Spanish olives provide test case for US duties on agricultural imports from EU

25 April 2018 10:36am
Olives on tree

23 April 2018. By Adam Sigal.

US olive growers are pushing trade authorities for an increase in import duties that would set a precedent for a broad array of EU agricultural products.

The US Department of Commerce has already made a preliminary determination that ripe olives from Spain have been dumped and subsidized, but the growers, on Monday's deadline for comments, asked the agency to impose a finding on the product that could not only raise duties on olives, but would make it easier to get duties imposed on other EU products.

The US growers reiterated their case, rejected in Commerce's preliminary finding, that a ‘particular market situation’ exists in Spain. Such a decision from Commerce would almost certainly cause the agency to propose significantly higher duties.

A 'particular market situation' occurs when Commerce finds that the actual cost of production isn't properly reflected in producers' reported costs. Without that finding, Commerce based its preliminary duty finding on the reported costs of Spanish companies. With the finding, Commerce can disregard a company’s reported costs for inputs and instead use data from another ‘surrogate’ country.

The preliminary duty rates were assessed on a per-company basis. Antidumping duties ranged from 14.64 percent to 19.73 percent, and antisubsidy rates ranged from 2.31 to 7.24 percent.

In 2016, the US imported $20.6 billion dollars of agricultural products from Europe, driven largely by demand in high-value products.

If Commerce finds the EU’s Common Agricultural Policies cause a particular market situation, US growers and food processors will find it much easier to make the case that imports are dumped. The change would not only affect primary ingredients such as nuts, but would include finished products such as pasta, wine, cheese and oils.

Arguments

In its preliminary decision, Commerce said it lacked sufficient evidence that a particular market situation, or PMS, exists in Spain. But in briefs filed on Monday, US olive growers argue that a 2015 change to the law in the Trade Preferences Extension Act, known as the TPEA, lowered the bar for the agency to find a PMS.

“Since the TPEA amended the antidumping statute, the Department has focused attention on distortions in the market for significant inputs used to produce the subject merchandise,” the US companies said.

The companies point to the contemporaneous antisubsidy investigation that determined, on a preliminary basis, that Spanish olive growers were subsidized.

“The Department’s affirmative subsidy finding with regard to raw olives thus means that an overwhelming portion of the value of Spanish producers’ ripe olive [cost of production] is comprised of one input that is subsidized, thereby distorting the [costs of production]. This situation qualifies as a PMS because the subsidization prevents an accurate calculation of the cost of ripe olives in the ordinary course of trade,” the US companies said.

The companies also argue that the decision contradicts Commerce precedents that reject the use in calculations of purchase prices for inputs when those inputs may have been subsidized.

Subsidies

Spanish companies expressed concern that Commerce could increase anti-subsidy duties with a finding that the companies failed to cooperate. The companies have claimed that they were unable to provide information from many unaffiliated olive suppliers.

The Government of Spain filed a case brief saying it has “fully cooperated” with Commerce, but called into question some of the agency’s methods.

“[Commerce] has not acted with the proportionality and moderation that comes from the Agreement on Subsidies and Countervailing Measures,” Spain said, referring to the international agreement that governs when and how the US is allowed to calculate antisubsidy duties.

The Government of Spain said Commerce asked for “an enormous quantity of information” on tight deadlines, and the number of companies included in the investigation has ballooned.

Commerce is scheduled to make its final antidumping and antisubsidy determinations by June 4.