In Katy Esquivel's article last week, she highlighted the history of the Tomato Suspension Agreement from its inception in 1996, and discussed in general terms some of the new requirements in the recently revised Tomato Suspension Agreement. We've received several questions regarding the Agreement, all of which we will address in the coming weeks. Let's begin this week by focusing on the basic terminology throughout the Agreement, and going forward, we will apply the terminology to procedures and requirements that must be complied with when handling Mexican grown tomatoes. 

What types of tomatoes are covered under the Agreement?

The Agreement covers all fresh or chilled tomatoes that have a Mexican origin. Certain varieties of tomatoes, such as common round, cherry, grape, plum, greenhouse, and pear tomatoes, are subject to the Agreement. Fresh tomatoes that are imported for only cutting purposes also must be handled in accordance with the Agreement.

In contrast, "processed" tomatoes are not subject to the Agreement. The definition of "processing" under the Agreement includes preserving the characteristic of the covered tomatoes by canning, dehydrating, drying, or adding chemical substances, or converting the tomato product into juices, sauces, or purees. Any Mexican grown tomatoes that undergo any of these "processing" methods are considered outside the coverage of the Agreement; nevertheless, the Agreement sets forth certain procedures that must be followed for handling processed, Mexican grown tomatoes sold in the United States.

Who are the "signatories" of the Agreement?

They are the producers and exporters of fresh tomatoes from Mexico.

The term "Selling Agent" is mentioned throughout the Agreement. Who is considered a "Selling Agent?"

In short, a "Selling Agent" is the party that is responsible for the first sale of the Mexican grown tomatoes to its customers in the United States.

What is meant by the "reference price?"

As Katy mentioned last week, tomatoes originating from Mexico must be sold in the United States at or above a specific price. This is called the "reference price." In sum, "reference price" is defined under the Agreement as the price F.O.B. from the Selling Agent, and includes palletizing and cooling expenses prior to shipment from the Selling Agent. The actual movement or handling expense beyond the point of entry into the United States must be added to the reference price, and must reflect the cost for an arm's-length transaction.

In the Agreement, the "reference prices" are categorized by date, the environment (controlled or open field and adapted) in which the tomatoes are grown, specialty or non-specialty tomatoes, and prices. The chart below contains the new reference prices:

Does the Agreement apply when the adjusted sales prices are above the reference prices?

No. The procedures for granting adjustments only apply if the adjustment reduces the net sales price below the reference price.

Should a company sign the letters being sent by many Mexican producers and exporters in Mexico concerning the Agreement?

To start, companies are receiving these letters because the Agreement recommends that signatories and their sales agents notify their customers that their sales of Mexican grown tomatoes are subject to the Agreement's terms. Within these letters is a signature block which is to be signed by the customer evidencing its consent to comply with the terms and requirements set forth in the Agreement.

Some companies, however, have decided to forgo signing the letter, figuring the lack of a signed agreement means the sales would not be subject to the Agreement. However, returning a signed copy is not the only way to evidence a company's consent to the Agreement's terms. A company's purchase of tomatoes after receiving the letter subjects that company to the rules and procedures governing the handling of Mexican grown tomatoes.

To answer the question, if a company buys Mexican grown tomatoes after receiving notice of the Agreement, it will be subject to the terms and requirements of the Agreement.

Next week, we continue our discussion of the Agreement by focusing on the procedure for making adjustments to the sales price due to changes in condition after shipment.