Congressman Gonzalez and Bipartisan Members of Congress Urge Commerce Secretary to Maintain Current 2019 Tomato Suspension Agreement Minimum Reference Pricing

WASHINGTON – On Thursday, July 22, Congressman Vicente Gonzalez (TX-15) led a bipartisan letter the Secretary of Commerce, Gina Raimondo, urging her to reject a proposal to reinterpret the definition of Minimum Reference Price in the 2019 Mexico Tomato Suspension Agreement (TSA).

Current reference pricing provides predictability for American produce distributors and consumers alike. The proposed change to the minimum reference price would be a drastic change from current definition that would impact tens of thousands of jobs, harm distributors who rely on predictable pricing, and make tomatoes less affordable for American families, grocers and restaurants.

The bipartisan Members of Congress urged the Department of Commerce to reject the proposal: "The sale and distribution of tomatoes from Mexico creates tens of thousands of jobs across the United States, and is a particularly important jobs engine throughout the entire southwest border region. The proposed reinterpretation would hit small businesses in this industry hardest. A larger distributor with a more efficient cost structure would need to increase the reference price by a smaller magnitude relative to small- and medium-sized enterprises with higher costs. The Department should not be in the business of picking winners or losers in the U.S. supply chain, particularly in an industry which brings healthy products to our constituents and at a time when so many businesses are attempting to recover from the economic havoc wreaked by the COVID-19 pandemic.

"Tomato trade between the United States and Mexico provides a thriving industry in border communities and across Texas," added Congressman Gonzalez. "This proposal would negatively impact our economy, our jobs, and our businesses. I urge the Department of Commerce to maintain the standard reference pricing definition."

Cities and organizations also weighed-in urging Secretary Raimondo to reject the proposal:

"The import of fresh tomatoes from Mexico creates thousands of U.S. jobs and delivers the variety and price point U.S. consumers want. Disrupting this trade not only puts those jobs at risk and could lead to higher food prices at a time of concern over inflation, but it also risks U.S. fresh produce exports to Mexico being the subject of potential retaliation. The Border Trade Alliance thanks Rep. Gonzalez for working to ensure that the cross-border trade of fresh tomatoes can continue in a predictable, stable environment that serves the interests of U.S. importers, exporters, and shoppers," said Border Trade Alliance President Ms. Britton Mullen.

"The matter of not only changing the interpretation of the 2019 Tomato Suspension Agreement, but changing a fundamental term such as FOB Shipping Point, will have far reaching implications and potentially devastating economic impacts throughout Texas and North America. The tomatoes brought from Mexico through Texas represent investments in our state, jobs for our local communities, and a healthy and affordable food for all Americans. We applaud and thank Congressman Gonzalez for his leadership, as well as the Texas representatives that support this effort and this letter. It is their efforts and their backing that makes our voices heard, and addressing these issues with Commerce possible. The fresh produce industry in Texas looks forward to continuing to work with our elected officials in DC to ensure the spirit of the agreement remains intact and executed as intended," said Dante L Galeazzi, CEO & President, Texas International Produce Association.

"The drastic new interpretation under consideration by officials at the Department of Commerce would require U.S. distributors in Pharr and elsewhere to add to the reference price all expenses incurred from the moment the tomatoes cross the U.S.-Mexico border. In addition to being incredibly difficult for our local selling agents to administer, these changes would force them to dramatically increase prices, by as much as 20 percent and in some cases more, handing a shattering setback to economic activity in Pharr and the entire South Texas region. Given the nexus we find ourselves in and the urgency of this matter, I implore the Department of Commerce to prudently review the catastrophic repercussions of implementing a new version that would be conflicting to consistent administration of tomato suspension agreements for a quarter of a century," said Dr. Ambrosio Hernandez, Mayor, City of Pharr.

Cosignatories of the letter include Representatives Filemon Vela (TX-34), Marc Veasey (TX-33), Henry Cuellar (TX-28), Lloyd Doggett (TX-35) Jamie Herrera Beutler (WA-03), Greg Stanton (AZ-09), Raul M. Grijalva (AZ-03), Ruben Gallego (AZ-07), Tom O'Halleran (AZ-01) and Ann Kirkpatrick (AZ-02).

The full letter can be found here and below.

July 22, 2021

The Honorable Gina M. Raimondo
Secretary
U.S. Department of Commerce
1401 Constitution Ave NW
Washington, DC 20230

Dear Secretary Raimondo:

We write to you concerning the Department of Commerce's administration of the 2019 Mexico Tomato Suspension Agreement ("2019 TSA") (A-201-820). We understand that the Department is considering a proposal to break with 25 years of precedent of how it administers the minimum reference price, a cornerstone of the agreement. The proposed reinterpretation of the reference price would be costly for the tens of thousands of Americans that distribute and sell tomatoes from Mexico and their millions of American customers. We urge Commerce to reject it.

The minimum pricing threshold established by the 2019 TSA through the "reference price" mechanism provides predictability for American tomato growers, produce distributors, and consumers alike. The proposal under consideration would require U.S. distributors to add all expenses incurred the moment tomatoes cross the U.S.-Mexico border to the reference price, including wages, utilities, and inspection fees. This proposed interpretation stands in stark contrast to the decades-old interpretation of the reference price, which treats such expenses as included in the reference price and establishes that the reference price applies when the tomatoes are sold at the distributor's warehouse/first point of sale in the United States.

Similar to prior suspension agreements on fresh tomatoes from Mexico, the 2019 TSA works well because it establishes clear guidelines for distributors of Mexican tomatoes to follow by setting a specific minimum price for each type of tomato. However, if Commerce adopts the proposed reinterpretation of the reference price, distributors would lose this predictability and certainty. Instead of following set reference prices, distributors would be required to anticipate their expenses, quantify such expenses on a per-unit basis, and add those additional, unknown costs to the established reference price at the time of sale. Thus, the reference prices established in the 2019 TSA would have no meaning at all because such prices would no longer represent the prices at which the distributor can sell tomatoes.

The sale and distribution of tomatoes from Mexico creates tens of thousands of jobs across the United States, and is a particularly important jobs engine throughout the entire southwest border region. The proposed reinterpretation would hit small businesses in this industry hardest. A larger distributor with a more efficient cost structure would need to increase the reference price by a smaller magnitude relative to small- and medium-sized enterprises with higher costs. The Department should not be in the business of picking winners or losers in the U.S. supply chain, particularly in an industry which brings healthy products to our constituents and at a time when so many businesses are attempting to recover from the economic havoc wreaked by the COVID-19 pandemic.

A disruption of the 2019 TSA through the adoption of this novel and unreasonable interpretation would raise the price of tomatoes across the board, harming restaurants and grocers, as well as squeezing the budgets of working families. Our grocers and restaurants need imports to satisfy the growing demand for tomatoes. Mexico is not only the United States' largest and most reliable foreign supplier, it also grows many varieties of tomatoes that simply are not grown in the United States.

We urge the Department to reject the proposed novel interpretation to add to the reference price expenses that are incurred upon passage of the tomatoes across the U.S.-Mexico Border and before the final sale of such tomatoes occurs at the U.S. distributor. We look forward to working with you to resolve this important concern.

/s/

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