USTR Makes More Sugar Available for Import

The Office of the United States Special Trade Representative (USTR) in Washington recently announced a country-specific reallocation of the fiscal year 2010 tariff rate quota (TRQ) for imported raw cane sugar. While freeing up sugar imports, the reallocation essentially fills in the gap caused by countries that can’t fulfill their original quotas.

The recent changes are based upon consultations with quota-holding nations over the last several months. Several nations who could not ship, surrendered quota quantities for the current 2010 fiscal year, which was in turn allocated to other quota-holding nations.

Resulting in a wash, the total reallocation amounted to 81,945 metric tons (2,204.6 pounds = one metric ton). The table below shows the quantity of sugar that was surrendered and the countries who received additional rights to ship to the U.S. under quota.

“While this quantity of sugar may lead to more imports eventually, the quantities allocated to many nations are too small to economically ship to the U.S. at this time,” said Patrick Henneberry, senior vice president and chief of commodities management for Imperial Sugar Company.

“Brazil, the Philippines and the Dominican Republic received enough sugar to ship independently. Others will have to wait for additional allocations or co-ship with sugar from other nations to take advantage of these allocations.”

Patrick Henneberry, senior vice president and chief of commodities management for Imperial Sugar Company

The TRQ establishes a quantity of sugar from each of the countries named to be imported into the U.S., assessing either no duty or only a small duty. For quantities above the TRQ allocations, importers must pay a duty of $15.36 per pound to secure entry. Ordinarily, the over-quota duty makes imports twice the price of U.S. sugar. The new allocations, however, will not result in over-quota duties.

More relief still might be on the way. In the 2008 Farm Bill, Congress ruled that USDA should not increase the quota until after April 1st unless there was a declaration of disaster. It is expected that USDA will act soon after the April 1 deadline to increase the quota.

According to Henneberry, just how much sugar is added will be crucial for the marketplace, as many industry analysts – as well as Imperial – believe significantly more sugar will be needed than USDA estimates would indicate.

“Given the USDA lags the industry estimates, it is likely it will add sugar slowly over time, gauging the effect on supply and demand,” Henneberry said. “If the industry analysts are correct, this behavior will lead to a tight market in the U.S. for the rest of the year.”