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Fresh Produce Association of the Americas Expresses Alarm About Potential Monopoly of U.S. Tomato Market
A small group of Florida companies is pushing dramatic changes to U.S. trade policy that will drive other U.S. companies out of the tomato supply chain and disadvantage consumers
Nogales, Arizona (June 26, 2019) – The Tomato Suspension Agreement should be continued but the agreement should maintain equal market access for all U.S. marketers of Mexican tomatoes, according to a delegation of leaders from the Fresh Produce Association of the Americas, which last week shared these concerns with U.S. Department of Commerce officials and members of Congress.
Instead, the newest proposal from the Department of Commerce would allow a small group of Florida-based marketing companies to establish a virtual monopoly over the marketing and distribution of Mexican tomatoes in the U.S., threatening to put current U.S. importers and marketers of those tomatoes out of business.
“As a whole, the proposed provisions establish a raft of rules and tools to discriminate against some U.S. businesses and benefit large Florida marketing companies,” Jungmeyer said. “These companies, which have long demanded the proposed changes, are using the Department of Commerce to allow them to create a monopoly in the marketplace at the expense of other U.S. marketing companies and consumers.”
The delegation from FPAA made the point that, by all appearances, domestic tomato growers in Florida sought out the Department of Commerce’s dramatic and market-shocking policy changes – notably the termination of the 22-year-old Tomato Suspension Agreement and a subsequent imposition of a 17.56 percent duty on all tomatoes imported from Mexico – to protect them from competition from Mexican producers of higher-quality tomatoes.
“Onerous as those new policies will be for consumers and for businesses that make up the U.S. tomato supply chain,” said FPAA President Lance Jungmeyer, “there is an even bigger and more destructive agenda here. The reality is that some Florida grower-distributors are seeking to establish a monopoly on the marketing of Mexican tomatoes in the U.S. If they are successful, these companies will ultimately drive our companies out of business, endanger the well-being of thousands of people who work for us and eliminate the kind of competition that currently delivers high-quality, affordable tomatoes to average American consumers.”
On May 7 the Commerce Department withdrew from the Suspension Agreement and imposed duties ostensibly to give Florida growers more of an advantage to sell their lower-quality, “gassed-green” tomatoes. The Department of Commerce is now considering new replacement Suspension Agreement policies that offer a clear advantage to the Florida companies, which are not only growers but also distribute Mexican tomatoes through their own large network of repackers and other middle-market companies in which they have an ownership stake. The Florida companies’ ability to integrate the entire supply chain of Mexican tomatoes makes them uniquely positioned to benefit from the proposed trade policy changes and to put other U.S. importers and marketers out of business.
Among other troubling provisions, the proposed policies will dismantle long-established legal rights that allow produce buyers to seek price adjustments for tomatoes that do not meet quality standards. That will result in U.S. buyers either paying twice or more above the minimum price for Mexican tomatoes or, most likely, buy tomatoes from repackers across the U.S. that are owned by the Florida marketing companies – not from current importers and marketers who sell popular, high-quality Mexican tomatoes that do not need to be repacked. (For more detail about price adjustments, see the sidebar below.)
“Give us an agreement that allows all companies to use the rules and regulations afforded by the Perishable Agricultural Commodities Act, which was passed by Congress and affords buyers the ability to make adjustments for breach of contract, which is an essential element of interstate commerce. The proposed agreement essentially eliminates these benefits for some U.S. marketers of Mexican tomatoes,” Jungmeyer said.
Also up for consideration is a proposed provision that would require USDA inspections of 100 percent of Mexican tomato shipments, which could be held at the border for up to 72 hours. If adopted, this new provision will substantially slow the flow of and cause damage to perishable high-quality tomatoes from Mexico. It will also cost current importers more to modify facilities and expand personnel necessary to respond to inspectors.
Jungmeyer added that “FPAA looks forward to continued discussion about these concerns with the Department of Commerce, which has the difficult, but important task of finding common ground for all the parties involved with the agreement.”
For a copy of FPAA’s correspondence to Commerce on this matter, please contact Erika Dominguez at 520-287-2707.
Sidebar: Eliminating Adjustments in the U.S. Tomato Market Will Lead to Monopoly
Many tomatoes imported from Mexico typically get to retail markets with little, if any need for repacking. This has been one of the main market appeals of Mexican vine-ripened tomatoes.
While most of these shipments arrive in top-quality condition, a small portion are not up to standards due to their handling, perishability or other factors. Under the terms of the Perishable Agricultural Commodities Act of 1930, retail and food service buyers of tomatoes from Mexico are entitled to reparation of damages from importers for small portions of any shipment that do not meet quality or condition requirements.
The proposed new Suspension Agreement terms call for eliminating this widely supported, and legally mandated industry practice. As a result, buyers will be forced to pay more for shipments. Deprived of the ability to reject defective products, U.S. buyers will be clearly disadvantaged in the marketplace unless they buy tomatoes that have been repacked at or near destination. With this provision, the Florida-owned repackers are attempting to force competitors out of both national and regional markets and to establish a virtual monopoly over the industry.
Most current importers and marketers of Mexican tomatoes do not repack tomatoes after they enter the U.S. They will therefore be unable to compete with the large number of repacking subsidiaries across the U.S. that are owned and operated by a small group of vertically integrated Florida companies.
The proposal goes well beyond the intended effect of protecting U.S. growers and instead has the effect of cornering the markets for the integrated repackers represented by the Florida Tomato Exchange. Some integrated FTE marketer/handlers have amassed a dominating presence as repackers and distributors all across the U.S.
About the Fresh Produce Association of the Americas: The FPAA is a nonprofit trade association headquartered in Nogales, Arizona, that represents over 120 U.S. member companies involved in importing, sales and transportation of fresh fruits and vegetables grown in Mexico. The FPAA leverages the efforts of private companies and partner-associations to increase the consumption of fresh fruits and vegetable from Mexico. For more information, go to: https://www.freshfrommexico.com