Proc. Fla. State Hort. Soc. 123:82–86. 2010.
An Economic Analysis of the U.S. Orange Juice Tariff and
the Competitiveness of Florida Growers and Processors
Robert A. Morris* and Ronald P. Muraro
University of Florida, IFAS, Citrus Research and Education Center, Food and Resource Economics
Department, 700 Experiment Station Road, Lake Alfred, FL 33850
Additional index words. Florida freeze, Brazil, citrus industries, tariffs, frozen concentrate
Although Sao Paulo, Brazil has a climate and soils conducive to producing juice oranges, prior to the 1970s, Brazil was
a relatively minor producer of processed oranges and orange juice (Table 1). However, a devastating Florida freeze in
1962, and subsequent freezes in the 1970s and 1980s created an opportunity for Brazil to expand its orange and orange
juice production. Most of this production was exported (Table 1), primarily to the U.S. and Western Europe. A climate
where freezes do not occur along with cheaper land and labor enabled Brazil to continue its expansion, until by the
1990s, Brazil was by far the largest orange juice producer in the world (Fig. 1), producing almost twice the amount of
oranges and orange juice as Florida. In fact, without the protective U.S. tariff on imported frozen concentrated orange
juice (FCOJ), the Florida processed orange industry would probably either be much smaller that it is or out of business.
This paper shows how this tariff has been reduced by trade legislation and by inflation and the impact than it has had
on the Florida processed orange industry.
The FCOJ Tariffs
The following section is based on information provided by
Florida Citrus Mutual (Mutual). The FCOJ orange juice tariff
was initiated with the passage of the Smoot-Hawley Act (Tariff
Act) in 1930, before citrus concentrate had been developed. The
Tariff Act imposed a tax of 70 cents per single strength gallon on
imported orange juice (Table 2), probably several times as much
as it cost to produce oranges and canned orange juice in Florida at
that time. The citrus tariff remained unchanged until 1947 when
the General Agreement on Tariffs and Trade (GATT) talks occurred in Geneva, Switzerland. There it was reduced to 35 cents
per single strength gallon ($.34 per lb solids) for concentrate and
20 cents per gallon for chilled single strength juice, still probably
more than it cost to produce oranges and orange juice at that time.
Table 1. Orange and orange juice production in Sao Paulo, Brazil.
Orange
Orange juice
Orange juice
production
production
exports
Season
(Mil. 90 lb boxes)
(Thousand metric tons 65 °Brix)
1964–65
16
5
6
1969–70
35
29
33
1974–75
82
170
181
1979–80
155
435
401
1984–85
205
784
808
1989–90
295
1,050
899
1994–95
311
1,110
960
1999–00
395
1,310
1,296
2004–05
380
1,335
1,077
2008–09
330
1,020
1,030
Sources: U.S. Department of Agriculture, 1965–1990; Florida Department of Citrus, 2009.
*Corresponding author; phone: (863) 956-1151; email: [email protected]
82
Fig. 1. Sources: U.S. Department of Agriculture, 1965–1990; U.S. Department
of Agriculture, PSD Online.
Table 2. History of the U.S. orange juice tariff.
Concentrate
NFCz
Year
($ per SSE galy)
1930–1947
0.70
0.70
1948–1994
0.35
0.20
1995
0.3415
0.1969
1996
0.3324
0.1893
1997
0.3237
0.1855
1998
0.3150
0.1817
1999
0.3059
0.1742
2000 Onward
0.2972
0.1704
NFC = Not-from-Concentrate orange juice; SSE = single strength
equivalent.
yThe concentrate tariff can be converted to dollars per lb solids by dividing the tariff per SSE gallon by 1.029 lb of solids per gallon. Source:
Florida Department of Citrus, 2009.
z
Proc. Fla. State Hort. Soc. 123: 2010.
In 1963, the Kennedy administration attempted to pass legislation that would reduce and possibly eliminate duties on imported
citrus products. Mutual battled against this legislation for 4 years
and the duty was maintained. Later, in 1970, the U.S. government again tried to reduce citrus import tariffs. American citrus
growers had operational costs that were four times higher than
their counterparts. Thus, a reduction in tariffs would render them
helpless in the international market. Mutual fought against this
tariff reduction and won.
A U.S. Customs ruling in 1980 brought a decade full of legislative victories for Florida citrus growers. U.S. Customs ruled that
processors couldn’t convert imported FCOJ into single strength
orange juice in a Class 8 bonded warehouse in order to pay a lower
tariff. If processors had been allowed to continue this practice,
growers would have lost an estimated $300 million a year. Soon
after, the U.S. Department of Commerce discovered that the
government of Brazil had provided illegal subsidies to growers as
well as FCOJ exporters. The U.S. Department of Commerce then
forced these companies to pay additional countervailing taxes on
exports to the U.S. Three Brazilian producers protested this accusation, but Mutual fought back and the U.S. International Trade
Commission ruled to uphold a countervailing duty on Brazilian
FCOJ exports. Brazil once again attempted to bypass the tariff
legislation and was discovered to have been dumping FCOJ at
less than the fair market value in the U.S. The U.S. Department
of Commerce forced exporters from Brazil to pay an additional
duty bond on FCOJ. An international trade court then ruled on
an anti-dumping order that required continued surveillance of
Brazilian prices. This was done in order to protect U.S. citrus
growers from Brazilian exports being sold at less than fair market
value. The battle for the protection of the citrus tariff continued at
the Uruguay Round Tariff and Non-Tariff Measure Negotiations.
Though there was a proposal to reduce the citrus tariff, Mutual
combated the reduction and citrus products were excluded from
tariff reductions that were included in this agreement.
Trade negotiations continued in the 1990s with the advent of
the North American Free Trade Agreement (NAFTA). NAFTA’s
primary goal was to establish free trade between Mexico and the
U.S. Also, during this time, the U.S.-Canada Free Trade Agreement
sought to eliminate tariffs between Canada and the U.S. Mutual
fought against the effort to eradicate tariffs and was victorious
when the Generalized Agreement on Tariffs and Trade maintained
the tariff on imported citrus. Though NAFTA was finally passed
during the 1992–93 season, it included special provisions for
citrus. These provisions granted a 15-year phase-out on import
tariffs as well as a snapback provision for tariffs to be reinstated if
specified shifts in price and import volume occurred. Tariffs also
suffered a gradual decrease as a result of the Uruguay Round Trade
talks in 1994. It was negotiated that FCOJ and NFC (Not-fromConcentrate orange juice) tariffs decrease in equal increments,
finally totaling 15%, after a period of 6 years.
Currently, Florida citrus growers are again forced to defend
the citrus tariff that protects their livelihood. If the Florida citrus
industry is to remain a viable $9 billion economic engine to
Florida, the current citrus tariff must not be altered in future
trade agreements.
Dumping
In economics, “dumping” can refer to any kind of predatory
pricing. However, the word is now generally used only in the
context of international trade law, where dumping is defined
Proc. Fla. State Hort. Soc. 123: 2010.
as the act of a manufacturer in one country exporting a product
to another country at a price which is either below the price it
charges in its home market or is below its costs of production.
Dumping can drive domestic producers out of business while
also destabilizing the competitive structure of world industries.
In the U.S., domestic firms can file an anti-dumping petition with
the U.S. Department of Commerce and the U.S. International
Trade Commission which will then conduct an investigation. If
the domestic industry is able to establish that foreign producers
are dumping in the U.S. market and that the domestic industry is
being injured as a result, then anti-dumping duties, or deposits,
are imposed on goods imported from the dumpers’ country at a
percentage rate calculated to counteract the dumping.
The U.S. annually reviews sales and if it shows no dumping
by the company, the duties are refunded in full with interest. If
the review determines that dumping did occur, then the company
forfeits the duties. The order can be lifted when a company successfully completes three consecutive reviews with no findings
of dumping.
Recent Allegations of Dumping
Florida Citrus Mutual presented data showing that Brazilian
processors were purchasing fruit during the 2003–04 season at
prices that would generate significant losses given the prices at
which they were selling FCOJ on the world market. These additional fruit purchases at a loss added to an already oversupplied
market for FCOJ that 2003–04 season. Also, Brazilian processors
made several deliveries of juice into the FCOJ futures market at
prices well below the cost of production for just the fruit, not
including the cost of processing and shipping FCOJ to the U.S.
These visible transactions put substantial downward pressure on
futures prices. Since movements in fruit prices and futures prices
are highly correlated, fruit prices for Florida growers were also
pressured downward, pushing many Florida growers into losses
that season.
This additional downward pressure on prices enabled Brazilian
processors with plants in Florida to buy Florida fruit at substantially lower prices than if FCOJ had been fairly priced at levels
that at least covered costs of production. Using the dumping
margins calculated by the U.S. Department of Commerce, it is
estimated that dumping reduced Florida farm gate citrus revenues
by about 9%, or $70 million. Based on Mutual’s investigation
and examination of the data, the actual loss may have been $100
million or more.
The following timeline provided by Florida Citrus Mutual
describes the schedule of activities that have occurred on the
current anti-dumping suit against Brazil:
Dec. 2004—A coalition consisting of Florida Citrus Mutual and
a group of Florida-based orange juice processors (A. Duda &
Sons, Inc.; Citrus World, Inc.; Southern Gardens, Inc.) filed a
petition with the U.S. Department of Com­merce requesting
anti-dumping duties be levied to offset unfair prices offered by
Brazilian processors on orange juice.
Jan. 2005—The U.S. International Trade Commission (ITC)
held a preliminary hearing to review the data contained in the
petition filed by the coalition.
Feb. 2005—The U.S. Department of Commerce announced the
decision to initiate an investigation in response to the petition
filed by the coalition.
83
Jan. 2006—The U.S. Department of Commerce ruled that Brazilian processors were dumping Frozen Concentrated Orange Juice
(FCOJ) and Not- From-Concentrate (NFC) orange juice, by the
price margins of 10% to 60% of the export value of the juice.
Feb. 2006—The ITC reached a final determination that Florida
orange growers and processors have suffered material injury by
reason of dumped Brazilian orange juice.
Mar. 2006—Final order was issued.
June 2007—The ITC reaffirmed the determination that Brazilian
imports injured Florida growers and processors.
June 2007—Tropicana filed a petition with the ITC requesting
a new investiga­tion because of changed market circumstances
(higher prices).
Oct. 2007—The ITC rejects Tropicana’s petition filed in June 2007.
Oct. 2007—The ITC reaffirmed the determination that Brazilian imports injured Florida growers and processors during the
2003–04 season.
Apr. 2009—Florida Citrus Mutual filed additional dumping
complaints against a Brazilian processor relating to the injury
of Florida growers during the 2003–04 season.
Impact of Inflation on the FCOJ Tariff
Inflation has reduced the constant dollar value of the U.S.
orange juice tariff by about 50% since 1980 (Table 3). During
that same period, orange production costs in Florida increased
Table 3. Impact of inflation on the U.S. orange juice tariff.
FCOJz Tariff
NFC Tariff
Current $
1980 $
Current $ 1980 $
Year
($ per lb solids}
($ per gal)
1979–80
0.34
0.34
0.20
0.20
1983–84
0.34
0.32
0.20
0.19
1987–88
0.34
0.30
0.20
0.18
1992–93
0.34
0.28
0.20
0.17
1996–97
0.32
0.24
0.19
0.15
2000–01
0.29
0.23
0.17
0.13
2003–04
0.29
0.20
0.17
0.12
2008–09
0.29
0.18
0.17
0.10
FCOJ = Frozen Concentrated Orange Juice; NFC = Not-from-Concentrate
Orange Juice.
Sources: Florida Department of Citrus, 2009; U.S. Department of Labor,
Bureau of Labor Statistics, 2010.
z
Table 4. Delivered-in processed orange production costs.
Florida
Growing
Harvest and haul
Season
1979–80
0.453
0.242
1983–84
0.521
0.253
1987–88
0.456
0.268
1992–93
0.462
0.291
1996–97
0.414
0.282
2000–01
0.435
0.324
2003–04
0.368
0.327
2008–09
0.696
0.375
from $0.69 to $1.07 per lb solids, while in Brazil they went from
$0.40 to $0.73, increases of 55% and 83%, respectively (Table
4). Much of this increase occurred since 2002–03, and was the
result of increased energy costs, increased fertilizer costs, and
costs to battle HLB (Muraro and Morris, 2009).
Brazil’s orange production costs ranged from 52% to 67% of
Florida’s over this 1980–2009 period. However, once the U.S.
orange juice tariff is added to Brazil’s production costs, they
ranged from 94% to 120% of Florida’s (Table 5). Thus, the tariff
protects Florida growers and processors now about as well as it
has over the past 30 years (Fig. 2). Costs in Brazil increased 80%
between 1980 and 2009 compared to 54% in Florida (Table 4),
offsetting the erosion of the tariff by inflation.
Duty-Drawback and U.S. Export Competitiveness
Duty-drawback is a trade provision that allows a U.S. orange
juice importer/exporter to receive 99% of the $0.29 per lb solids
duty they paid for concentrate imports or the $0.17 per gal they
paid for NFC imports as a refund against their concentrate or NFC
exports. To receive the drawback, the firm must have imported
orange juice within the past 3 years of their exports. Concentrate
duty-drawback cannot be claimed against NFC exports or viceversa. This trade provision improves the competitiveness of U.S.
orange juice in export markets, although it doesn’t remove 100% of
U.S. juice export cost disadvantage over Brazil (Table 6). Without
duty-drawback, Florida is at a $0.45 per lb solids disadvantage
in sales to Europe compared to Brazil. But with duty-drawback,
it is only $0.11 per lb solids.
The reason that duty-drawback doesn’t completely equalize
the delivered-to-Europe concentrate prices between Florida and
Brazil is that the shipping cost from Brazil to the U.S. is in the
U.S. concentrate price. That is because in order for concentrate to
be imported from Brazil, it must cover its shipping costs before
it can come into the U.S. market and have an impact on U.S.
concentrate prices. Since the shipping cost from Brazil is part of
the U.S. price, it is also affected by the 15.2% European tariff,
effectively adding $0.01 to the $0.10 in this example.
Lack of duty-drawback of bulk concentrate and bulk NFC
creates a trade barrier for those Florida processors who do not
import orange concentrate or NFC. This has been an incentive
for some Florida processors to develop an orange juice importing
program. In fact, Florida Citrus Mutual has often been opposed to
any legislation that would increase U.S. orange juice export price
competitiveness on the basis that it would increase the incentives
for Florida processors to import more Brazilian orange juice.
Total
Growing
($ per lb solids)
0.694
0.268
0.775
0.267
0.724
0.250
0.753
0.344
0.696
0.389
0.759
0.336
0.695
0.332
10.070
0. 502
Brazil
Harvest and haul
Total
0.136
0.139
0.124
0.121
0.133
0.089
0.096
0.223
0.403
0.406
0.374
0.465
0.523
0.425
0.428
0.725
Sources: Muraro and Amaro, 1990; Muraro, 1993; Muraro, 1979–80 through 2002–03 seasons; Muraro and Pozzan, 2004; Muraro and Morris,
2010; Muraro and Morris, 2009; Muraro, 2009; Muraro et al., 2000; Muraro et al., 2002.
84
Proc. Fla. State Hort. Soc. 123: 2010.
Table 5. Orange production costs in Florida and Brazil with the U.S. tariff.
Florida
Brazil
Total delivered-in
Total delivered-in
costs
costs plus tariff
Season
($ per lb solids)
1979–80
0.694
0.743
1983–84
0.775
0.746
1987–88
0.724
0.714
1992–93
0.753
0.805
1996–97
0.696
0.833
2000–01
0.759
0.715
2003–04
0.695
0.718
2008–09
1.070
1.015
Sources: Florida Department of Citrus, 2009; Muraro and Amaro, 1990;
Muraro, 1993; Muraro, 1979–80 through 2002–03 seasons; Muraro and
Pozzan, 2004; Muraro and Morris, 2010; Muraro and Morris, 2009;
Muraro, 2009; Muraro et al., 2000; Muraro et al., 2002.
Year
Fig. 2. Sources: Florida Department of Citrus, 2009; Muraro and Amaro, 1990;
Muraro, 1993; Muraro, 1979-80 through 2002-03 seasons; Muraro and Pozzan, 2004; Muraro and Morris, 2010; Muraro and Morris, 2009; Muraro, 2009;
Muraro et al., 2000; Muraro et al., 2002.
Table 6. Impact of duty-drawback on U.S. orange concentrate exports.
Florida bulk concentrate in U.S.
Brazil bulk concentrate in Brazil (1.25 – 0.29 U.S. tariff – $0.10 shipping cost between Brazil and U.S.)
Brazil bulk concentrate in USA (0.86 + 0.10 haul from Brazil to USA + 0.29 U.S. duty)
Brazil bulk concentrate celivered into European market (0.86 + 0.10 shipping cost to Europe
+ 15.2% of landed value European tariff)
Florida bulk concentrate delivered into European market – no duty-drawback (1.25 + 0.10 haul to Europe
+ 15.2% European tariff)
Florida bulk concentrate delivered into European market – with duty-drawback (1.25 – 0.29 duty-drawback
+ 0.10 haul to Europe + 15.2% European tariff)
Brazilian price advantage
Without duty-drawback
With duty-drawback
$ per lb solids
1.25
0.86
1.25
1.11
1.56
1.22
0.45
0.11
Conclusions
Literature Cited
Brazil has grown from an insignificant producer and exporter
of orange juice in the 1960s to the largest producer and exporter
of orange juice in the world. This is because Brazil has lower
orange production costs than Florida or other potential producers such as Mexico, Costa Rica, China, etc. However, a tariff on
U.S. orange juice imports, put into effect in 1930, protects the
Florida orange juice industry. Threats to the success of this tariff
have come from legislation to reduce it, Brazilian dumping of
orange juice into the U.S. market, and inflation. However, this
tariff protects Florida orange producers now about as well as it
has over the past 30 years. That is because more rapid increases in
orange production costs in Brazil have offset increases in orange
production costs in Florida.
The U.S. orange concentrate tariff increases Florida orange
and concentrate prices by the amount of the tariff since Brazilian
imports must cover this tariff in order to be sold in the U.S. However, a trade provision that enables U.S. orange juice processors
who have imported orange juice and paid the tariff to receive
99% of this duty back enables U.S. orange juice exports to be
competitive in foreign markets.
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of Florida, IFAS, Gainesville.
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