From the federal docket of comments to the USTR on trade barriers, Susan Day of the California Table Grape Commission weighs in.


Public Comments National Trade Estimate Report on
Foreign Trade Barriers and Reports, etc.
Docket ID: USTR-2010-0020


October 4, 2010
Ms. Gloria Blue
Executive Secretary
Trade Policy Staff Committee
Office of the U.S. Trade Representative
600 17th St. NW
Washington, DC 20508

Dear Ms. Blue:

This document is in response to the U.S. Trade Representative's (USTR’s) request for assistance in identifying significant Sanitary and Phytosanitary (SPS) barriers to U.S. exports for inclusion in the 2011 SPS National Trade Estimates Report.

The California Table Grape Commission (commission) would like to submit the following comments on significant trade barriers California table grape (HS 0806.10) exports face in Australia, China, the European Union (E.U.), Indonesia, Jamaica, Japan, New Zealand, South Africa, South Korea, Taiwan, Thailand, and Vietnam.

The commission is charged with maintaining and expanding the market for fresh California grapes worldwide. California produces 99 percent of the grapes grown commercially in the U.S. with a value of over $1 billion FOB.
Despite an active commission trade policy program designed to eliminate SPS barriers in foreign markets, a number of significant trade barriers remain. These trade restrictions adversely affect table grape exports.

The following information details the most significant of these SPS barriers to the export of California table grapes.
The commission respectfully requests that information in this document be included in the final report published by USTR.

Regards,
Susan Day
Vice President International Marketing


AUSTRALIA
I. Restrictive Quarantine Standards on U.S. Table Grapes

Since the Australian market opened for California table grapes in 2002, Australia has grown into a major market for California table grape exports. Unfortunately, several unresolved phytosanitary issues, outlined below, prevent the industry from fully developing this market.

New Quarantine Requirements: In March 2010, the Australian Quarantine Inspection Service (AQIS) suspended all import permits for U.S. table grapes due to the presence of spotted wing drosophila (SWD) in California and its interception in fruits other than table grapes. After months of negotiation between Biosecurity Australia (BA) and United States Department of Agriculture (USDA), revised import requirements were implemented August 2010. The new measures are very restrictive despite the fact that SWD has never been identified in California table grapes. As a result of the new measures, the commission estimates that California table grape exports to Australia are likely to decline from $56.2 million in 2009 to less than 10 million in 2010. The commission urges the U.S. government to work with Australia to ensure that all quarantine decisions are based on sound science and are the least trade restrictive as possible. The conditions must be improved before the 2011 California export season.

Western Australia: Australia prevents market access for California table grapes into Western Australia. The Australian government has reportedly begun the required pest risk analysis (PRA). However, the process is not expected to conclude until 2011. Considering Western Australia’s population of nearly 2 million, market access could increase California table grape exports to Australia by 10 percent or more compared with 2009 shipments. The commission urges this PRA to be completed as quickly as possible. The commission has sought access to Western Australia for over 10 years.

These remaining phytosanitary issues must be addressed before the industry can be considered to have achieved full market access to Australia. The commission urges USTR and USDA to continue to press Australia for phytosanitary market access improvements by addressing the trade barriers listed above.

II. Maximum Residue Levels (MRLs)

Australia has a limited number of pesticide MRLs. Unlike its neighbor, New Zealand, Australia does not defer to Codex to supplement its limited MRL list. This, along with a lack of transparency on whether import tolerances can be obtained in the market, make Australian pesticide MRLs a potential concern when exporting to the market. In 2009, for the first time, other U.S. products than grapes were prevented entry into Australia due to the applications of pesticides that were legal in the U.S. but were not approved in Australia.

The commission requests the U.S. government to urge Australia to defer to Codex or international MRLs when no MRL has been established in Australia for a pesticide-commodity combination.

III. Estimate of Potential Increase in Exports if Barriers Were Removed

In 2009, the U.S. table grape export value was $56.2 million, making Australia the third largest export market for California grapes. Once market access is improved, it is estimated that $65 million worth of table grapes will be exported to Australia annually.

PEOPLE’S REPUBLIC OF CHINA

I. Shippers List Associated with Market Access
For the past several years, the California table grape industry included in its National Trade Estimates (NTE) a request that China eliminate its requirement for a list of California table grape shippers. The reason for this request was the challenge faced with updating the list throughout the season as new shippers decided to enter the Chinese market.

In the past two years, the California table grape industry has noted that the system for adjusting the shipper list has improved and no shipments of California table grapes have had difficulty obtaining phytosanitary certificates in the U.S. or entering China upon arrival.

Given this improvement, the removal of the Chinese shipper list requirement is no longer a priority for the California table grape industry. The commission would like to thank USDA for its efforts on this issue. The industry believes these efforts led to the improved system of managing the shipper list in both the U.S. and China.
II. Maximum Residue Levels (MRLs)

China’s pesticide MRL list is outdated. China has not strictly enforced its limited MRLs and has unofficially used Codex as an arbitration standard on pesticide residues. However, should China decide to only apply its own MRLs, U.S. agriculture exports to China could be severely affected.

The commission is aware that China is in the process of updating its food safety laws, and as a result, China’s MRL legislation is likely to be modernized. The commission urges USTR, USDA, and Environmental Protection Agency (EPA) to work cooperatively with China during this inevitable transition and to encourage China to harmonize new MRLs with U.S. levels and to defer to Codex MRLs when no Chinese MRL is established in the market.

III. Estimate of Potential Increase in Exports if Barriers Were Removed
In 2009, the U.S. shipped $76.45 million to China.* China represented the second largest export market for California table grapes in 2009.

If the 13% tariff is eliminated, the China market could grow to $95 million.
*Includes shipments to Hong Kong.

THE EUROPEAN UNION

I. E.U. Pesticide Residue Harmonization
The United Kingdom (U.K.) is the California table grape industry’s largest export market in the European Union (E.U.) Though the E.U. harmonized its member state pesticide maximum residue levels (MRLs) on September 1, 2008, many E.U. MRLs are established at levels significantly more restrictive than U.S. or Codex MRLs.
The E.U.’s adoption of restrictive MRLs could also result in other barriers or disruptions in countries that adopt and defer to E.U. standards.

The commission has additional concerns that new E.U. legislation covering pesticide authorizations will result in the withdrawal of certain pesticides. Some of these crop protection tools will remain in use in the U.S.
The commission requests that the U.S. government work with the European Commission to ensure that import tolerances remain in place in the E.U. even when a product has been withdrawn from active use in Europe.

II. Estimate of Potential Increase in Exports if Barriers Were Removed
In 2009, the U.K. was California’s ninth largest table grape market by value, with exports worth approximately $18.6 million. Exports to the E.U. as a whole total $21 million.

Should significant pesticide residue issues emerge in Europe, this entire market could be under threat.

INDONESIA
I. Maximum Residue Levels (MRLs) and other Standards Concerns
In June 2009, Indonesia announced its new food safety framework law which was expected to be implemented in August. On the positive side, Indonesia informed USDA that they will adopt Codex MRLs.
On the negative side, Indonesia did not appear to have reviewed the U.S. government comments on the new Indonesian policy. USDA was able to secure a delay in the implementation through November 19, 2009.
In early fall 2009, USDA hosted a delegation of Indonesian government officials to review the U.S. food safety system. The goal was to have Indonesia recognize the U.S. food safety system as equivalent to the Indonesian food safety system. In November 2009, Indonesia agreed and as a result, U.S. food shipments were allowed to enter without having to provide the government-issued food safety certificates. Table grapes were listed as one of the specific products allowed to enter under these conditions.

Indonesia’s recognition of equivalency was granted for two years (until November 2011). After that time, it will need to be extended.

The commission requests that USDA’s Foreign Agricultural Service seek a permanent extension of this equivalency so trade issues can be avoided in the future.

II. Estimate of Potential Increase in Exports if Barriers Were Removed
Indonesia is the 5th largest export market for California table grape exports by value in 2009 at $24.1 million. With transparent food safety laws, the market could grow to $35 million.

JAMAICA
I. Sanitary Issue: Pesticide Concerns
U.S. commodity groups have assumed that Jamaica deferred to U.S. pesticide MRL standards. In recent years Jamaican media reports on pesticide residue issues with U.S. fruit have raised concerns among U.S. commodity exporters.

Table grapes were listed as one of the U.S. commodities tested, and although no violations were reported on grapes, other U.S. commodities were cited as containing violations.

The industry’s concern is that reported Jamaican standards have not been publicly announced and have not been vetted through the World Trade Organization (WTO) Sanitary and Phytosanitary Committee (SPS Committee) notification process. Moreover, in the case where a violation was cited, the reported Jamaican MRL was twenty times lower than the U.S. and international Codex tolerance. Under its international trade obligations, Jamaica would have needed to conduct a scientific risk assessment to justify such a departure from international norms.
Jamaica should honor its WTO commitments and base its policies on sound science or on U.S. or Codex MRLs if it has not conducted a risk assessment on a specific chemical.

II. Estimate of Potential Increase in Exports if Barriers Were Removed

In 2009, U.S. fresh table grape exports to Jamaica were valued at $600,000. If Jamaica would use U.S. and Codex MRLs, this market would continue to grow, with annual shipments reaching $1 million annually.

JAPAN
I. Japan Pesticide Residue Sanctions Policy
Japan implemented its new “positive” pesticide regime with thousands of new MRLs on May 29, 2006. Residues on imported food now cannot exceed Japanese tolerances, which are not necessarily in line with U.S. or Codex standards.

Japan’s actions taken for residue non-compliance are excessive and can result in punishing entire industries, including shippers that have not had a violation.

Such actions are not least trade restrictive measures, and it is unclear if Japan’s Ministry of Health, Labor, and Welfare (MHLW) applies these sanctions equally to its domestic producers.

This situation is increasingly sensitive due to recurrent and widely publicized detections of above-MRL pesticide residues on imported food products, including fruits and vegetables from the U.S., but not table grapes.
While the commission appreciates the tremendous effort USTR and USDA expended to sign an agreement with Japan in July 2009 seeking to limit when Japan will apply sanctions on a foreign industry, Japan’s actions since then demonstrate that Japan’s sanctions policy remains a major area of concern for the commission.
The commission urges USTR and USDA to continue to work with MHLW regarding MRL issues to ensure that trade will not be affected as a result of Japanese actions.

The California Table Grape Commission believes sanctions should be applied to the violating shipper, not a U.S. industry as a whole.

II. Estimate of Potential Increase in Exports if Barrier Were Removed

In 2009, the U.S. shipped $5.8 million worth of table grapes to Japan. Should California table grapes become subject to increased levels of pesticide testing under Japan’s existing sanctions policy, trade could be shut down.

NEW ZEALAND
I. Restrictive Quarantine Standards on U.S. Table Grapes

In June 2010, the New Zealand Ministry of Forestry and Fisheries (NZ-MAF) issued revised import requirements for California table grapes due to the presence of SWD in California and its interception in fruits other than table grapes. The new measures require either cold treatment or fumigation with methyl bromide to address SWD despite the fact that SWD has never been identified in California grapes. As a result of the new measures, the commission estimates that California table grape exports to New Zealand will decline from $14 million in 2009 to less than $10 million in 2010.

The commission urges the U.S. government to work with New Zealand to ensure that all quarantine decisions are based on sound science and are the least trade restrictive as possible. The conditions must be improved before the 2011 California export season.

II. Estimate of Potential Increase in Exports if Barriers Were Removed

In 2009, the U.S. table grape export value to New Zealand was $14 million, making New Zealand the 12th largest export market for California grapes. Once market access is improved, it is estimated that $16 million worth of table grapes will be exported to New Zealand annually.

SOUTH AFRICA

I. Market Access Issue
As of October 19, 2009, the South African government suspended the issuance of import permits for California table grapes. This suspension is due to the detection of Lobesia botrana (European grapevine moth) in California on October 7, 2009, in the wine grape-growing area of Napa. Since then, there have been interceptions in other areas of the state, including one table grape growing area in which a federal quarantine was implemented.
Animal and Plant Health Inspection Service (APHIS) responded to the South African government by describing trapping and control measures and indicating that the detection does not warrant halting California table grape imports. However, South Africa continues to prohibit the issuance of import permits.

The commission is continuing to work with APHIS with the objective of reopening the South African market to California fresh grapes.

II. Estimate of Potential Increase in Exports if Barrier Were Removed
In 2009, the U.S. shipped no table grapes to South Africa. Reopening the South African market could allow the market to grow to $5 million in the short term and larger in the long term.

SOUTH KOREA
I. Pesticide Residue Sanctions and Testing

In 2010, South Korea imposed additional pesticide residue testing requirements on a California specialty crop commodity (not table grapes) due to an MRL violation in Taiwan. These additional requirements caused significant disruptions to shipments of that commodity and are problematic for several reasons.

First, the commission questions the practice of South Korea of imposing testing sanctions on commodities due to violations in a third country. This is especially true for Taiwan violations. Given Taiwan’s limited MRL list and lack of international MRL deferrals, violations are much more likely to occur in Taiwan. A violation in Taiwan typically indicates that Taiwan has not established a national MRL.

Additionally, the South Korean testing requirements were extremely onerous and unnecessarily complicated. South Korea required that each combination of grower, shipper, and importer clear a certain number of shipments through residue testing before the requirements could be removed. Even if the requirements were removed for a given combination of grower, shipper, and importer, testing would start over if even one of those parties changed.
Following this sequence of events, the South Korea Food and Drug Administration (KFDA) announced additional residue testing requirements for several other imported fruits, including table grapes. Under this testing requirement, at least one shipment of table grapes must be cleared by each exporter. An exporter is determined to be the same if the address listed is exactly the same (including full zip code, etc.). Small, non-vital variations in the address could result in additional, unnecessary testing.

These testing requirements are cumbersome and often non-transparent. The commission requests that USTR and USDA work with KFDA to ensure that testing is in line with international standards and does not restrict or disrupt trade in U.S. agricultural products.

The commission is also concerned that South Korea may move away from Codex deferrals in the future. Such a move could cause major trade disruptions.

II. Estimate of Potential Increase in Exports if Barriers Were Removed
In 2009, the U.S. shipped $4.3 million worth of table grapes to South Korea. Continued disruptions due to residue testing have the potential to greatly reduce exports to this market.

TAIWAN
I. Taiwan Pesticide Standards
Taiwan has a limited list of pesticide MRLs. Many more crop protection products are registered in the U.S. than in Taiwan. Taiwan has approximately 40 grape MRLs established, while the U.S. has 100. This was not problematic until Taiwan began to detain U.S. imports of other fruits than grapes for residue detections in 2007. In 2009 and 2010, other U.S. fruit commodities were rejected in Taiwan due to the lack of established residue limits in the market.

The commission has been working with USTR and USDA to encourage the establishment of additional grape MRLs in Taiwan. Unfortunately, Taiwan is so backlogged with MRL work that although tolerance approvals are coming, they are published slowly.

Taiwan has only agreed to review 11 grape data packages, leaving scores of products without MRLs in Taiwan including new, reduced risk compounds. This makes California table grape shipments, along with all U.S. agricultural shipments, vulnerable to rejections.

The commission has asked USTR and USDA to press Taiwan to accept an interim solution. Taiwan should consider deferring to international MRLs such as Codex or the U.S. when an MRL is not established in Taiwan. Alternatively, they could create a provisional MRL list for products that have not yet been reviewed. Japan established such a list in 2005 and Hong Kong is in the process of doing this.

To date, Taiwan has refused to defer to international MRLs or establish a comprehensive provisional list, leaving all U.S. agricultural exports to Taiwan at risk.

The commission strongly encourages USTR to weigh in on this issue and pressure Taiwan to establish some sort of interim solution to this unstable trade situation.

II. Estimate of Potential Increase in Exports if Barrier Were Removed
In 2009, the U.S. shipped $21.8 million worth of table grapes to Taiwan. Rejection of grapes for pesticide residue issues would have serious ramifications on shipments to Taiwan.

THAILAND
I. Maximum Residue Levels and Pesticide Residue Testing
While Thailand’s MRL standard formally recognizes deferral to Codex MRLs where no Thai MRL exists, it is important to note that a large number of compounds approved for use on table grapes in California still do not have a corresponding Codex MRL. Also, Thailand has recently proposed establishing MRLs for important compounds that are more restrictive than U.S. MRLs. For these reasons, Thailand’s MRL standard does not provide adequate coverage relative to U.S. tolerances.

The commission would like to emphasize the importance of ensuring that Thailand’s MRL standard be developed in a manner that does not impede trade.

Additionally, Thailand in May 2009 announced that it planned to “quick-test” all imported fruits and vegetables for pesticide residues. This policy was apparently in response to concerns over Chinese products entering the country. Imports could avoid this testing if they carried a certificate of analysis generated by the government of the product’s country of origin. Such certificates do not exist in the U.S.

In response, USDA protested this policy as trade disruptive and overly restrictive. In June 2009, Thailand agreed to postpone its plans, although the duration of the postponement is not known. The U.S. Embassy in Bangkok continues to work with the Thai government on this issue and is pressing for the full exemption of U.S. produce from any new Thai testing-upon-arrival regime based on the quality of U.S. product. There have been no developments associated with this policy in 2010.

Should Thailand renew plans for residue testing of all imports, the commission requests that USTR and USDA protest this action.

II. Quarantine Regulatory Changes

In August 2006, Thailand announced that all imported commodities will need Pest Risk Assessments (PRA) conducted in the future. Commodities such as U.S. table grapes that have a record of export will be allowed to ship during this review, but other products will be prohibited.

Although the commission worked with USDA/APHIS to ensure that its products are not detained due to this new regulation, the commission remains concerned that this rule may affect trade and requests that USTR and USDA closely monitor this issue.

III. Estimate of Potential Increase in Exports if Barriers Were Removed
In 2009, the U.S. shipped $12.8 million worth of table grapes to Thailand. The commission anticipates that the Thai market will grow to become a $20 million market once potentially trade distorting regulations are addressed.

VIETNAM

I. Quarantine Regulatory Changes
In June 2010, Vietnam wrote to USDA/APHIS asking for details of California table grape growing processes. Vietnam is in the process of conducting a PRA on California table grapes. While Vietnam is within its right to conduct this PRA, California table grapes have enjoyed market access to Vietnam for over a decade without incident.

The commission worked with USDA/APHIS to ensure Vietnam’s requests were addressed.
The commission requests that Vietnam’s PRA is based on sound science and does not result in excessive unnecessary additional import requirements on California table grapes.

II. Estimate of Potential Increase in Exports if Barriers Were Removed
In 2009, the U.S. shipped $12 million worth of table grapes to Vietnam. Vietnam is now the California table grape industry’s 14th largest export market by value. The commission anticipates that the Vietnam market will grow to become a $20 million market if exports are allowed to continue under current shipping conditions.