Safeguards: The US Wall Against Blueberries

By Sebastian Osman, Country Manager of Araya & Cía. Lawyers Peru

Undoubtedly, the numbers show that the blueberry, even with its small size, is a giant of Peruvian exports. According to the Peruvian Exporters Association, for the year 2019 the shipment of blueberries abroad reached a value of about USD 825 million, positioning that country as its first exporter worldwide.

Despite the foregoing, according to data from Blueberries Consulting, during 2019 the United States (“USA”) was the destination for around 50% of Peru's blueberry exports. This excess of centralization can generate the classic risk of putting many eggs in a single basket, a risk that, in fact, seems to be materializing with the investigation that the North American country has initiated in relation to its imports of blueberries.

The aforementioned investigation has its origin in a set of local claims made to the United States government in relation to the possible existence of unfair competition -generated by illegal subsidies and / or dumping- by certain Mexican agricultural products in the United States market. In response to these claims, the Office of the US Trade Representative (“USTR”) organized, in conjunction with the Department of Agriculture (“USDA”) and the Department of Commerce (“USDOC”), hearings during the month of August in order to listen to the concerns of US producers and other interested parties.

Once the hearings were completed, the aforementioned US institutions issued the report entitled “Report on Seasonal and Perishable Products in US Commerce"In which the following measure aimed at addressing some concerns of American producers is announced:"The USTR will require the United States International Trade Commission to initiate a global safeguards investigation under Section 201 that increased blueberry imports have caused serious harm to local blueberry producers.".

Having explained the relevant background information, in this article we are going to evaluate, from a legal point of view, the implications and consequences of the announced measure for blueberries exported from Peru to the US market.

  • The Investigation of Global Safeguards under Section 201.

As a result of the aforementioned report, on October 6, the US International Trade Commission (“ITC”) initiated the investigation requested by the USTR covering imports of fresh, refrigerated and frozen blueberries. Now, to understand the scope of this research, it is important to answer the following questions:

  1. What is a global safeguard ?: The World Trade Organization (“WTO”) defines a safeguard as the temporary restriction on imports of a product in order to protect a domestic industry against increased imports that cause or threaten to cause serious injury to said industry of production. The expression overall it refers to the fact that the safeguard covers all the countries from which the product subject to the measure is imported.
  2. What is Section 201 ?: This is a section of US law titled “Trade Act of 1974”According to which the ITC can investigate whether increased imports of a product to the US causes or threatens to cause serious harm to local producers.
  3. How long will the ITC investigation take ?: The investigation lasts 120 days and, if the ITC reaches an affirmative answer regarding the impact on the local industry, it will have 60 more days to present a report to the US president recommending actions to take.
  4. What consequences could such an investigation bring ?: The US president could take different measures to limit blueberry imports, such as: Increasing or imposing tariffs, creating restrictions on import volumes, negotiating with exporting countries, among others.
  • Safeguards within the WTO. 

Now, the safeguards to be applied by the United States not only depend on its domestic law, but also must adhere to the international legal system created by the WTO, an organization of which both the United States and Peru are part. Specifically, there are two agreements framed in the WTO that regulate these measures:

  1. General Agreement on Tariffs and Trade of 1994: This agreement regulates the possibility that countries have to implement safeguards.
  2. Agreement on Safeguards: This agreement sets out two elements that are of essential consideration:
    1. Safeguard Application Level (Article 5): Safeguards should be applied only to the extent necessary to prevent or remedy a situation of serious injury and facilitate the application of the required adjustments.
    2. Duration of the Safeguard Measure (Article 7): The period of application of the safeguard measures cannot exceed a total of 8 years.
  • Tools of the Exporting Countries.

In order to avoid the imposition of safeguards by the US, exporting countries must demonstrate that their blueberry exports do not cause serious harm to US producers or threaten to do so. Along these lines, the legal tools that these countries have to achieve their objective are the following:

  1. Participate in the ITC investigation with the objective of presenting evidence to support its position; I,
  2. Go to the WTO dispute settlement system, which has instances of negotiation and review of the case by third-party experts.

In conclusion, the safeguards in the United States could represent a true legal wall for blueberry exports to that country. Along these lines, regardless of the result of this situation, it seems that what we are experiencing is an invitation to explore new markets that allow us to reduce the risks in the commercialization of this small giant of the fruit world.

Source
Sebastian Osman, Country Manager of Araya & Cía. Lawyers Peru

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