June 5, 2018 / 1:05 AM / 4 months ago

Exclusive: Mexico set to impose 20 percent tariff on U.S. pork legs - sources

MEXICO CITY (Reuters) - Mexico will impose a 20 percent tariff on U.S. pork imports, two industry officials with direct knowledge of the plan told Reuters on Monday, for the first time providing details of the country’s retaliatory measures to U.S. President Donald Trump’s tariffs on steel and aluminum.

FILE PHOTO: Piglets are pictured in a production module at the pig farm Granjas Carrol de Mexico (GCM), in Cuyoaco, Puebla state, Mexico August 4, 2017. REUTERS/Edgard Garrido/File Photo

Last week, Mexico said the retaliatory tariffs would apply to pork legs and shoulders from U.S. suppliers, which account for about 90 percent of the country’s $1.07 billion annual imports of the cuts.

“It’s a 20 percent (tariff) on legs and shoulders, fresh and frozen ... with bones and without bones,” said Heriberto Hernandez, president of Mexico’s leading pork producers association OPORPA, following a briefing earlier on Monday with Economy Minister Ildefonso Guajardo and his team.

The government has not yet given details of the level of the tariff and did not immediately respond to a request for a comment about the tariff or the meeting.

Hernandez said he supported the Mexican government’s decision and does not expect it to cause pork prices in Mexico to rise because “there are many alternatives” to U.S. suppliers.

The tariff was in response to the Trump administration’s decision last week to impose steel and aluminum tariffs on Mexican exporters on grounds that countries including Mexico engage in competition damaging to U.S. national security.

The U.S. decision to go ahead with the steel and aluminum tariffs has complicated talks with Mexico and Canada to rework the North America Free Trade Agreement (NAFTA).

FILE PHOTO: A veterinarian checks a sow after she gave birth in a production module at the pig farm Granjas Carrol de Mexico (GCM), in Cuyoaco, Puebla state, Mexico August 4, 2017. REUTERS/Edgard Garrido/File Photo

Other industry officials pointed to Canada as a possible substitute pork supplier that has tariff-free access to Mexico thanks to NAFTA, or the European Union, which recently concluded a revised trade pact with Mexico that allows tariff-free pork imports but does include other restrictions like volume quotas.

The industry officials said the new pork tariff schedule will be published on Tuesday in Mexico’s official gazette and will go into effect on Wednesday.

Last year, Mexico imported nearly 650,000 tonnes of pork legs and shoulders worth an estimated $1.07 billion, according to government data.

Mexico’s overall pork imports in 2017 totaled about 840,000 tonnes.

Pork legs and shoulders are not as highly valued in the United States, where ribs and bacon are in greater demand, but in Mexico they are used to make some of the country’s most popular dishes, including tacos al pastor and carnitas.

Victor Manuel Ochoa, chief executive of top Mexican pork producer Granjas Carroll, said he would support a temporary import deal for Brazilian pork legs if Mexico goes ahead with the tariffs on U.S. imports.

He said prices in Mexico will likely rise as a result of the tariffs on U.S. pork. “We think they’d rise around 15 or 16 percent, and I think that could reduce consumption which worries me,” Ochoa said.

Granjas Carroll is a joint venture of ECOM Agroindustrial Corporation, a major commodity trader, and China’s WH Group.

“It would be very difficult for Mexican pork prices to stay the same,” Ochoa added, if imported U.S. pork prices spike as a result of the tariffs.

Reporting by David Alire Garcia; Editing by Leslie Adler

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