November 29, 2016 / 10:51 PM / a year ago

UPDATE 3-U.S. says Mexico sugar trade pact may not be working

(Adds American Sugar Alliance comment)

By Chris Prentice

NEW YORK, Nov 29 (Reuters) - A U.S.-Mexico sugar trade deal signed just under two years ago may not be working as intended, the U.S. Department of Commerce said in notices on Tuesday after conducting a months-long review.

The United States and Mexico hammered out the trade deal in 2014 to end a months-long probe of cheap, subsidized sugar that the U.S. government decided was harming the American market. The review was requested by U.S. sugar companies, which last month asked the deal be terminated.

Department of Commerce official Paul Piquado said in a memo on Tuesday that the government needs more information from the government and cane millers in Mexico to finish its review of the deal.

Initial findings indicate the deal may not be meeting all requirements and that there may be some violations, the Commerce Department said.

The findings could be a blow to Mexico, which ships the bulk of its exportable surplus to its northern neighbor. The 11-million-tonne U.S. sugar market is heavily protected through price supports and import quotas.

For refiners ASR Group, the maker of Domino Sugar, and Louis Dreyfus Co’s Imperial Sugar Co, the move would mark a victory. Both companies have said that the deal has been starving them of raw supplies and wiping out their profit margins.

The American Sugar Alliance, which represents members of the U.S. industry that asked the trade pact be scrapped, welcomed the Commerce Department’s preliminary decisions. “They confirm that both the antidumping and countervailing duty agreements are not working,” said spokesman Phillip Hayes.

Negotiators from both countries have already been engaged in talks to rework the pact, amid demands that the Mexican side agree to certain changes. The pact sets minimum prices and a quota system for raw and refined sugar imported from Mexico.

Those talks are set to resume this week, according to industry sources.

The final decision is due within 120 days of its publication of the results in the Federal Register, the Commerce Department said. (Reporting by Chris Prentice; Editing by Tom Brown, Jonathan Oatis and Bill Rigby)

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