October, 1998

The first shot in the apple juice concentrate war has been taken

by Matt McCallum

The U.S. Apple Association (USApple) has launched an investigation that could lead to legal action against foreign suppliers of low-cost apple juice concentrate.
"A flood of cheap concentrate imports has significantly reduced prices U.S. growers receive for their processing apples," said USApple President and CEO Kraig R. Naasz. "In some cases apples are left to rot in the orchards because growers aren't even able to recoup their cost of harvest. We are concerned that the economic health of the entire apple industry may be threatened. Processing-apple prices are the foundation of the industry's entire price structure - if our foundation collapses, the rest of the structure is at risk.
Under U.S. trade law, domestic producers of a product can seek relief if it can be proven that foreign suppliers are dumping product in the United States - i.e., selling product at a price that is cheaper than it costs to produce. If dumping is found to be occurring, and is proven to be the cause of economic injury to domestic producers, the U.S. government can place a tariff on incoming product to level the playing field.
Two major apple juice-processing cooperatives are helping to fund USApple's investigation, Tree Top Inc. of Selah, Wash. and Knouse Foods of Peach Glen, Pa. In addition, two grower-based organizations also are helping to fund this effort: Michigan Processing Apple Growers, Lansing, Mich., and the New York Apple Association, Fishers, N.Y.
USApple has engaged the international trade lawyers of Skadden, Arps, Slate, Meagher and Flom to evaluate both the legal and economic merits of an antidumping case, the first step in preparing an antidumping petition to be filed with the U.S. Department of Commerce. The legal action, if taken, could cost from $1 to $1.5 million.
The law firm will do a legal and economic analysis, which should be completed by the first of November. The purpose of the study will be to determine three things including:
1) Who within the industry has legal standing to file an anti-dumping petition.
2) Determine who in the U.S. industry should be defined for purposes of proving injury.
3) Bring to light the economic factors that would influence the Department of Commerce and International Trade Commission to rule in favor of a dumping petition.
The information will then be forwarded to USApple's anti-dumping task force, chaired by Michigan grower Ed Whittenbach, to consider potential legal remedies. The task force will forward its recommendation to the USApple board of trustees, which will then vote on any action which, in all likelihood, will be an invitation to those with standing to file an anti-dumping petition. The board will probably act on a recommendation in early November.
Neither USApple or individual apple growers couldn't bring the case under the trade laws because only companies producing "like" goods can file such a case, Naasz said. In all likelihood a U.S. concentrator, juice processor or grower-owned cooperative will have to sue.
To win the case it must be proven that a country is selling a product below what it is sold for in the producing country's market or sold at a price that fails to cover the cost of production plus a reasonable profit.
The next part of the case would be to prove that the producers of like goods are being negatively effected. If this is all proven, then an import could be slapped on countries selling apple juice concentrate below cost into the U.S.
Once the petition is filed the Department of Commerce and International Trade Council could issue a preliminary decision in three months - which could be as soon as February or March. A preliminary import duty could be imposed if the Department of Commerce finds that apple juice concentrate is being dumped and the ITC rules that there appears to be economic injury.
"The key to this process is that it's done correctly," Naasz said. "Sufficient time needs to be allowed to generate the support necessary in filing of the petition if one is to be filed."
USApple has determined that through the end of last month China has increased its volume of apple juice concentrate exports to the U.S. 997% with a corresponding 52% decrease in price over the last three years.
Other countries have also increased volume and decreased prices, including Hungary whose sales into the U.S. are up 254% and prices are down 53%.
Chinese apple juice concentrate has been getting cheaper all year. In June it was selling in the U.S. for $3.50 a gallon, the lowest level ever. Before the Chinese entered the market two years ago the lowest juice concentrate had ever been sold in the U.S. on average for a year was $5.20 in 1994 when there was a record U.S. apple crop, according to The Food Institute.
Average prices in the last four years have been: $10 in 1995; $9.43 in 1996; $6.44 in 1997, and $4.80 in the first six months of 1998.
Two agricultural industries have won anti-dumping suits against China in recent years. Canned mushroom producers have won a preliminary decision and a 180% tariff has been slapped on any product being exported into the U.S. from the Communist country. Honey also won a similar suit several years ago.

Some want to try different direction in anti-dumping action