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Mexican tomato interests propose a renewed suspension agreement

Mexico’s tomato industry submitted to the U.S. Department of Commerce a proposed suspension agreement on May 22.

Among the recommended changes in Mexican tomato trade with the United States is that “reference prices for each of the tomato types cover the entire growing season, regardless if the tomatoes are produced in the winter or summer.”

Mexican interests also propose that “each of the tomato types will have separate reference prices for organic and non-organic tomatoes. Organic reference prices will be based on a 30 percent price differential above non-organic reference prices.”Del-Campo-shade-house-tomatA Del Campo tomato shadehouse near Culiacan, Sinaloa, Mexico.

It’s proposed that the prices for Round and Roma conventional tomatoes is $0.31 per pound. The organic reference price for Rounds and Romas would be $0.40. “Round” tomatoes are defined here as “round tomatoes, whether mature green or vine ripe, not including any stem on tomatoes, regardless of growing method or type of packing.” Roma in Mexico’s discussion means Roma or plum tomatoes, “whether mature green or vine ripe, not including any stem on tomatoes, regardless of growing method or type of packing.”

“Stem on” tomatoes, defined here as “any type of tomato with some or all of the stem attached, including tomato clusters and single tomatoes with stem attached” would have a reference price of $0.41 per pound for conventional and, for organics, $0.53.

Specialty tomatoes, described as “grape, cherry, heirloom, cocktail tomatoes, or any other tomato varietal, other than Round and Roma tomatoes” would have a reference price of $0.45 per pound for loose-pack conventional and $0.585 per pound for organic loose pack.

Specialty packed tomatoes are proposed to have a reference price of $0.59 a pound, and for organics, $0.767.

The Mexican proposal stated that these reference prices “are modifications of what has been proposed by FTE,” or, the Florida Tomato Exchange. The Mexican tomato proposal said its reference prices are “designed to foster continued market stability.” Furthermore, it was stated: “As the Department is aware, price increases serve only to bring more Mexican growers into the business and more volume in the U.S. market.”

Beyond the suggestion of changes in reference prices, the proposal challenges an FTE proposal that would severely limit the recovery of liquidated damages by U.S. buyers for breach of warranty. The growers argue that such a change would deny U.S. buyers their rights under the PACA.

Also proposed by Mexican interests is enhanced enforcement by USDA under an amended Federal marketing order, which would add additional tomatoes, specifically Romas and specialty tomatoes.

The Mexicans also ask for enhanced enforcement of Mexican tomato trade by USDA under PACA.

The Washington, DC, law firm Shearman & Sterling LLP addressed Secretary of Commerce Wilbur Ross on behalf of five Mexican tomato producer and exporter organizations, which are indicated to represent “substantially all imports of fresh tomatoes from Mexico.”

The May 22 letter to Commerce requested a June 3 meeting in Washington with Department of Commerce representatives to discuss this proposal. The Department of Commerce is determining whether to accept an agreement to suspend the tomato investigation by July 6, 2019.

On May 23, Michael Schadler, the executive vice president of the Florida Tomato Exchange responded to the Mexican proposal with this statement: “We appreciate the Mexican growers’ willingness to continue negotiating. We are surprised, however, that the new Mexican proposal is a step backwards. It withdraws proposals they had made to the Commerce Department in early May. We do not understand why the Mexican growers continue to reject the good faith efforts of the Commerce Department to negotiate a new suspension agreement. We think the Commerce Department’s May 10 proposal is the basis for an agreement that will prevent unfair Mexican trade practices from injuring American tomato producers while continuing to allow Mexican tomato growers to access the U.S. market.”

Schadler continued: “Any new agreement must address the flaws of the old agreement. The latest Commerce Department proposal would be an improved agreement for both sides. The domestic industry simply will not support any proposal that does not stop the injury to American growers by dumped Mexican tomatoes.”

The five Mexican tomato organizations represented in the proposal are Confederación de Asociaciones Agrícolas del Estado de Sinaloa, A.C., Consejo Agrícola de Baja California, A.C., Asociación Mexicana de Horticultura Protegida, A.C., Asociación de Productores de Hortalizas del Yaqui y Mayo and Sistema Producto Tomate.

In its “Proposed Terms for a Suspension Agreement," Mexican interests indicate: “The record of the 2013 agreement reflects full compliance and a healthy U.S. market. A recent report by the U.S. Department of Agriculture finds that import prices for fresh tomatoes from Mexico are above the reference price, often significantly. Economist reports and testimony before the U.S. International Trade Commission find that Mexican pricing in the U.S. market is having no impact on Florida growers and that Mexican tomatoes sell for a premium over all U.S. producers.

“In this context, the Mexican signatories have developed proposals on both sides of the border focusing on enforcing the arrival condition of the first sale. This will serve to significantly strengthen the U.S. market, especially at peak season when volumes and inventories are at their highest point and FTE faces the most pressure.

“Major components of this proposal include regrouping reference prices by type; restructuring treatment of liquidated damages for breach of warranty; enhanced export management; and, enhanced enforcement by the Commerce Department and by USDA. As such, this proposal builds on the provisions of the 2013 Agreement and incorporates the existing terms by reference, except as modified” in the proposal.