Remarks by Assistant Secretary Wang - January 30, 2023

Enforcing the Mexican Suspension Agreements: E&C’s Priorities and Challenges

January 30, 2023

As Prepared for Delivery

 

Thank you for the kind introduction, and for having me here to speak about trade enforcement and the suspension agreements on Sugar from Mexico. As this group knows well, U.S. farmers and the agricultural industry are critical to the health of the U.S. economy.  

The Biden-Harris Administration is implementing a robust policy agenda to support farmers, ranchers, and producers throughout the country and has put agriculture at the center of the U.S. trade policy agenda. The Administration is working hard to ensure that the United States maintains and improves secure and resilient agricultural supply chains, to support U.S. producers and ensure that Americans have access to safe and affordable food.

Commerce’s Enforcement and Compliance Unit, which I lead, is playing a key role in this effort by ensuring that the agricultural industry can thrive and compete on a level playing field. We know that American workers, farmers, and businesses can compete with anyone when that competition is fair.  However, when foreign producers benefit from unfair trade practices or subsidies, it is critical that the United States take strong action to support U.S. producers. The antidumping and countervailing duty laws provide American farmers and businesses an opportunity to address unfair pricing practices and subsidization provided by foreign governments. These laws go a long way in making that level playing field a reality. 

Today, I’m here to specifically talk about enforcement of the sugar suspension agreements and how Enforcement and Compliance is monitoring those agreements.  

I’m sure that everyone here is aware of the suspension agreements related to sugar, but for anyone unfamiliar I will provide a quick refresher.  In 2014, Commerce entered into the sugar suspension agreements with Mexican sugar producers and the Government of Mexico.  The agreements contain provisions putting a minimum on the price of Mexican sugar sold in the United States and the volume of Mexican sugar exported to the United States. Together, the agreements present a “belt and suspenders” approach. The agreements work together and support each other to provide an effective trade remedy. After feedback from U.S. industry that the original agreements were not providing the necessary relief in 2020, Commerce negotiated amendments to the sugar agreements. These amendments strengthened Commerce’s oversight through more powerful tools to examine sugar coming in and stronger penalties for infractions.  

These amendments have ensured that the agreements provide effective relief to U.S. industry, and E&C is constantly working to keep it that way. In order to do so, I want to underline some of the safeguards in place to ensure that the sugar suspension agreements benefit all parties.   

First, there is a safeguard because Commerce would impose duties if the agreements were no longer in place.  Commerce is always on the lookout for serious misconduct.  And if Commerce finds a violation of the agreements, Commerce has the ability to terminate them and impose collective duties of up to 60 percent on all imports of Mexican sugar. If Commerce imposed these duties after a termination, it wouldn’t be possible to enter into another suspension agreement. That provides a big incentive for the Mexican sugar industry and the Government of Mexico to keep their end of the bargain. To be clear, termination and duties would be rare and such action would not be taken lightly. To date, the Mexican signatories have clearly recognized that the agreements benefit all parties and that the cost of bad behavior is too high.

Returning to the idea of safeguards, the agreements include several provisions to ensure enforcement so that U.S. sugar producers get the benefits of the bargain.  For example, provisions in both agreements reduce the amount of Mexican sugar allowed into the United States if there is cheating on the export limit. For the AD agreement, we have similar restrictions if there is cheating on the price minimums. Because the United States is a such major market for Mexican sugar producers, the Government of Mexico and the Mexican sugar industry go to great lengths to ensure that the export volumes and prices are in line with the agreements. 

So, we talked about safeguards and enforcement, but those tools are only effective when backed up by stringent monitoring. Fortunately, with our hard-working staff at Commerce and government partners, we have the tools we need for monitoring and enforcement. Some of Commerce’s efforts related to enforcement and monitoring are visible to the public, but there is always significant work going on behind the scenes.

Commerce regularly conducts intensive monitoring of the business and pricing practices in proceedings called “administrative reviews.” In these proceedings, Commerce also digs into the Government of Mexico’s export licensing system. By vetting and analyzing hundreds, sometimes thousands, of pages of documents and dissecting large data sets, we’re able to respond to domestic industry representative concerns about whether the agreements are working and if the signatories are in compliance. As part of these cases, we also conduct on-site audits or “verifications.” In these audits, Commerce visits companies and reviews their books and records in-person through a strict and structured process. Because these visits happen in real-time, they hold the company and officials accountable. The audits also ensure that the documents submitted by the companies or governments are accurate. 

I mentioned a little earlier that some of the work that we do is not as well-known to the broader public and across the U.S. government. For example, U.S. Customs and Border Protection provides import data and documentation to ensure that we can spot-check and monitor sugar imports. In addition, the U.S. Department of Agriculture provides us with the exact number of shipments of sugar entering the United States during a specific period, ensuring that Commerce can monitor whether the Mexican sugar signatories are holding up their end of the bargain. By consulting closely across the government, we make sure that the agreements work for everyone. 

I want to take a moment to highlight the dedication of the team members that contribute to the enforcement and compliance of the sugar suspension agreements and our agency’s broader mission.  These incredible public servants are the unsung heroes that make our trade remedy system work.  Before I wrap up and move onto some questions, I want to make a couple more general points.  First, I hope that we can agree that the sugar suspension agreements have been successful in delivering the intended trade remedy.  We have been working with our counterparts in the Mexican government and with the Mexican sugar industry to ensure compliance and to make sure the agreements fulfill their intended purpose – to address unfair trade affecting the U.S. sugar industry. 

The agreements have strict penalties for specific acts of noncompliance, and I am happy to report that, thus far, no such penalties have been necessary.  While we hope that this will continue to be the case, Commerce will not hesitate to take enforcement action where appropriate.

The second point I want to make is that preventing potential circumvention is one of our enforcement priorities.  We are very focused on proactively addressing potential problems with monitoring or enforcement of the sugar agreements. After our last administrative review, we sat down with representatives of the Government of Mexico, and, separately, the Mexican sugar industry, to discuss certain issues surrounding recordkeeping and reporting. Our meetings were productive, and we are keeping lines of communication open to address other potential issues that might arise. These consultations allow Commerce and the Signatories to the agreements to proactively address issues as they arise. 

Again, I want to emphasize that the cooperation of the Mexican signatories and the Mexican government has, thus far, made these agreements a great example of a negotiated trade remedy. The Government of Mexico has put a lot of work on its side to manage the export license system and ensure comprehensive coverage of exports of sugar.

Overall, I hope we have shown you today that we work hard to make sure that the Mexican signatories and the Mexican government are upholding their end of the bargain. Again, Commerce will not hesitate to take strong enforcement action where appropriate and justified by the facts and the law.  Further, we listen closely to input from the petitioners and other interested parties as we look to improve our administration and enforcement of the agreements. 

While I don’t know what challenges the future may hold for enforcement of the sugar suspension agreements, I am confident that the team at Commerce has the diligence and the expertise to tackle any potential problems head-on.  We will continue our strong monitoring and enforcement of the agreements to support the U.S. sugar industry.

Thank you again for the opportunity to speak about enforcement and to highlight some of the great work that we do at Commerce.