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May 24, 2019 - International Trade News

Canada-US-Mexico Agreement - Outcomes for Canadian Sugar and Sugar-Containing Product Exports to the United States

On November 30, 2018, Canada, the United States and Mexico signed the text of the new Canada-United States-Mexico Agreement (CUSMA). The CUSMA will preserve the existing sugar and sugar-containing product (SCP) provisions between Canada, the U.S. and Mexico and will add new access to the U.S. for sugar and SCPs. The agreement will not be implemented until it is ratified by all three countries. It is still unknown if and when the U.S. Congress will support the deal, so there is no certainty regarding the date of implementation. If ratified this year, it is possible that it could be implemented in 2020.

The CUSMA agreement preserves current access to the US for Canadian refined sugar and sugar-containing products (SCPs). This includes the current access of 10,300 tonnes beet sugar and 59,250 tonnes SCPs. These are Canada-specific shares of U.S. WTO tariff rate quotas (TRQs) which were specified in a 1997 Canada-U.S. bilateral understanding. The provisions of this bilateral understanding have been incorporated into the CUSMA agreement (Chapter 3 Agriculture, Annex 3-A, Agricultural Trade between Canada and the United States, Article 3.A.5: Sugar and Sugar Containing Products).

The CSI had hoped to achieve more flexible rules for SCPs under the existing TRQ for 59,250 tonnes, which benefits Canadian refined cane sugar producers, their SCP blending operations in eastern Canada as well as a number of smaller SCP producers. Current rules under the NAFTA are too restrictive and require that SCPs containing more than 65% sugar are retail ready; i.e., SCPs cannot be exported to U.S. food service or food processing establishments to be mixed with water or other ingredients. In addition, a restrictive rule of origin for certain beverage mixes prevents the use of Canadian refined cane sugar. As a result of these restrictions, the SCP TRQ continues to be under-filled.

The CUSMA adds two new quotas providing an increase in U.S. access for Canadian beet sugar as well as an increase for Canadian SCPs; i.e., 9,600 tonnes of beet sugar and 9,600 tonnes of SCPs (Chapter 2 National Treatment and Market Access for Goods, Appendix 2: Tariff Schedule of the United States - (Tariff Rate Quotas), 14. TRQ – US 9: Sugar and 15. TRQ – US 10: Sugar Containing Products). The additional SCP access has a wider range of products and more flexible rules to ensure the quota will be fully utilized; i.e., all products can be made from cane sugar “refined in Canada” and can be shipped to U.S. retail, food service or food processing establishments.

Canada-specific access to US market under CUSMA Current access maintained Additional access
Sugar: beet sugar processed in Alberta exclusively from Alberta sugar beets; export certificates are administered by the Canadian government. 10,300 tonnes 9,600 tonnes
Sugar-containing products: produced mostly in eastern Canada; all products can use "sugar refined in Canada"; quote shares are based on export certificates allocated by the Canadian government. 

59,250 tonnes

(not fully utilized given the restrictive quota rules)

9,600 tonnes 

(flexible quota rules will ensure full utilization; wider range of products*)

*Tariff codes eligible for new US TRQ for sugar-containing products:

17019148, 17019158, 17022028, 17023028, 17024028, 17026028, 17029058, 17029068, 17049068, 17049078, 18061015, 18061028, 18061038, 18061055, 18061075, 18062073, 18062077, 18062094, 18062098, 18069039, 18069049, 18069059, 19011076, 19012025, 19012035, 19012060, 19012070, 19019068, 19019071, 21011238, 21011248, 21011258, 21012038, 21012048, 21012058, 21039078, 21069046, 21069072, 21069076, 21069080, 21069091, 21069094, 21069097.