SA lemon juice exporters have rejected dumping claims by Ventura Coastal, the US’s largest supplier of lemon juice, saying the juice maker has never been able to supply the high demand while poor harvests had negatively affected the domestic US market.
Investigations into whether lemon juice from SA and Brazil is sold at less than fair value in the US kicked off on Friday at the US International Trade Commission (USITC), with a handful of witnesses giving testimony.
Ventura Coastal has requested a 128.61% anti-dumping duty against exports from SA and about 555.22% against Brazil.
The US is a major export destination for the fledgling SA lemon juice market, and if duties are imposed in the US the excess SA volumes will be forced to move to smaller markets, further suppressing prices and increasing the probability of anti-dumping action in those markets.
“Imports are not a reason for any injury for the US market, which halved its production and still managed to increase its market share in a declining market,” said Rian Geldenhuys, counsel for the SA Fruit Juice Association.
He argued that US production of fresh lemons declined by as much as 18% in the two seasons which form part of the investigation, affecting the volume of lemon available for concentrate, “therefore loss of production cannot be attributed to imports”.
Representing the Californian juice maker, counsel Matthew McGrath of Barnes, Richardson & Colburn appealed to the commission to take remedial action “to stem the exponentially increasing flow of unfairly priced lemon juice” coming from SA and Brazil since 2018.
He argued that Ventura had suffered revenue losses from 2018 until 2021 as per-unit profit per shipment of lemon juice decreased and consequently knocked gross profits by 25%.
“The period under investigation is best understood as a lost generational opportunity for the domestic industry. This was a time where supply chain disruptions and historically high international freight costs should have strongly favoured US-based producers,” he contended.
Instead, imports significantly underpriced Ventura’s domestic shipments of lemon juice by roughly a third on average every year from 2018 to 2021.
Despite costs to produce a litre of lemon juice remaining relatively stable since 2018, “we are being forced to push our price down lower and lower”, counsel Mert Arkin said on behalf of Ventura.
SA and Brazil have both been able to increase their market share in the US, with SA’s export revenue rising from R102m in 2018 to an estimated R165m in 2021.
But the lion’s share of juice imports into the US still came from Argentina and Mexico, constituting nearly 50%.
SA imports rose 61% in the period, making the country the fastest-growing exporter but nowhere near levels of the large players, according to Geldenhuys.
Unquenchable thirst for lemon concentrate
Representing those opposing the petition in the US, attorney Cami Mazard said imports of lemon juice from SA did not cause any material injury given that Ventura Coastal could not and never has been able to meet all the demand.
Her argument was backed by the testimony of Jason Maxfield, a procurement manager for Coca-Cola, the largest buyer of lemon juice globally, supplying popular chain stores such as McDonald’s and Wendy’s.
Maxfield said the multinational company did not see any risk because Ventura cannot produce enough juice to satisfy the high US demand, but also that Ventura could not until recently produce lemon juice in the 500GPL (grams per litre of citric acid) level of concentration, to meet specifications outlined since 2013.
The higher the GPL concentration and the less the amount of water in the products, the lower the shipping costs. “Ventura Coastal was only able to produce 400GPL until recently — 2020,” noted Maxfield.
Lemon juice concentrate is mainly procured by beverage manufacturers to flavour carbonated drinks, but those in the business of making condiments and other lemon-tasting foods also stock the concentrate, which is also available in frozen form.
No fresh lemons purchased outside the US are processed into lemon juice on a commercial scale, leaving buyers with no recourse but to source lemon juice from abroad.
Greenwood Associates, an Illinois-based US supplier of natural fruit juice concentrates, purées and essential oils, agreed on the issue of short supply.
COO Jim Berman said the SA market allowed the company to hedge its risk when supply was low in other regions.
Greenwood had “learnt from painful experience that when the lemon harvest is poor or supply is tight, the domestic producers will cut us off”, he said in reference to Ventura, adding that “their business model appears to favour high-volume users”.
“Unfortunately we have not found the petitioner Ventura or the other small domestic producers to be reliable suppliers of domestic lemon juice ... not even close,” said Berman.
The heart of the US concentrate shortage is characterised by lemon growers who prioritise the more lucrative fresh lemon market. Only lemons that do not meet the grade are sent for processing.
According to experts, that amount is ordinarily capped at 30% of all US lemon harvests. Of the 2.8-million tonnes of citrus produced in SA, 20% or more than 554,000 tonnes is processed.
Ventura’s legal team emphasised that “at risk are hundreds of good-paying American jobs” and the commercial viability of any future US-based lemon juice industry.
Implementing such tariffs could have implications for the African Growth and Opportunity Act’s duty-free privileges that SA lemons now enjoy in the US market.
The parties are expected to hear feedback from the USITC on the preliminary investigations by mid-February.
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