The Department of Commerce has issued an affirmative preliminary determination in a countervailing duty (CVD) investigation of sugar imports from Mexico, and the United States is preparing to impose import duties as high as 17 percent on Mexican sugar. According to an International Trade Administration fact sheet, the CVD investigation was instituted in March 2014 after domestic sugar interests filed a petition seeking relief from “the market distorting effects caused by injurious subsidization of imports into the United States.” Beginning the first week of September, Commerce will instruct U.S. Customs and Border Protection to require cash deposits based on the preliminary subsidy rates calculated for different Mexican exporters. A final determination in the matter is scheduled for January 2015.

An American Sugar Alliance spokesperson said that the August 26, 2014, determination “validates our claim that the flood of Mexican sugar, which is harming America’s sugar producers and workers, is subsidized by the Mexican government.” Meanwhile the president of Mexico’s sugar chamber reportedly indicated that the country’s sugar industry is ready to agree to a deal that would limit sugar exports to the United States, but the amount exported could not drop below 1 million metric tons per cycle. He believed that an agreement could be reached before Commerce resolves a separate antidumping case in October.

While the United States produces about 70 percent of the sugar used in the country, the remainder is, to a large extent, imported from Mexico. Added duties mean that U.S. food makers will have to pay up to 5 cents per pound more for imported Mexican sugar, on the basis of current prices. The Sweetener Users Association said that the ruling should not come as a surprise and claimed that Mexico has “unfairly become the scapegoat” for the purported shortcomings of the U.S. sugar program. “This case has been, and continues to be, a cynical effort to drive up prices for consumers and kill American jobs in the food manufacturing sector,” the group said, adding that Mexico is “a critical U.S. ally and trading partner,” and its sugar is essential because domestic producers cannot meet U.S. needs.

U.S. sugar prices started rising in March and are at a nearly two-year high. A glut of Mexican sugar in 2013 caused U.S. prices to plunge and reportedly led to loan defaults by U.S. processors, at a cost to the U.S. government of more than $250 million. Mexico is reportedly expected to export nearly 2 million metric tons of sugar to the United States in the crop year that ends in September. See Agweek, The Wall Street Journal, BNA International Trade Reporter™, and Reuters, August 26, 2014.