|
Sugar Loan Program
Tariff-Rate Quotas
Re-Export Programs
Free Trade Agreements
The two main elements of U.S. sugar policy are the price support
loan program and the tariff-rate quota (TRQ) import system. The
loan program supports the U.S. price of sugar. The tariff-rate quota
system ensures that there is an adequate supply of sugar at reasonable
prices for both consumers and producers. U.S. commitments under
international trade agreements, including the North American Free
Trade Agreement (NAFTA), affect the level and allocation of TRQs.
The United States also operates the Refined Sugar and Sugar-Containing
Products Re-Export Programs to allow U.S. refiners to be competitive
in global refined and sugar-containing products markets.
Sugar Loan Program
The primary policy tools available to USDA to assist
sugarcane and sugar beet producers are contained in the
Farm Security
and Rural Investment Act of 2002 (2002 Farm Act). The
U.S. sugar program provides for USDA to make loans available
to processors of domestically grown sugarcane at a rate
of 18 cents per pound and to processors of domestically
grown sugar beets at the rate of 22.9 cents per pound
for refined sugar. The 2002 Farm Act allows processors
to obtain loans for "in-process" sugar and
syrups at 80 percent of the loan rate.
Loans are taken for a maximum term of 9 months and
must be liquidated along with interest charges by the
end of the fiscal year in which the loan was made. Unlike
most other commodity programs, sugar loans are made
to processors and not directly to producers. This is
because sugarcane and sugar beets, being bulky and very
perishable, must be processed into sugar before they
can be traded and stored. To qualify for loans, processors
must agree to provide payments to producers that are
proportional to the value of the loan received by the
processor for sugar beets and sugarcane delivered by
producers. USDA has the authority to establish minimum
producer payment amounts.
The loans are nonrecourse. This means that when the
loan matures, USDA must accept sugar pledged as collateral
as payment in full in lieu of cash repayment of the
loan, at the discretion of the processor. "In-process"
sugar and syrups must be converted into raw cane or
refined beet sugar at no cost to the Commodity Credit
Corporation (CCC) before being eligible for forfeiture.
The processor cannot be required to notify USDA of the
intention to forfeit the sugar under loan. By forfeiting
the sugar, the processor effectively withdraws sugar
from the market, thereby reducing excess supply and
helping to support the market price of sugar.
The 2002 Farm Act requires USDA, to the maximum extent
possible, to operate the U.S. sugar loan program at
no cost to the Federal Government. Specially, this provision
means that USDA must operate the program in order to
avoid the forfeiture of sugar to CCC. In order to discourage
forfeiture of nonrecourse loans, the sugar price at
the time of loan repayment must be high enough to cover
the loan principal plus interest expenses and other
costs. The 2002 Farm Act gives USDA the authority to
accept bids from sugarcane and sugar beet processors
to obtain raw cane sugar or refined beet sugar in CCC
inventory in exchange for reducing the production of
raw cane sugar or refined beet sugar. This is one way
to control expected excess (or "price-depressing")
supplies of sugar. The 2002 Farm Act notes specifically
that this authority is in addition to any other authority
that CCC may have under any other law. (For example,
CCC relied on the Cost Reduction Options of the 1985
Farm Security Act (section 1009) for its authority for
the Payment-in-Kind (PIK) Diversion Programs for the
2000-01 crop years.)
As another way to guarantee the sugar loan program
operates at no cost to the Federal Government, USDA
is required to establish flexible marketing allotments
for sugar. The overall quantity of sugar to be allotted
for a crop year is determined by subtracting the sum
of 1.532 million short tons, raw value (STRV) and carry-in
stocks of sugar (including CCC inventory) from the USDA's
estimate of sugar consumption and reasonable carryover
stocks at the end of the crop year. USDA is required
to adjust allotment quantities to avoid the forfeiture
of sugar to CCC.
The overall allotment quantity is divided between
refined beet sugar at 54.35 percent of the overall quantity
and raw cane sugar at 45.65 percent of the overall quantity.
For cane sugar, Hawaii and Puerto Rico are jointly allotted
325,000 STRV. The mainland cane sugar producing States'
(Florida, Louisiana, and Texas) allocations are assigned
based on past marketings of sugar, the ability to market
sugar in the current year, and past processing levels.
Beet sugar processors are assigned allotments based
on their sugar production for the 1998-2000 crop years.
The 2002 Farm Act provides for a number of contingencies
that could require reassignment of allotments during
the crop year.
USDA's authority to operate sugar marketing allotments
is suspended if USDA estimates that sugar imports levels
for human consumption, not including the re-export programs
(see below), will exceed 1.532 million STRV such that
the overall allotment quantity would have to be reduced.
The marketing allotments would remain suspended until
such time that imports have been restricted, eliminated,
or otherwise reduced to or below the 1.532 million STRV
level.
Top of page
Tariff-Rate Quotas
A tariff-rate quota is a two-tiered tariff for which
the tariff rate charged depends on the volume of imports.
A lower (in-quota) tariff is charged on imports within
the quota volume. A higher (over-quota) tariff is charged
on imports in excess of the quota volume.
The United States establishes separate TRQs for imports
of raw cane sugar and for imports of certain other sugars,
syrups, and molasses. Authority to establish TRQs is
under Additional U.S. note 5(a)(I) to chapter 17 of
the Harmonized Tariff Schedule (HTS). Each year, the
Secretary of Agriculture announces the quantity of sugar
that may be imported at a nominal tariff rate. Any additional
annual quantity may be imported at a higher tariff rate.
In the Uruguay Round of the General Agreement on Tariffs
and Trade (GATT), the United States agreed to make available
for import a minimum quantity (1.256 million STRV) of
raw and refined sugar each marketing year (October to
September). Included in this amount is a commitment
to import at least 24,251 STRV of refined sugar.
The raw cane sugar TRQ is allocated to 40 countries
based on a representative period (1975-81) when trade
was relatively unrestricted. An additional allocation
is made available to Mexico to satisfy U.S. obligations
under NAFTA.
The refined sugar tariff rate quota includes several
components, including specific allocations to Canada,
Mexico, and a quantity of refined sugar that is available
to all countries on a first-come, first-served basis.
The first-come, first-served section of the refined
sugar TRQ also includes a category for specialty sugars
such as organic sugars.
In addition, the United States administers TRQs on
imports of various sugar-containing products that originally
had been subject to absolute quotas under Section 22
of the Agricultural Adjustment Act of 1933. There are
four TRQs on imports of similar products from countries
other than Mexico.
Top of page
Re-Export
Programs
The United States also operates two re-export programs to help
U.S. sugar refiners and manufacturers of sugar-containing
products compete in world markets. The Refined Sugar Re-Export
Program establishes a license against which a company
can import sugar at world prices for refining and sale
to replace sugar in the market that has been exported
as refined sugar or as sugar in sugar-containing products.
The Sugar Containing Products Re-Export Program allows
U.S. participants to buy sugar at world prices for use
in products that will be exported onto the world market.
Raw cane sugar imports under the two programs are not
subject to the sugar TRQs. The 2002 Farm Act specifies
that all refined sugars derived from either sugar beets
or sugarcane are substitutable under these programs.
Free Trade Agreements
Under the North American Free Trade Agreement (NAFTA), as of January 1, 2008, there are no longer any restrictions on trade in sweetener products between the United States and Mexico.
Under the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), there are specific provisions for trade in sugar. For more information, see the Sugar Backgrounder (page 47).
Top of page
|
