The U.S. OJ tariff and
the competitiveness
of Florida growers
The tariff protects
Florida growers and
processors now about
as well as it has over
the past 30 years.
By Allen Morris
and Ronald P. Muraro
P
rior to the 1970s, Brazil was a
relatively minor producer of processed oranges and orange juice.
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, primarily to
the United States and Western Europe.
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
A climate where freezes do not
occur — along with cheaper land and
labor — enabled Brazil to continue
its expansion, so that by the 1990s
Brazil was by far the largest orange
juice producer in the world, providing
almost twice the amount of oranges
and orange juice as Florida.
Without the protective U.S. tariff on
imported frozen concentrated orange
juice (FCOJ), the Florida processed
orange industry would probably either
be much smaller than it is or out of
business. This article shows how the
tariff has been reduced by trade legislation and by inflation, and the resulting impact that has had on the Florida
processed orange industry.
THE FCOJ TARIFF
(This section draws heavily on information provided by Florida Citrus
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 singlestrength gallon on imported orange
juice (Table 1). The citrus tariff
remained unchanged until 1947 when
Table 1. History of the U.S. Orange
Juice Tariff
Year
Concentrate NFC
1930-1947
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($ per SSE gallon)
0.70
0.70
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
Notes: (1) SSE is single-strength equivalent
(2) The concentrate tariff can be converted to dollars per pound solids
by dividing the tariff per SSE gallon
by 1.029 pounds of solids per gallon
Source: Florida Department of Citrus.
CITRUS INDUSTRY • October 2010
orlando drum.indd 1
juice
tariff table.indd 1
2/24/10Orange
3:29:13
PM
9/23/10 9:41:15 AM
Table 2. Delivered-In Processed Orange Production Costs
Florida
Season
Growing
Harvest & Haul
Total
Growing
($ Per Pound
.694 Solids) .268
Brazil
Harvest & Haul
Total
.136
.403
1979/80
.453
.242
1983/84
.521
.253
.775
.267
.139
.406
1987/88
.456
.268
.724
.250
.124
.374
1992/93
.462
.291
.753
.344
.121
.465
1996/97
.414
.282
.696
.389
.133
.523
2000/01
.435
.324
.759
.336
.089
.425
2003/04
.368
.327
.695
.332
.096
.428
2008/09
.696
.375
1.070
.502
.223
.725
Sources: Muraro, 1990; Muraro et al., 1993; Muraro, et al., various reports covering the 1979-80 through 2002-03 seasons; Muraro, et al.,
2004; Muraro, et al., 2010; Muraro et al., March 2009; Muraro, et al., September 2009; Muraro, et al., 2000; Muraro, et al., 2002.
theOrange
General
Agreement on Tariffs and
from tariff reductions.
(NAFTA). NAFTA’s primary
goal was
production costs.indd 1
9/23/10 9:46:07 AM
Trade negotiations continued in the
to establish free trade between Mexico
Trade (GATT) talks occurred in Gene1990s with the advent of the North
and the United States. Mutual fought
va, Switzerland. There it was reduced
American Free Trade Agreement
against the effort to eradicate tariffs
to 35 cents per single strength gallon
($.34 per pound 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.
In the 1980s, 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 United
States. Three Brazilian producers
protested this accusation, but Florida
Blue Goose Dec Ci ad.qxp:Blue Goose Dec Ci ad.qxp 2/23/10 3:06 PM Page
Citrus 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 Progressive Ad August.indd 1
7/23/10 10:56:49 AM
tariff legislation and was discovered
to have been dumping FCOJ under the
fair market value in the United States.
Heavy
Growers
The U.S. Department of Commerce
Equipment
forced exporters from Brazil to pay
• Grove Care
• Services for Agrian additional duty bond on FCOJ. An
cultural and Com• Crop Management
international trade court then ruled
mercial construction.
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on an anti-dumping order that
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required continued surveillance of
• Grading
Brazilian prices. This was done in
• Land Clearing
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order to protect U.S. citrus growers
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from Brazilian exports being sold
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investment
tariff continued at the Uruguay Round
• Cross Hedging
• Leasing Services
Tariff and Non-Tariff Measure Nego• Skirting
• Agricultural Sales and Purchases
tiations in September 1986. Though
negotiators threatened to reduce the
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citrus tariff, Mutual fought the reduc16050 West Orange Ave.
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tion and citrus products were excluded
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CITRUS INDUSTRY • October 2010
15
1
and was victorious when the Generalized Agreement on Tariffs and Trade
upheld 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 in which tariffs are reinstated if there are considerable shifts in
price and import volume. Tariffs also
suffered a gradual decrease as a result
of the Uruguay Round Trade talks in
1994. It was negotiated that FCOJ and
NFC tariffs decrease in equal increments, finally totaling 15 percent, after
a period of six years.
IMPACT OF INFLATION ON
THE FCOJ TARIFF
Inflation has reduced the U.S.
orange juice tariff by about 50 percent
since 1980. During that same period,
orange production costs in Florida
increased from $.69 to $1.07 per
pound solids, while in Brazil they
went from $.40 to $.73 (Table 2, page
15). Much of this increase occurred
since 2002/03, and was the result of
increased energy costs, increased
fertilizer prices and costs to battle
greening disease.
Citrus Canker
Brazil’s orange production costs
ranged from 52 percent to 67 percent
of Florida’s production costs over this
1980-2009 period. However, once the
U.S. orange juice tariff is added to
Brazil’s production costs, they ranged
from 94 percent to 120 percent of
Florida’s, over this 1980-2009 period.
Thus, the tariff protects Florida
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CITRUS INDUSTRY • October 2010
growers and processors now about as
well as it has over the past 30 years
(Figure 1). Costs in Brazil increased
80 percent between 1980 and 2009
compared to 54 percent in Florida,
offsetting the erosion of the tariff
by inflation.
CONCLUSIONS
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.
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.
Allen Morris is an associate Extension
scientist and economist and Ronald
P. Muraro is a professor of food and
resource economics. Both work at the
Citrus Research and Education Center,
Lake Alfred.