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`15 March 2019
`
`Ms. Lisa R. Barton
`Secretary to the Commission
`US International Trade Commission
`500 E Street, SW
`Washington, DC 20436
`
`Submitted via edis.usitc.gov, plus eight paper copies
`
`Re: USITC Investigations TA-131-045 and TPA-105-006 on US-UK Trade Agreement: Advice on the
`Probable Economic Effect of Providing Duty-free Treatment for Currently Dutiable Imports
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`This statement is submitted by the National Confectioners Association (NCA) in response to USITC’s
`request for comments on the probable economic effect of providing duty-free treatment to imports from the
`UK under the proposed US-UK Trade Agreement.
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`We believe the US-UK agreement must be mutually beneficial, support US-domestic manufacturers’
`access to critical inputs, and create new market access opportunities into the UK for US exporters.
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`For more than thirty years, NCA has advocated free trade. While US tariffs on our products are among the
`lowest in the world, we continue to support an open market despite significant tariff barriers in important
`export markets and high raw materials costs at home resulting from protective sugar and dairy programs.
`Our industry pays two to three times the world price for sugar incurring millions of dollars in excess costs
`each year. Despite this cost disadvantage, our industry has never requested import protection and instead
`supports open markets and fair competition. We believe this provides consumers a wide range of choices
`at varying price points.
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`Our industry’s priorities include increased market access into the United States for refined sugar of 1701
`and cocoa inputs containing sugar and/or dairy under Chapter 18 from the UK to support US manufacturing
`and US jobs. As a shortage of supply exists in the US market, expanding market access for these critical
`ingredients from the UK is necessary to help the US manufacturing industry compete globally.
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`Finally, we believe the benefits must be two-way, and see opportunities for increased market access into
`the UK for our members’ cocoa, chocolate and confectionery product exports through tariff elimination, and
`addressing divergences in labeling requirements in the two markets.
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`Background on the US Chocolate and Confectionery Industry
`NCA is the trade organization representing the $35 billion US confections industry. We represent nearly
`700 companies that manufacture or supply chocolate, candy, gum, and mints. Half of our member
`companies are manufacturers that produce thousands of beloved and iconic brands. Our supplier
`community produces the machinery, flavors, and packaging to support our manufacturers.
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`The majority of our membership consists of multi-generational, family-owned, small businesses.
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`The confectionery industry directly employs nearly 54,000 people in 1,300 facilities across the United
`States. For every job that is created in confectionery, another ten are supported in related industries. That
`means more than 607,000 jobs rely on the manufacturing and sale of confectionery products.
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`Confectionery production has a direct economic impact of $44.6 billion dollars. Confectionery is made in
`every state. NCA members are located in more than 40 states with particular manufacturing concentration
`in Pennsylvania, California, New Jersey, Illinois, New York, Wisconsin, Utah, and Ohio. Our members pay
`more than $13 billion annually in taxes in the United States.
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`US Export Opportunities are Critical in this Agreement
`The US confectionery and chocolate industry views negotiations with the UK as a critical opportunity to
`assist US exporters by addressing long-standing barriers that have existed in all EU Member States –
`including the UK – to US-made chewing gum, sugar confectionery, and chocolate confectionery.1
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`High, complicated tariffs in the UK/EU: The average applied MFN rate on confectionery in the
`UK/EU is 23.6%.2 The UK follows the EU’s Meursing System, a complex and outdated tariff system
`based on protected agricultural components, which is not easy to penetrate.
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`Elimination of Meursing system and the UK’s high MFN tariffs resulting in duty-free/quota free access
`for US products would benefit US manufacturers with more than $3 million in annual tariff cost savings.
`Duty-free access must also be backed up by straightforward rules of origin that acknowledge the
`substantial transformation in each phase of cocoa and chocolate production without overly burdensome
`ingredient limitations.
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`Warning statements required for certain colors: Our industry supports transparency in labeling all
`colors used in the manufacture of chocolate and confectionery products, and includes such information
`in ingredient panels. However, products sold in the UK/EU also require an additional warning statement
`that the color “may have an adverse effect on activity and attention in children” if they contain six certain
`colors: Tartrazine (E102), Quinoline Yellow (E104), Sunset Yellow (E110), Carmoisine (E122),
`Ponceau 4R (E124), and Allura Red (E129). In essence, the required warning statement imposes a
`ban on the use of these six above-mentioned artificial colors.
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`Our members continue to innovate product portfolios to meet consumer demand, including on use of
`colors. Some members have transitioned, or are in process of transitioning, to colors from natural
`sources for products sold in the European and other markets, while a number of NCA member
`companies use certified synthetic food colors in their confectionery products for the United States and
`international markets, including the six above-mentioned colors.
`• All six colors are approved for use in the UK/EU and by many Governments around the world.
`• These colors are widely used by the global food industry and have been the subject of safety
`reviews by the United Nations FAO/WHO Joint Expert Committee on Food Additives (JECFA).
`• All have been assigned a numerical Acceptable Daily Intake (ADI) by JECFA which establishes the
`number of milligrams of the color an individual can consume per kilogram of body weight every day
`without adverse effect.
`• The JECFA safety review and establishment of an ADI is necessary before the colors can be
`incorporated into the Codex General Standard for Food Additives.
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`Despite using safe, approved colors, some of our manufacturers – including many of our smaller
`companies -- have turned away from the UK/EU market altogether given these additional warning
`statement requirements that are not based on sound scientific evidence.
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`1 NCA member companies manufacture intermediate cocoa inputs, bulk chocolate, finished chocolate and chocolate
`confectionery, sugar confectionery, sugar-free confectionery, and chewing gum. Our members’ products are classified
`under HS codes 1704.10, 1704.90, 1803, 1804, 1805. 1806.10, 1806.20, 1806.31, 1806.32, 1806.90, 1905.31, 1905.32,
`and 2106.9098.
`2 World Tariff Profiles, Co-publication of the WTO, ITC and UNCTAD on market access for goods, 2017 report.
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`NCA Comments on the Probable Economic Effects of the Proposed US-UK Trade Agreement
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`Page 2 of 4
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`Divergent labeling requirements on biotech inputs: Our industry has been following the regulatory
`changes for labeling of bioengineered inputs in the United States and other markets. Some of our
`members have taken the lead in the United States, UK/EU, and other markets for on-pack disclosure
`of BE inputs, and our industry continues to evolve in this space.
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`Under the new “National Bioengineered Food Disclosure Standard” in the United States BE labeling
`will be required for products meeting the standard effective 1 January 2020, with delayed
`implementation in 2021 for smaller food companies. All products meeting the criteria must be labeled
`by the mandatory date of 1 January 2022. Most corn, sugar beets and soy grown in the United States
`use BE-modified seeds. As such, basic ingredients (such as corn sweeteners, sugar and soy lecithin)
`used in US-produced candy may require additional labeling to be sold in the United States if they
`contain detectable traces of BE ingredients. In contrast, in the UK/EU, all food products containing or
`consisting of BE-derived ingredients must be labeled even if they no longer contain detectable traces
`of BE ingredients. This difference in the requirements for labeling, and the nearly 3-year transition
`period here in the United States means some of our smaller members will continue to be at a
`disadvantage and may forego the UK/EU market despite an agreement that achieves lower tariffs.
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`We trust that the US and UK can find a solution that recognizes differences in market requirements,
`allows for flexibilities based on evidence-based standards, and is in line with the new US labeling
`requirement.
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`Dedicated and Increased Access for Sugar and Intermediate Goods of Chapter 18 from the UK will
`Support US Manufacturing and US Jobs
`Access to the UK’s efficient sugar supply will benefit American confectioners and promote job growth in our
`sector here at home. We urge the United States to engage in market access negotiations with the UK on
`refined sugar and SCPs into the United States.
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`Additional sugar imports into the United States from the UK will alleviate tight supply and
`provide more certainty for confectionery manufacturers of all sizes. The United States is a net
`importer of sugar. In recent years, the US has consumed at least 11 million tons of sugar annually,
`while annual US domestic production from both sugar beet and cane producers has averaged 8 million
`tons.3 As a result, the United States must import at least 3 million tons of sugar every year to meet
`manufacturing demand. While the sugar re-export program operated by USDA lowers tariffs for some
`imports of sugar, it is cumbersome and hinders real time global business transactions.
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`As the Sweetener Users Association has noted in the past, sourcing of white (i.e. refined) sugar from
`the UK/EU would be beneficial for US sugar-users, including our sector. The United Kingdom consumes
`around 2 million tons of sugar annually but produces around 8 million tons annually.4 Currently, refined
`sugar from the UK/EU is subject to high import tariffs of 16.25 cents per pound, so the flow of refined
`sugar from the UK/EU to the United States is almost non-existent.
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`The US should provide duty-free, quota-free access for imports of refined sugar from the UK as soon
`as possible and no later than five years after implementation of the bilateral agreement; and refining of
`sugar should confer origin. Granting duty-free access to the UK’s sugar industry would provide more
`certainty in terms of supply for sugar-using manufacturers in the United States, especially when refined
`sugar is in tight supply as it currently is for many of our manufacturers.
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`Lifting of TRQs will provide access to critical inputs. The United States currently has tariff rate
`quotas (TRQs) in place on various cocoa and chocolate inputs containing sugar and/or dairy of USHTS
`Chapter 18. Imports from the UK of sweetened cocoa powder, bulk chocolate preparations, and other
`chocolate materials are severely restricted which limits the ability of smaller manufacturers to source
`cocoa and chocolate inputs from British suppliers in sufficient quantities, and constrains more efficient
`supply-chain integration between US and UK operations of NCA’s members invested in both markets.
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`3 USDA FAS, Sugar: World Markets and Trade bi-annual reports.
`4 ABSugar, The UK Sugar Sector.
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`NCA Comments on the Probable Economic Effects of the Proposed US-UK Trade Agreement
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`Page 3 of 4
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`Our industry supports duty-free/quota-free access for UK-origin inputs into the United States falling
`under the following global TRQs to support US-domestic manufacturing in our sector:
`• Refined sugar TRQ in Chapter Chapter 17, Additional Note 5;
`• Sugar blends TRQ in Chapter 17, Additional Note 8;
`• Cocoa, chocolate and low-fat crumb products TRQs in Chapter 18, Additional Notes 1, 2 and 3;
`• Dairy products TRQ in Chapter 4, Additional Note 10.
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`Conclusion
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`On behalf of our members, we very much appreciate the opportunity to comment on the probable economic
`impact of the proposed US-UK trade agreement and outline NCA’s support for US manufacturers’ access
`to refined sugar from the UK, tariff elimination in both markets on finished goods and critical inputs, and
`continued efforts by the US Government to support science-based risk assessments for food safety and
`labeling in the United States and overseas markets.
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`Please contact Liz Clark, NCA’s Senior Vice President for Public Policy at 202-534-1440 or
`liz.clark@candyusa.com if you have any questions or require more information from NCA.
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`NCA Comments on the Probable Economic Effects of the Proposed US-UK Trade Agreement
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`Page 4 of 4
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