South Mill Champs is challenging a preliminary US Department of Commerce decision imposing countervailing duties on fresh Canadian mushroom imports.
In a statement on Tuesday (19 May), the US-based mushroom grower and supplier argued the decision relies on a “flawed legal theory that threatens agricultural producers across the United States and Canada”.
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“Canadian production complements domestic US supply, filling demand that Pennsylvania and other US growers do not fully meet. Disrupting that supply chain raises costs for no gain in quality or supply security,” South Mill Champs said.
The company believes new cash duty deposits on Canadian mushroom imports, required from 18 May, will be passed on to consumers through higher grocery and restaurant prices.
In September, competitor Giorgio Fresh Co. launched a petition alongside six other US growers alleging that Canadian mushrooms benefit from heavy subsidies and are sold at unfairly low prices.
The US International Trade Commission announced the formal duties on Friday (15 May).
According to South Mill Champs, the trade action penalises standard farming tax practices and sets a “precedent” that could impact producers on both sides of the border.
Lewis Macleod, the CEO of South Mill Champs, called the trade case as holding “no merit”, but conceded it is still causing “disruption”.
“The suggestion that our Canadian operations are propped up by targeted government subsidies is wrong on the facts and wrong on the law. This action was brought by a competitor that has chosen litigation over investment. We will contest it at every stage – for our customers, for our employees, and for the American and Canadian agricultural communities who have a direct stake in how this precedent is resolved.”
The preliminary countervailing duty (CVD) rate is based mainly on provincial sales tax exemptions available to all Canadian agricultural producers.
South Mill Champs described the exemptions as “not targeted subsidies to mushroom growers, they are standard, sector-wide tax treatment that Canadian governments have extended to farmers as a matter of long-established policy”.
The Commerce department is also examining cash-basis taxation used by farmers on both sides of the border.
South Mill Champs warned that “forcing producers into accrual-based taxation could create serious, potentially existential, liquidity problems for farms that owe tax on income not yet realised”.
The case now moves to the US International Trade Commission for an independent injury determination. Final CVD and antidumping rulings are expected in December.
South Mill Champs operates mushroom cultivation and processing facilities in British Columbia and Manitoba in Canada, as well as in Pennsylvania and Maryland in the US.
It supplies the retail, foodservice and wholesale channels, as well as mushroom processing customers.
