accounting for substantially all imports of sugar from Mexico, signed a finalized amendment to the AD Suspension Agreement. The amendment, as integrated with the AD Suspension Agreement, allows for exports of Mexican sugar to the United States in accordance with the collective terms therein.

In accordance with section 734(c) of the Act, we have determined that extraordinary circumstances, as defined by section 734(c)(2)(A) of the Act, exist with respect to the amended AD Suspension Agreement. We have also determined that the amended AD Suspension Agreement will eliminate completely the injurious effect of exports to the United States of the subject merchandise and prevent the suppression or undercutting of price levels of domestic sugar by imports of that merchandise from Mexico, as required by section 734(c)(1) of the Act. We have also determined that the amended AD Suspension Agreement is in the public interest and can be monitored effectively, as required under section 734(d) of the Act.

For the reasons outlined above, we find that the amended AD Suspension Agreement meets the criteria of section 734(c) and (d) of the Act.

The terms and conditions of the amendment to this AD Suspension Agreement, signed on June 30, 2017, are set forth in the Amendment to the AD Suspension Agreement, which is attached in Annex 1 to this notice.

Administrative Protective Order Access

The administrative protective order (APO) the Department granted in the suspension agreement segment of this proceeding remains in place and effective for the amended AD Suspension Agreement. All new parties requesting access to business proprietary information submitted during the administration of the amended AD Suspension Agreement, under the APO currently in effect, must submit an APO application in accordance with the Department's regulations currently in effect.

We are issuing and publishing this notice in accordance with section 734(f)(1)(A) of the Act and 19 CFR 351.208(g)(2).

Annex 1: Amendment to Agreement Suspending the Antidumping Duty Investigation on Sugar From Mexico

The Agreement Suspending the Antidumping Duty Investigation on Sugar from Mexico (Agreement) signed by the United States Department of Commerce (the Department) and the signatory producers and exporters of Sugar from Mexico (the Signatories) on December 19, 2014, is amended, as set forth below (Amendment).

If a provision of the Agreement conflicts with a provision of this Amendment, the provision of the Amendment shall supersede the provision of the Agreement to the extent of the conflict. All other provisions of the Agreement and their applicability continue with full force.

The Department and the Signatories hereby agree as follows:

Section II (“Definitions”) is amended as follows:

Section II.C is replaced with:

“Effective Date of the Agreement” means the date on which the Department and the Signatories signed the Agreement. Additionally, the “Effective Date of the Amendment” means the date on which the Department issues its next calculation pursuant to Section V.B of the Agreement Suspending the Countervailing Duty Investigation on Sugar from Mexico (CVD Agreement) and, as such, means that the Amendment applies to all contracts for Sugar from Mexico for the for the October 1, 2017 through September 30, 2018 Export Limit Period (as defined in the CVD Agreement), and to all contracts for Sugar from Mexico (regardless of Export Limit Period) exported from Mexico on or after October 1, 2017.

Section II.F is replaced with:

“Other Sugar” means

a. Sugar at a polarity of less than 99.2, as produced and measured on a dry basis;

b. Where such Sugar is Additional U.S. Needs Sugar, as defined in Section II.O, Sugar at a polarity of less than 99.5, as produced and measured on a dry basis; and,

c. In the event that Section V.B.4.d of the CVD Agreement is exercised, Sugar at a polarity specified by USDA that is below 99.5, as produced and measured on a dry basis.

Such Other Sugar must be exported to the United States loaded in bulk and freely flowing (i.e., not in a container, tote, bag or otherwise packaged) into the hold(s) of an ocean-going vessel. To be considered as Other Sugar, if Sugar leaves the Mexican mill in a container, tote, bag or other package (i.e., is not freely flowing), it must be emptied from the container, tote, bag or other package into the hold of the ocean-going vessel for exportation. All other exports of Sugar from Mexico that are not transported in bulk and freely flowing in the hold(s) of an ocean-going vessel will be considered to be Refined Sugar for purposes of the Reference Prices, regardless of the polarity of that Sugar.

Section II.H is replaced with:

“Refined Sugar” means

a. Sugar at a polarity of 99.2 and above, as produced and measured on a dry basis;

b. Sugar considered to be Refined Sugar under Section II.F;

c. Where such Sugar is Additional U.S. Needs Sugar as defined in Section II.U, Sugar at a polarity of 99.5 and above, as produced and measured on a dry basis; and

d. In the event that Section V.B.4.d of the CVD Agreement is exercised, Sugar at a polarity specified by USDA that is 99.5 or above, as produced and measured on a dry basis.

New Section II.N is added as follows:

“Intermediary Customer” means trader, processor, or other reseller located outside of the United States who sells Sugar to an unaffiliated customer in the United States.

New Section II.O is added as follows:

“Additional U.S. Needs Sugar” means the quantity of Sugar allowed to be exported, over and above the Export Limit calculated under Section V.B.3 of the amended CVD Agreement, to fill a need identified by USDA in the U.S. market for a particular type and quantity of Sugar, and offered to Mexico pursuant to Section V.B.4.c of the amended CVD Agreement.

Section VII (“Monitoring of the Agreement”) is amended as follows:

Section VII.B (“Compliance Monitoring”) is amended as follows:

Section VII.B.4—an additional sentence as follows is added to the end of paragraph 4:

The Department may verify polarity testing practices at any Mexican mill and request supporting documentation for polarity test results.

Section VII.C (“Shipping and Other Arrangements”) is amended as follows:

Section VII.C.4 is replaced with the following, with the sentence in italics being added to the language:

4. Not later than 30 days after the end of each quarter, each Signatory will submit a written statement to the Department certifying that all sales during the most recently completed quarter were at net prices, after rebates, discounts, or other adjustments, at or above the Reference Prices in effect and were not part of or related to any act or practice which would have the effect of hiding the real price of the Sugar being sold. Further, each Signatory will certify in this same statement that all sales made during the relevant quarter were not part of or related to any bundling arrangement, discounts/free goods/financing package, swap or other exchange where such arrangement is designed to circumvent the basis of the Agreement. As part of the certification, each Signatory will submit a listing of the total quantity of Other Sugar and Refined Sugar that was exported during each quarter.

Each Signatory that did not export Sugar to the United States during any given quarter will submit a written statement to the Department certifying that it made no sales to the United States during the most recently completed quarter. Each Signatory agrees to permit full verification of its certification as the Department deems necessary. Failure to provide a quarterly certification may be considered a violation of the Agreement.

Section VII.C.5 is added as follows:

5. For each sale made by a Signatory to an Intermediary Customer, the Signatory shall incorporate into its sales contract with the Intermediary Customer the obligation that such customers will abide by the terms of the Agreement, including selling the Sugar from Mexico to the first downstream unaffiliated U.S. customer in accordance with the terms of the Agreement. Further, for each sale made by a Signatory to an Intermediary Customer, the Signatory shall incorporate into its sales contract with the Intermediary Customer a provision requiring the Intermediary Customer to provide the Department with all sales and other related information the Department requests.

Further, Signatories and Intermediary Customers must retain evidence in their files to document that these contractual obligations were implemented. The Department retains its authority to request the Signatory and/or Intermediary Customer to provide such documentation, and the Department may verify such documentation. Where a Signatory does not have access to the documentation but has obligated the Intermediary Customer to provide it to the Department, the Department will request the Intermediary Customer to provide the documentation. Failure by a Signatory and/or Intermediary Customer to provide requested documentation may be considered a violation under Section VIII of the Agreement.

Section VII.C.6 is added as follows:

6. Other Sugar may enter the Customs territory of the United States if the following conditions are met:

Exporters of Other Sugar are required to ensure, through inclusion of obligations in their sales contracts or otherwise, that importers of record of such Other Sugar agree to ensure that Other Sugar is tested for polarity by a laboratory approved by U.S. Customs and Border Protection (CBP) upon entry into the United States, with samples drawn in accordance with CBP standards, and that the importers of record agree to report the polarity test results for each entry to the Department within 30 days of entry. Such polarity test reports must be filed on the official records of the Department for both this Agreement and the CVD Agreement. For clarity, sampling will be done in accordance with CBP standards (e.g., CBP Directive No. 3820-001B), or its successor directive as agreed by the Department and the Signatories, including the CBP requirement that the polarity level of an entry will be the average of the samples from that entry.

The Department will request that CBP inform the importing public of the requirements for importation of Other Sugar set forth in this sub-section.

Section VII.C.7 is added as follows:

7. Penalties for Non-Compliance with Section VII.C.6.a:

a. Where the Department finds that exporters and importers of record of Other Sugar are not complying with Section VII.C.6.a, the Department may consider this a violation under Section VIII.D of the Agreement.

b. If the Department finds that issues with meeting the polarity requirements of the Agreement as required by Sections II.F, II.H, VII.C.6 and Appendix I continue to arise, the Department can at any time terminate the Agreement under Section X.B. Apart from termination, the Department may take additional steps to ensure compliance with the terms of this Agreement, including action under Section VIII.B.4 of the CVD Agreement.

Section VIII (“Violations of the Agreement”) is amended as follows:

Section VIII.D is amended by adding new paragraphs 3 and 4, and moving paragraph 3 to paragraph 5:

D.3 Failure by Signatories and Intermediary Customers to provide the required documentation specified in Section VII.C.5.

D.4 Failure by Signatories and importers of record to comply with the requirements under Section VII.C.6.

Appendix I is amended as follows:

At Appendix I, the following will be changed:

The FOB plant Reference Price for Refined Sugar is $0.2800 per pound commercial value (whether freely flowing or in totes weighing one (1) MT or greater as the sugar leaves the mill), as produced and measured on a dry basis.

The FOB plant Reference Price for Other Sugar is $0.2300 per pound commercial value (whether freely flowing or in totes weighing one (1) MT or greater as the sugar leaves the mill), as produced and measured on a dry basis.

In addition, the following clause will be added to Appendix I when referencing the Reference Prices.

Mexican Signatory producers/exporters must ensure that the delivered sales price for all Sugar from Mexico exported to the United States must include all expenses, e.g., transportation, de-bagging, warehousing, handling, and packaging charges, in excess of the FOB plant Reference Price. As specified in Sections VII.B.1 and VII.B.2 of the Agreement, the Department has the authority to request sales information, and to verify such information, which demonstrates compliance with the Reference Prices and terms of the Agreement.

Signed in Washington, DC, on June 30, 2017.

For the U.S. Department of Commerce:

Wilbur L. Ross, Jr.,

Secretary of Commerce, U.S. Department of Commerce

The following party hereby certifies that the members of the Mexican sugar industry agree to abide by all terms of the Amendment to the Agreement:

Juan Cortina Gallardo

For Mexican Sugar Industry.