Michigan cherry processors request 650% tariff on Turkey

Breana Noble
The Detroit News
Cherry farmer Nels Veliquette checks a blossom for frost damage in a 350-acre tart cherry orchard north of Acme on May 24.

The industry at the center of the festival that brings hundreds of thousands of people to Traverse City every summer is petitioning the U.S. government to implement a nearly 650% tariff on dried tart cherries from Turkey.

U.S. tart cherry growers and processors have seen profits slump and disappear as imports from Turkey, the world's largest tart cherry producer, take over the U.S. market with prices below domestic production costs. U.S. businesses claim Turkey heavily subsidizes its cherry growers and that a hefty levy is needed to level the playing field — or else the U.S. tart cherry industry, about three quarters of which is in Michigan, could evaporate.

"We could lose this industry in the next decade if we don’t have some sort of relief," said Nels Veliquette, a cherry grower and chief financial officer of Cherries R Us and Cherry Ke. Inc.

Four Michigan cherry processors — Traverse City's Shoreline Fruit LLC and Cherry Central Cooperative and Frankfort's Smeltzer Orchard Co. LLC and Graceland Fruit Inc. — along with Utah-based Payson Fruit Growers Co-op make up the Dried Tart Cherry Trade Committee that filed a petition in April through the U.S. Commerce Department and International Trade Commission against Turkey.

The International Trade Commission on Friday is expected to determine if there is a reasonable indication of Turkey injuring domestic producers based on evidence provided by the processors. If it does, preliminary duties could be announced as early as July 18.

The companies allege Turkey is dumping dried tart cherries into the United States at a margin of up to 648.35% above fair value because of a wide array of Turkish government subsidies, including grants, loans, investment incentives, tax credits and land provisions.

The processors must show Turkey materially has injured their business or at least threatens to do so. In 2018, the United States imported more than $1.2 million in dried tart cherries from Turkey, up 259% from 2016, according to to the International Trade Administration.

With Turkey exporting 756 tons of dried tart cherries to the United States in 2018, that's an average wholesale price of approximately 82 cents per pound. Meanwhile, domestic producers say their wholesale rate is around $4.50, said Veliquette, whose family is one of two that owns Shoreline Fruit, which produces the Cherry Bay Orchards brand of dried tart cherries. In Turkey, dried tart cherries are selling for $3.60 per pound, he added.

The processors invested $80,000 to investigate and gather data on Turkey's impact on the industry prior to filing their lawsuit, Veliquette said. They expect to spend an additional $1.75 million for the case.

"This is us standing up for a market we built," Veliquette said. "It's important for us as an industry to move now. This is not being subsidized by the government. We're putting our money in what we feel is a cut and dry case."

'Under attack'

The processors had hoped to see the Trump administration self-initiate a similar case. U.S. Sen. Gary Peters, D-Bloomfield Township, has introduced legislation that would create a permanent task force in the Commerce Department's International Trade Administration to investigate dumping and subsidies on imported goods, particularly for small- and medium-sized businesses that often lack the resources to bring violations forward.

But with the clock ticking, the processors decided to petition now. They had waited too long to bring a case against Turkey's imported tart cherry juice concentrate to be able to show damages in the past three years. They did not want to lose the dried cherry market, too, said Tim Brian, president of Smeltzer Orchard Co.

"We’re all competitors, but it’s just the market conditions with the influx of dried tart cherries from Turkey," he said. "We all came together to fight this to some degree."

Graceland has seen a few of its suppliers leave the cherry business because of the downward price pressures, said Alan DeVore, Graceland's president. While blueberries and cranberries are keeping the processor afloat, it has taken several months from its own cherry production schedule due to less demand.

"This is an industry that is under attack," DeVore said. "The only thing holding Turkey back is probably their capacity right now. Just the magnitude of the difference is to the point where our fruit alone is probably two to three times more — just the fruit cost, not the cost of energy to convert it, not the cost of labor to produce it."

The Detroit News contacted several U.S. importers of dried tart cherries from Turkey, but they did not return requests for comment.

Economic impact

The cherry industry contributes millions of dollars to the northern Michigan economy. The state produced 189 million pounds of raw tart cherries in 2017 valued at $39.7 million, according to the U.S. Agriculture Department. At least a quarter of the raw crop is processed into dried tart cherries, said Elizabeth Drake, the processors' attorney.

The National Cherry Festival estimates it attracts roughly 500,000 people to Traverse City — the "cherry capital of the world" — annually. A 2016 study found the festival alone had an economic impact of $24 million. All previous participants in its cherry farm market are expected to attend this year's event, which starts June 29 and runs through July 6 this year.

"We couldn't have a festival without this iconic red fruit," said Kat Paye, the festival's executive director.

Traverse City Mayor Jim Carruthers said tart cherries are his community's "brand."

"It would totally be devastating to lose this industry; not everything can be gobbled up by grapes and hops," he said, referring to two growing markets in the community's agriculture scene. "If President Donald Trump can stand up and do something, he should to protect the farmers in the country and not allow other parts of the world to damage the industry."

'Fair playing field'

If the petition is successful, Veliquette said he hopes it will encourage the U.S. government to self-initiate antidumping and countervailing duties on other imported cherry products. He also would like to see higher quality standards on imported tart cherry juice and concentrate to help domestic producers get a foothold in that market again.

"Nothing breeds success like success," Veliquette said. "A positive outcome with this action will help to rally and galvanize our own industry. It sends a message to other countries looking to dump product here."

The petition follows a symbolic victory in November after President Trump issued a proclamation instigating a half-cent tariff per liter on cherry juice imported from Turkey. The proclamation revoked the country's duty-free status for cherry juice under the United States' Generalized System of Preferences, a trade category that eliminates tariffs for developing nations.

"It's pennies; it's nothing," Mike DeRuiter, a cherry grower in Hart and member of the Cherry Central Cooperative, said of the proclamation. "When you say there is a 0% tariff on imports, it was driving cherry growers crazy. It was a win, but it's not a number that will affect sales."

Since the beginning of the Trump administration, the Commerce Department has initiated 168 new antidumping and countervailing duty investigations, a 223% increase from the comparable period in the Obama administration. The department currently maintains 481 antidumping and countervailing duty orders.

Michigan's tart cherry growers and processors hope it will add at least one more: "If it's a fair playing field, U.S. farmers can compete," DeRuiter said. "The industry wants to fight to survive."