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MeneameThe US Department of Commerce (DOC) has reached an agreement with Mexican officials to put an end to the long-running dispute over US imports of Mexican cement, according to a Department of Commerce press release.
"The agreement is a positive step toward resolving a 16-year dispute between the US and Mexico. The decision underscores the strong trading relationship with one of our Nafta trading partners and our ability to resolve trade disputes in a constructive manner," DOC secretary Carlos Gutierrez said.
"The arrangement will help boost the margins of the [cement] companies, especially Cemex and GCC [Grupo Cementos de Chihuahua] who will be able to increase their exports, and I think that [Holcim] Apasco will also be able to look into making exports too," cement analyst at Mexican brokerage Vector, Carlos Hermosillo told BNamericas.
"However, I think that Moctezema and Cruz Azul won't be so involved in making exports to the US in the short or medium term because they are focused on the central Mexican market and the delivery costs [to the US] are simply too much, but they could try to move into the export market within four or five years," Hermosillo added.
Meanwhile, Mexico's largest cement maker Cemex said that the resolution of the antidumping order "will serve to enhance trade relations between the US and Mexico and create benefits for US consumers and the industries of both countries," according to a company press release.
DETAILS OF THE AGREEMENT
Under the accord reached between the two sets of authorities, The US antidumping restrictions on Mexican cement will be gradually reduced over a three-year transition period, before being totally abolished in 2009.
Once the US antidumping order is revoked, Mexican cement will be permitted to enter the US without having to pay duty or being forced to adhere to any limits on volumes.
During the three-year transition period, imports of 3Mt of Mexican cement will be allowed and this figure may be raised if the US market grows in the second and third years, with a 4.5% annual cap.
The duty on cement imports during the transitional period will be cut from the current level of over US$26/t to just US$3/t.
Also under the agreement, "unliquidated historical duties associated with the antidumping order will be shared by the US and Mexican cement industries," read the Cemex press statement. This means that Cemex will receive around US$100mn in cash and US$65mn in liabilities will also be eliminated.
AGREEMENT RESOLVES CEMENT LITIGATION
This settlement between the US and Mexico comes at a time when key litigation decisions are close to being announced by the World Trade Organization (WTO) and also while the US is suffering from acute shortages of cement, partly due to the reconstruction programs put into place in the wake of hurricane devastation in southern states in 2005.
"The two parties have agreed to suspend temporarily Mexico's complaint against the US with the World Trade Organization and later request termination on the basis of reaching a satisfactory agreement to put an end to the dispute," read a statement from the Mexican ministry of economy.
The accord also suspends the North American Free Trade Agreement panel proceedings related to the US International Trade Commission (ITC) decision in 2000 to allow the antidumping order to remain in effect. This body was due to issue a decision later this year.
The Mexican and US authorities will continue to work to finalize the text of the agreement in order to ensure that outstanding issues are resolved, said the US commerce secretary.
HISTORY OF THE CEMENT DUMPING CASE
An antidumping duty order on gray Portland cement imported from Mexico went into effect on August 30, 1990 after it was decided that the product was being sold at unfair prices in the southern tier states of the US.
In the investigation and subsequent annual administrative reviews, Cemex received margins ranging between 37.4% and 109.43%. The current margin for the company was set at 42.26% only recently.
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