September 18, 2000

USDA has established the fiscal year 2001 tariff rate quota for sugar imports at 1.26 million metric tons, raw value (1.5 million short tons raw value). The quota includes raw, refined, and specialty sugar. The announcement pleased sugar producers, and one news report noted the decision "brushed aside" congressional criticism of the program's management.

The raw sugar quantity, 1.117 million raw value is the minimum required by the United States under the Uruguay Round Agreement. The total also includes a quantity for refined sugar of 38,000 metric tons raw value; 105,788 metric tons raw value, which is the additional amount that the United States is committed to provide to Mexico under the North American Free Trade Agreement; and 100,000 metric tons raw value to be allocated, if needed, contingent on developments in international markets. USDA will make available all but the contingent quantity to the U.S. trade representative for allocation for import into the U.S. customs territory.

Under the harmonized tariff schedule of the United States, USDA has established the FY 2001 raw sugar TRQ at 1.223 million metric tons raw value (1.348 short tons raw value). Certificates of quota eligibility (CQEs) will be issued to allow Brazil, the Dominican Republic, and the Philippines to ship up to 25% of each country's initial allocation at the low-tier tariff during each quarter of FY 2001.

Argentina, Australia, Guatemala, and Peru will be allowed to ship up to 50% of their initial allocations in the first six months of FY 2001. Allocations not entered with the U.S. Customs Service during any quarter or six-month period may be entered in any subsequent period. The shipping pattern for Mexico will be determined at a later date. For all other countries, CQEs corresponding to each country's allocation may be entered at the low-tier tariff at any time during the fiscal year.

USDA also established the FY 2001 refined sugar TRQ at 143,788 metric tons raw value (158,499 short tons raw value) for which the sucrose content, by weight, in the dry state, must have a polarimeter reading of 99.5 degrees or more. USDA established the specialty sugar allocation, a subset of the refined sugar TRQ, at 17,656 metric tons raw value (19,462 short tons raw value) which must have a polarity of at least 99.5 degrees and be accompanied by a specialty sugar certificate.

Luther Markwart, chairman of the American Sugar Alliance, the group that represents sugar farmers and processors, said the organization had urged USDA to set the import quota at a level greater than 1.5 million short tons so that traditional agricultural non-recourse loans could be available. Under the 1996 farm law, an import quota of 1.5 million or less would preclude non-recourse loans but would allow recourse loans, or loans that would have to be repaid to the government. Non-recourse loans allow the product to be forfeited in lieu of repayment.

The ASA said wholesale refined sugar prices have declined by more than a third since the 1996 farm law went into effect. Some sugar beet and cane processing mills have closed, and thousands of tons of sugar have been forfeited to the government with more likely by the end of this month.

REUTERS reports that the quota for Mexico is "much less than the 500,000 to 600,000 tons Mexico says it is entitled to ship to the United States in fiscal 2001 under the North American Free Trade Agreement" No comment was immediately available from Mexican officials. Last month, Mexico asked for a NAFTA dispute settlement panel to resolve the dispute on its level of access to the U.S. sugar market in fiscal 2001.

The article also noted that U.S. sugar growers want processors to have access to non-recourse loans, but "they do not want actual imports to reach 1.50 million short tons because the U.S. market is already oversupplied with sugar." To get around that problem last year, USDA set the fiscal 2000 quota slightly about 1.50 million short tons, but held about 250,000 tons in reserve.

Critics, such as Rep. Dan Miller (R-FL) called that a "phantom quota" because foreign suppliers would not have access to all 1.50 million short tons, the article says. This year, because of Mexico, USDA will only hold 100,000 tonnes of the fiscal 2001 quota in reserve. Nonetheless, the move is likely to renew the phantom quota charges again this year.