Gilroy – It’s a great week for garlic.
Just in time for the world’s biggest garlic party, the U.S House of Representatives has passed legislation that will make it far more difficult for Chinese garlic growers to dump their product in the U.S.
“This is definitely good news,” said Bill Christopher, managing partner of Christopher Ranch. “If this passes the Senate it will affect the amount of garlic coming in from China and that’s good for us.”
The legislation passed the House on 255-168 vote as part of the United States Trade Rights Enforcement Act, a broader trade bill aimed at China’s trade and currency policies. The bill would suspend for three years a provision in the Tariff Act that allows new shippers not implicated in a 1994 anti-dumping order to post surety bonds rather than cash to meet tariff requirements. So-called new shippers will have to post cash deposits until they are able to prove they are not dumping garlic.
Last year, a separate bill to protect producers of garlic, mushrooms, crawfish and honey was passed unanimously in the Senate, but stalled in the House ways and Means Committee. Michael Coursey, a Washington D.C. lawyer representing garlic growers said Thursday he expects the Senate will pass the new bill when legislators return from summer recess in a little more than a month.
“We have some work to do,” Coursey said. “But given the climate right now concerning China it looks like there’s a very good chance of having this companion legislation pass.”
Chinese garlic was first imported in vast quantities in the early 1990s. U.S trade officials determined that the Chinese were “dumping” the garlic, or selling it at prices below production costs (Because China does not have a market economy, U.S. officials figure its production costs based on those in India.).
In 1994, U.S. Customs officials issued an anti-dumping order and socked Chinese importers with a 377-percent tariff. Shippers were allowed to pay lower tariffs if they proved they weren’t selling below costs, but they had to put up cash deposits equal to the difference between the declared value of the imports and the highest tariff rate. If, as long as two years later, commerce officials determined that the shipper was not dumping the garlic, the government would issue a refund.
The rules worked. After peaking at 55 million pounds in 1993, Chinese garlic imports dipped as low as 205,000 pounds in 1996. But imports started climbing again as shippers took advantage of a loophole in the anti-dumping ordinance. Existing shippers must pay cash deposits on their products, but new shippers need only post bonds. In 2002, imports leapt to 42 million pounds and more than doubled that last year.
Coursey said those “new” shippers were often the same companies found guilty of dumping operating under different names, working in concert with the importers who must post the bonds. By the time the U.S. Department of Commerce attempts to collect on a bond, both the shipper and importer are ostensibly out of business, but likely operating as new entities. In 2004, the federal government received $175,000 in garlic import duties. At the end of the year it had nearly $25 million outstanding.
“Basically, you’re talking about crooked exporters and crooked importers,” he said. “We’ve gotten killed by this cheating but remaining domestic producers have hung tough and there are signs the government is getting a handle on it.”
For the first time last year, California growers produced less garlic, about 81 million pounds, than the 86 million pounds imported from China. Since 2001, when Chinese imports started denting the U.S. market, Christopher Ranch has taken 40 percent of its garlic fields out of production. The farm is now growing about 60 million pounds annually, down from a peak of 90 million.
Christopher said this year has been better because China ran out of garlic in early summer and won’t begin importing again until late next month. The shortage has driven up the price of Chinese garlic from $13 a box, though nowhere near the $20 it costs Christopher Ranch to produce the same box. Christopher also buys Chinese garlic for customers who demand the lower-priced product, though it’s only about 10 percent of his business.
“We still have a bit of window to breathe and try to get rid of our product,” Christopher said. “Customers of Chinese garlic have been coming to us over the past five or six weeks to hold them over. It makes us feel a little bit better this year than last.”
Christopher also looks forward to the boost in business that the festival brings. Aside from selling at wholesale prices at the festival, the ranch profits from the ensuing, if short-lived garlic craze that follows.
“It promotes garlic and once people are thinking about garlic they’re cooking more and using more,” Christopher said. “Even if sales go up in the Bay Area for three weeks, it helps.”
